QuickLinks -- Click here to rapidly navigate through this document

As Filed with the Securities and Exchange Commission on April 8, 2014

Registration No. 001-36033

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 4
TO
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

Theravance Biopharma, Inc.
(Exact name of registrant as specified in its charter)
 	 	 	
Cayman Islands
(State or other jurisdiction of
incorporation or organization)	 	Not Applicable
(I.R.S. Employer
Identification No.)	

Ugland House, South Church Street
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)	
 	
KY1-1104
(Zip Code)	
(650) 808-6000
(Registrant's telephone number, including area code)

        Securities to be registered pursuant to Section 12(b) of the Act:
 	 	 	
Title of Each Class
to be so Registered	 	Name of Each Exchange on Which
Each Class is to be Registered	
Ordinary Share, par value $0.00001 per share	 	The NASDAQ Stock Market LLC	
        Securities to be registered pursuant to Section 12(g) of the ActNone

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 	 	 	 	 	 	 	
Large accelerated filer o	 	Accelerated filer o	 	Non-accelerated filer ý
(Do not check if a
smaller reporting company)	 	Smaller reporting company o	
        We are an "emerging growth company" as defined under the federal securities laws. For implications of our status as an emerging growth company, please see "Risk Factors" in Item 1A and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of this registration statement.

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

        Our information statement is filed as Exhibit 99.1 to this Form 10. For your convenience, we have provided below a cross-reference sheet identifying where the items required by Form 10 can be found in the information statement.
 	 	 	 	 	
Item No.	 	Caption	 	Location in Information Statement	
1.	 	Business	 	"Summary", "Risk Factors", "The Spin-Off", "Our Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Where to Obtain More Information"	

1A.	
 	
Risk Factors	
 	
"Risk Factors"	

2.	
 	
Financial Information	
 	
"Historical Selected Financial Data", "Unaudited Pro Forma Combined Balance Sheet", "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"	

3.	
 	
Properties	
 	
"Our Business" and "Our Relationship with Theravance, Inc. after the Spin-Off"	

4.	
 	
Security Ownership of Certain Beneficial Owners and Management	
 	
"Security Ownership of Certain Beneficial Owners and Management"	

5.	
 	
Directors and Executive Officers	
 	
"Management" and "Board of Directors"	

6.	
 	
Executive Compensation	
 	
"Compensation of Non-Employee Directors", and "Compensation of Named Executive Officers"	

7.	
 	
Certain Relationships and Related Transactions and Director Independence	
 	
"Security Ownership of Certain Beneficial Owners and Management", "Related Person Transactions", "Our Relationship with Theravance, Inc. after the Spin-Off" and "Board of Directors"	

8.	
 	
Legal Proceedings	
 	
"Our Business"	

9.	
 	
Market Price of Dividends on Registrant's Common Equity and Related Stockholder Matters	
 	
"The Spin-Off," "Dividend Policy", "Description of Share Capital", "Compensation of Non-Employee Directors" and "Compensation of Named Executive Officers"	

10.	
 	
Recent Sales of Unregistered Securities	
 	
Not Applicable	

11.	
 	
Description of Registrant's Securities to be Registered	
 	
"The Spin-Off", "Dividend Policy" and "Description of Share Capital"	

12.	
 	
Indemnification of Directors and Officers	
 	
"Indemnification of Directors and Officers"	

13.	
 	
Financial Statements and Supplementary Data	
 	
"Historical Selected Financial Data" and "Unaudited Pro Forma Combined Balance Sheet"	

 	 	 	 	 	
Item No.	 	Caption	 	Location in Information Statement	
14.	 	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	 	Not Applicable	

15.	
 	
Financial Statements and Exhibits	
 	
See "Index to Combined Financial Statements" and the statements referenced therein	

(a)
Financial Statements

        The information required by this item is contained in the "Unaudited Pro Forma Balance Sheet" and "Index to Financial Statements" and the statements referenced therein and is incorporated herein by reference.

(b)
Exhibits

        The following documents are filed as exhibits hereto:
 	 	 	 	
Exhibit No.	 	Exhibit	
 	2.1	 	Form of Separation and Distribution Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.	

3.1	
 	
Form of Amended and Restated Memorandum and Articles of Association of Theravance Biopharma, Inc.	

4.1	
 	
Specimen Stock Certificate of Theravance Biopharma, Inc.***	

4.2	
 	
Theravance Biopharma, Inc. Registration Rights Agreement, dated March 3, 2014	

4.3	
 	
Form of Rights Agreement by and between Theravance Biopharma, Inc. and Computershare Inc.	

10.1	
 	
Form of Transition Services Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.	

10.2	
 	
Form of Tax Matters Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.***	

10.3	
 	
Form of Employee Matters Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.***	

10.4	
 	
2013 Equity Incentive Plan**	

10.5	
 	
Forms of Notice of and Agreements for Option Grants, Restricted Share Unit Award and Restricted Share Award under the 2013 Equity Incentive Plan	

10.6	
 	
Theravance Biopharma, Inc. 2013 Employee Share Purchase Plan**	

*10.7	
 	
Theravance Biopharma, Inc. Change in Control Severance Plan	

*10.8	
 	
Form of Offer Letter with Executive Officers***	

10.9	
 	
Theravance Biopharma, Inc. Cash Bonus Program**	

*10.10	
 	
Form of Indemnity Agreement***	

10.11	
 	
Amended and Restated Lease Agreement, 951 Gateway Boulevard, between Theravance, Inc. and HMS Gateway Office L.P., dated January 1, 2001**	

10.12	
 	
First Amendment to Lease for 951 Gateway Boulevard effective as of June 1, 2010 between Theravance, Inc. and ARE-901/951 Gateway Boulevard, LLC**	

 	 	 	 	
Exhibit No.	 	Exhibit	
 	10.13	 	Lease Agreement, 901 Gateway Boulevard, between Theravance, Inc. and HMS Gateway Office L.P., dated January 1, 2001**	

10.14	
 	
First Amendment to Lease for 901 Gateway Boulevard effective as of June 1, 2010 between Theravance, Inc. and ARE-901/951 Gateway Boulevard, LLC**	

10.15	
 	
Form of Theravance Respiratory Company, LLC Limited Liability Company Agreement	

10.16	
 	
Technology Transfer and Supply Agreement, dated as of May 22, 2012 between Theravance, Inc. and Hospira Worldwide, Inc.**†	

10.17	
 	
Commercialization Agreement between Theravance, Inc. and Clinigen Group plc, dated March 8, 2013**†	

10.18	
 	
License Agreement between Theravance, Inc. and Janssen Pharmaceutica, dated as of May 14, 2002**†	

10.19	
 	
Collaboration Agreement between Theravance, Inc. and Glaxo Group Limited, dated November 14, 2002(2)	

10.20	
 	
Strategic Alliance Agreement by and between Theravance, Inc. and Glaxo Group Limited, dated March 30, 2004(3)	

10.21	
 	
Amendment to Strategic Alliance Agreement by and between Theravance, Inc. and Glaxo Group Limited, dated October 3, 2011(1)	

10.22	
 	
Collaboration Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited dated, March 3, 2014(4)	

10.23	
 	
Strategic Alliance Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited dated, March 3, 2014(4)	

10.24	
 	
Master Agreement by and between Theravance, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014(4)	

10.25	
 	
Extension Agreement by and between the Company and Glaxo Group Limited, dated March 3, 2014	

10.26	
 	
Governance Agreement by and between Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014	

21.1	
 	
Subsidiaries of Theravance Biopharma, Inc.***	

99.1	
 	
Preliminary Information Statement of Theravance Biopharma, Inc., dated April 8, 2014	

*
Management contract or compensatory plan or arrangement.

**
Previously filed.

***
To be filed by amendment.

†
Confidential treatment has been requested from the Securities and Exchange Commission (the "Commission") as to certain portions of this exhibit.

(1)
Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Theravance, Inc., filed with the Commission on February 27, 2012.

(2)
Incorporated by reference to an exhibit filed with the quarterly report on Form 10-Q of Theravance, Inc., filed with the Commission on November 1, 2013.

(3)
Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Theravance, Inc., filed with the Commission on March 3, 2014.

(4)
Incorporated by reference to an exhibit filed with the current report on Form 8-K/A of Theravance, Inc., filed with the Commission on March 6, 2014.

SIGNATURES

        Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
 	 	 	 	 	
 	 	Theravance Biopharma, Inc.	

Date: April 8, 2014	
 	
By:	
 	
/s/ RICK E WINNINGHAM

Rick E Winningham
Chief Executive Officer	

INDEX TO EXHIBITS

Exhibit No.	 	Exhibit	
 	2.1	 	Form of Separation and Distribution Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.	

3.1	
 	
Form of Amended and Restated Memorandum and Articles of Association of Theravance Biopharma, Inc.	

4.1	
 	
Specimen Stock Certificate of Theravance Biopharma, Inc.***	

4.2	
 	
Theravance Biopharma, Inc. Registration Rights Agreement, dated March 3, 2014	

4.3	
 	
Form of Rights Agreement by and between Theravance Biopharma, Inc. and Computershare Inc.	

10.1	
 	
Form of Transition Services Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.	

10.2	
 	
Form of Tax Matters Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.***	

10.3	
 	
Form of Employee Matters Agreement by and between Theravance Biopharma, Inc. and Theravance, Inc.***	

10.4	
 	
2013 Equity Incentive Plan**	

10.5	
 	
Forms of Notice of and Agreements for Option Grants, Restricted Share Unit Award and Restricted Share Award under the 2013 Equity Incentive Plan	

10.6	
 	
Theravance Biopharma, Inc. 2013 Employee Share Purchase Plan**	

*10.7	
 	
Theravance Biopharma, Inc. Change in Control Severance Plan	

*10.8	
 	
Form of Offer Letter with Executive Officers***	

10.9	
 	
Theravance Biopharma, Inc. Cash Bonus Program**	

*10.10	
 	
Form of Indemnity Agreement***	

10.11	
 	
Amended and Restated Lease Agreement, 951 Gateway Boulevard, between Theravance, Inc. and HMS Gateway Office L.P., dated January 1, 2001**	

10.12	
 	
First Amendment to Lease for 951 Gateway Boulevard effective as of June 1, 2010 between Theravance, Inc. and ARE-901/951 Gateway Boulevard, LLC**	

10.13	
 	
Lease Agreement, 901 Gateway Boulevard, between Theravance, Inc. and HMS Gateway Office L.P., dated January 1, 2001**	

10.14	
 	
First Amendment to Lease for 901 Gateway Boulevard effective as of June 1, 2010 between Theravance, Inc. and ARE-901/951 Gateway Boulevard, LLC**	

10.15	
 	
Form of Theravance Respiratory Company, LLC Limited Liability Company Agreement	

10.16	
 	
Technology Transfer and Supply Agreement, dated as of May 22, 2012 between Theravance, Inc. and Hospira Worldwide, Inc.**†	

10.17	
 	
Commercialization Agreement between Theravance, Inc. and Clinigen Group plc dated March 8, 2013**†	

10.18	
 	
License Agreement between Theravance, Inc. and Janssen Pharmaceutica, dated as of May 14, 2002**†	

10.19	
 	
Collaboration Agreement between Theravance, Inc. and Glaxo Group Limited, dated November 14, 2002(2)	

10.20	
 	
Strategic Alliance Agreement by and between Theravance, Inc. and Glaxo Group Limited, dated March 30, 2004(3)	

 	 	 	 	
Exhibit No.	 	Exhibit	
 	10.21	 	Strategic Alliance Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited, dated October 3, 2011(1)	

10.22	
 	
Collaboration Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited dated, March 3, 2014(4)	

10.23	
 	
Amendment to Strategic Alliance Agreement by and between Theravance, Inc. and Glaxo Group Limited dated, March 3, 2014(4)	

10.24	
 	
Master Agreement by and between Theravance, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014(4)	

10.25	
 	
Extension Agreement by and between the Company and Glaxo Group Limited, dated March 3, 2014	

10.26	
 	
Governance Agreement by and between Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014	

21.1	
 	
Subsidiaries of Theravance Biopharma, Inc.***	

99.1	
 	
Preliminary Information Statement of Theravance Biopharma, Inc., dated April 8, 2014	

*
Management contract or compensatory plan or arrangement.

**
Previously filed.

***
To be filed by amendment.

†
Confidential treatment has been requested from the Securities and Exchange Commission (the "Commission") as to certain portions of this exhibit.

(1)
Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Theravance, Inc., filed with the Commission on February 27, 2012.

(2)
Incorporated by reference to an exhibit filed with the quarterly report on Form 10-Q of Theravance, Inc., filed with the Commission on November 1, 2013.

(3)
Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Theravance, Inc., filed with the Commission on March 3, 2014.

(4)
Incorporated by reference to an exhibit filed with the current report on Form 8-K/A of Theravance, Inc., filed with the Commission on March 6, 2014.

QuickLinks
INFORMATION REQUIRED IN REGISTRATION STATEMENT CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10
SIGNATURES
INDEX TO EXHIBITS

Exhibit 2.1
 
SEPARATION AND DISTRIBUTION AGREEMENT
 
by and between
 
THERAVANCE, INC.
 
and
 
THERAVANCE BIOPHARMA, INC.
 
Dated as of [·], 2014

 
Table of Contents
 
 	PAGE	
Article I Definitions	1	
 	 	
Article II The Separation	11	
2.1	General	12	
2.2	Transfer of SpinCo Assets and Assumption of SpinCo Liabilities	13	
2.3	Governmental Approvals; Consents	13	
2.4	Deferred Transfers/Assumptions	13	
2.5	Calculation, Adjustment and Payment of Selected Liabilities	14	
2.6	Termination of Agreements	15	
2.7	Disclaimer of Representations and Warranties	15	
 	 	
Article III The Distribution	16	
3.1	The Distribution	16	
3.2	Actions in Connection with the Distribution	16	
3.3	Conditions to Distribution	17	
3.4	Fractional Shares	18	
 	 	
Article IV Insurance	19	
4.1	Policies and Rights Included Within the SpinCo Assets	19	
4.2	Post-Effective Time Claims	19	
4.3	ParentCo Policies	20	
 	 	
Article V Releases And Indemnification	20	
5.1	Release of Pre-Distribution Claims	20	
5.2	Indemnification by SpinCo	22	
5.3	Indemnification by ParentCo	22	
5.4	Reduction for Insurance Proceeds and Other Recoveries	23	
5.5	Procedures For Indemnification of Third-Party Claims	23	
5.6	Additional Matters	24	
5.7	Survival of Indemnities	25	
 	 	
Article VI Certain Covenants And Other Agreements Of The Parties	25	
6.1	Legal Names	25	
6.2	Preparation of Opening SpinCo Balance Sheet	25	
 	 	
Article VII Confidentiality	26	
7.1	Confidentiality	26	
7.2	Protective Arrangements	26	
 	 	
Article VIII Access To Information And Services	27	
8.1	Provision of Books and Records	27	
8.2	Access to Information	27	
8.3	Production of Witnesses	28	
8.4	Reimbursement	28	
 
i

 
8.5	Privileged Matters	28	
8.6	GSK Agreements	29	
 	 	
Article IX Dispute Resolution	30	
9.1	Disputes and Negotiation	30	
9.2	Dispute Resolution and Arbitration	31	
9.3	Confidentiality	31	
9.4	Limitation of Liability	32	
 	 	
Article X Further Assurances	32	
10.1	Further Assurances	32	
 	 	
Article XI Termination	32	
11.1	Termination	32	
 	 	
Article XII Miscellaneous	33	
12.1	Governing Law; Jurisdiction	33	
12.2	Assignability	33	
12.3	Third Party Beneficiaries	33	
12.4	Notices	33	
12.5	Severability	34	
12.6	Expenses	34	
12.7	Survival of Covenants	34	
12.8	Waivers of Default	34	
12.9	Specific Performance	34	
12.10	Waiver of Jury Trial	35	
12.11	Amendments	35	
12.12	Schedules	35	
12.13	Construction	35	
12.14	Counterparts	35	
 
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	 	 	
Attachment 1.64 — SpinCo Policies	 	 	
 
ii

 
Attachment 1.80— UMEC	
Attachment 1.81 — VI	
 
iii

 
SEPARATION AND DISTRIBUTION AGREEMENT
 
This SEPARATION AND DISTRIBUTION AGREEMENT (this “Agreement”), dated as of [·], 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 common 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-
 
1

 
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 Debt” shall mean the 2.125% Convertible Subordinated Notes due 2023 issued by ParentCo.
 
2

 
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 [ · ], 2014.
 
1.14                       “Effective Time” shall mean [·] Eastern Standard 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 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
 
3

 
relating to, arising out of or resulting from ParentCo’s performance or obligations under any Ancillary Agreement or this Agreement and (d) the Convertible 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 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.
 
4

 
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 [•], 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 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.
 
5

 
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 $[ · ] that the parties may determine within [ · ] ([ · ]) 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.
 
1.51                       “Post-Closing Cash” shall have the meaning set forth in Section 2.5(d).
 
6

 
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 [ · ], 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 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.
 
7

 
(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.
 
(n)                                Cash and cash equivalents in the amount of [· U.S. Dollars ($·)] in the aggregate [plus the amount of the Post-Closing Cash, as determined in accordance with  Section 2.5 .]
 
8

 
(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.
 
(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 [ · ], 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.
 
(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.
 
9

 
(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, and Theravance Biopharma Antibiotics IP, LLC, a Delaware limited liability company.
 
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.
 
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,
 
10

 
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 [ · ], 2014, by and between ParentCo and Theravance Biopharma R&D, Inc.
 
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)).
 
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.
 
11

 
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.
 
(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
 
12

 
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 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).
 
13

 
(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 [ · ] Report on Form 10-[ · ] for the [ · ] period ended [ · ], 2013 and filed with the Securities and Exchange Commission on [ · ] was prepared.  As soon as reasonably practicable after the Effective Time, the Parties shall coordinate in the preparation of the ParentCo Consolidated Balance Sheet.
 
(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 vacation, accrued preclinical and clinical trial expenses, personnel-related restructuring accruals and accrued post-employment benefits.  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 vendors for all current liabilities that are both recorded on
 
14

 
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] and debt accounts 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, the Ancillary Agreements and the TRC Operating Agreement (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 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
 
15

 
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.
 
(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.
 
16

 
(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.
 
(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.
 
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;
 
17

 
(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 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.
 
18

 
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, 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
 
19

 
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, 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, any Ancillary Agreement or
 
20

 
the TRC Operating 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 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.”
 
21

 
(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 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.
 
22

 
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.
 
(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 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,
 
23

 
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.
 
5.6                              Additional Matters.
 
(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-
 
24

 
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, 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 [ · ], 2013, included in the Form 10.
 
25

 
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 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,
 
26

 
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 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.
 
27

 
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 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.
 
28

 
(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 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
 
29

 
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 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 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.  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
 
30

 
(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 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.  Except as provided in the Non-Exclusive Cross-License Agreement for any disputes concerning Intellectual Property, disputes arising out of, relating to or in connection with this Agreement or the Ancillary Agreements, 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 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)
 
31

 
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 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.
 
32

 
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.  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 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 and neither this Agreement nor any Ancillary 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.
 
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):
 
33

 
If to ParentCo, to:	Theravance, Inc.	
 	Attention: General Counsel	
 	951 Gateway Boulevard	
 	South San Francisco, CA 94080	
 	Facsimile: [·]	
 	 	
If to SpinCo, to:	Theravance Biopharma, Inc.	
 	Attention: Legal Department	
 	[901 Gateway Boulevard	
 	South San Francisco, CA 94080]	
 	Facsimile: [·]	
 
12.5                       Severability.  If any provision of this Agreement or any Ancillary 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.
 
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
 
34

 
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 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
 
35

 
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]
 
36

 
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.
 
 	THERAVANCE, INC.	

 	By:	 	
 	Name:	
 	Title:	
 
[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.
 
 	 	THERAVANCE BIOPHARMA, INC.	

 	By:	 	
 	 	Name: Rick E Winningham	
 	 	Title: Chief Executive Officer	
 
[Signature Page to Separation and Distribution Agreement]

Exhibit 3.1
 
THE COMPANIES LAW (2013 REVISION)
 
OF THE CAYMAN ISLANDS
 
COMPANY LIMITED BY SHARES
 
AMENDED AND RESTATED
 
MEMORANDUM AND ARTICLES OF ASSOCIATION
 
OF
 
THERAVANCE BIOPHARMA, INC.
 
Adopted by Special Resolution passed on [·]

 
THE COMPANIES LAW (2013 REVISION)
 
OF THE CAYMAN ISLANDS
 
COMPANY LIMITED BY SHARES
 
AMENDED AND RESTATED
 
MEMORANDUM OF ASSOCIATION
 
OF
 
THERAVANCE BIOPHARMA, INC.
 
Adopted by Special Resolution passed on[·]
 
1                                        The name of the Company is Theravance Biopharma, Inc.
 
2                                        The Registered Office of the Company shall be at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, or at such other place as the Directors may from time to time decide.
 
3                                        The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law (2013 Revision) or as the same may be revised from time to time, or any other law of the Cayman Islands.
 
4                                        The liability of each Member is limited to the amount from time to time unpaid on such Member’s shares.
 
5                                        The authorised share capital of the Company is US$2,002.30 divided into 200,000,000 Ordinary Shares of a nominal or par value of US$0.00001 each and 230,000 Preferred Shares of a nominal or par value of US$0.00001 each with the power for the Company, insofar as is permitted by Statute, to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Companies Law and the Articles of Association and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference or otherwise shall be subject to the powers hereinbefore contained.
 
6                                        The Company has the power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
 
7                                        Capitalized terms that are not defined in this Amended and Restated Memorandum of Association bear the same meaning as those given in the Amended and Restated Articles of Association of the Company.

 
THE COMPANIES LAW (2013 REVISION)
 
OF THE CAYMAN ISLANDS
 
COMPANY LIMITED BY SHARES
 
AMENDED AND RESTATED
 
ARTICLES OF ASSOCIATION
 
OF
 
THERAVANCE BIOPHARMA, INC.
 
Adopted by Special Resolution passed on [·]
 
1                                        INTERPRETATION
 
1.1                              In these Articles, unless otherwise defined, the defined terms shall have the meanings assigned to them as follows:
 
“Affiliate”	 	means (i) in the case of a natural person, such person’s parents, parents-in-law, spouse, children or grandchildren, a trust for the benefit of any of the foregoing, a company, partnership or any natural person or entity wholly or jointly owned by such person or any of the foregoing, (ii) in the case of an entity, a partnership, a corporation or any natural person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity. The term “control” shall mean the ownership, directly or indirectly, of shares possessing more than fifty percent (50%) of the voting power of the corporation, or the partnership or other entity (other than, in the case of corporation, share having such power only by reason of the happening of a contingency), or having the power to control the management or elect a majority of members to the board of directors or equivalent decision-making body of such corporation, partnership or other entity.	
 	 	 	
“Articles”	 	means the Amended and Restated Articles of Association of the Company, including Exhibit A attached hereto, as from time to time altered or added to in accordance with the Statute and these Articles.	
 	 	 	
“Business Day”	 	means a day, excluding Saturdays or Sundays, on which banks in New York, U.S.A. are open for general banking business throughout their normal business hours.	
 
2

 
“Commission”	 	means Securities and Exchange Commission of the United States of America or any other federal agency for the time being administering the Securities Act.	
 	 	 	
“Company”	 	means Theravance Biopharma, Inc., a Cayman Islands company limited by shares.	
 	 	 	
“Company’s Website”	 	means the website of the Company, the address or domain name of which has been notified to Members.	
 	 	 	
“Designated Stock Exchange”	 	means the Nasdaq Global Market or any other stock exchange or automated quotation system on which the Company’s securities are then traded.	
 	 	 	
“Directors”and “Board of Directors”  and “Board”	 	means the directors of the Company for the time being, or as the case may be, the Directors assembled as a Board or as a committee thereof.	
 	 	 	
“Exhibit A”	 	means Exhibit A attached to this Amended and Restated Memorandum and Articles of Association, as amended and restated from time to time, which exhibit shall be incorporated by reference herein.	
 	 	 	
“electronic”	 	means the meaning given to it in the Electronic Transactions Law (2003 Revision) of the Cayman Islands and any amendment thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefore.	
 	 	 	
“electronic record”	 	means the meaning given to it in the Electronic Transactions Law (2003 Revision) of the Cayman Islands and any amendment thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefore.	
 	 	 	
“electronic communication”	 	means electronic transmission to any number, address or internet website or other electronic delivery methods as otherwise decided and approved by not less than a majority vote of the Board.	
 	 	 	
“Exchange Act”	 	means the United States Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.	
 	 	 	
“in writing”	 	includes writing, printing, lithograph, photograph, type-writing, electronic communication and every other mode of representing words or figures in a legible and non-transitory form and, only where used in connection with a notice served	
 
3

 
 	 	by the Company on Members or other persons entitled to receive notices hereunder, shall also include a record maintained in an electronic medium which is accessible in visible form so as to be useable for subsequent reference.	
 	 	 	
“Market Price”	 	means for any given day, the price quoted in respect of the Ordinary Shares on the Designated Stock Exchange of the close of trading on the previous trading day.	
 	 	 	
“Member”	 	means a person whose name is entered in the Register of Members as the holder of a share or shares.	
 	 	 	
“Memorandum of Association”	 	means the Amended and Restated Memorandum of Association of the Company, as amended and restated from time to time.	
 	 	 	
“month”	 	means the calendar month.	
 	 	 	
“Ordinary Resolution”	 	means a resolution passed by a simple majority of votes cast by such Members as, being entitled to do so, vote in person or, in the case of any Member being an organization, by its duly authorised representative or, where proxies are allowed, by proxy at a general meeting of the Company.	
 	 	 	
“Ordinary Shares”	 	means an Ordinary Share in the capital of the Company of US$0.00001 nominal or par value designated as Ordinary Shares, and having the rights provided for in these Articles.	
 	 	 	
“Preferred Shares”	 	means shares in the capital of the Company of US$0.00001 nominal or par value designated as Preferred Shares, and having the rights provided for in these Articles.	
 	 	 	
“Register of Members”	 	means the register maintained by the Company in accordance with section 40 of the Statute or any modification or re-enactment thereof for the time being in force.	
 	 	 	
“Seal”	 	means the common seal of the Company including any facsimile thereof.	
 	 	 	
“Securities Act”	 	means the Securities Act of 1933 of the United States of America, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.	
 	 	 	
“Series A Preferred Shares”	 	Means Preferred Shares designated as Series A Junior Participating Preferred Shares pursuant to Article 3.2.	
 	 	 	
“share”	 	means any share in the capital of the Company, including the Ordinary Shares and shares of other classes.	
 	 	 	
“signed”	 	means includes a signature or representation of a signature affixed by mechanical means or an electronic symbol or process attached to or logically associated with an electronic communication and executed or adopted by a person with the intent to sign the electronic communication.	
 
4

 
“Special Resolution”	 	means a resolution shall be a special resolution when it has been passed by not less than two-thirds of votes cast by such Members as, being entitled to do so, vote in person or, in the case of such Members as are corporations, by their duly authorized representative or, whether proxies are allowed, by proxy at a general meeting of which not less than ten (10) days’ (nor more than sixty (60) days’) notice, specifying the intention to propose the resolution as a special resolution, has been duly given.	
 	 	 	
“Statute”	 	means the Companies Law (2013 Revision) of the Cayman Islands and any statutory amendment or re-enactment thereof. Where any provision of the Statute is referred to, the reference is to that provision as amended by any law for the time being in force.	
 	 	 	
“Whole Board”	 	means a majority of the authorized number of Directors, whether or not there exist any vacancies.	
 	 	 	
“year”	 	means the calendar year.	
 
1.2                              In these Articles, save where the context requires otherwise:
 
(a)                                words importing the singular number shall include the plural number and vice versa;
 
(b)                                words importing the masculine gender only shall include the feminine gender;
 
(c)                                 words importing persons only shall include companies or associations or bodies of persons, whether corporate or not;
 
(d)                                “may” shall be construed as permissive and “shall” shall be construed as imperative;
 
(e)                                 a reference to a dollar or dollars (or $) is a reference to dollars of the United States of America;
 
(f)                                  references to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force;
 
(g)                                 any phrase introduced by the terms “including”, “include”, “in particular” or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms;
 
(h)                                Section 8 and 19(3) of the Electronic Transactions Law (2003 Revision) shall not apply;
 
(i)                                    “written” and “in writing” include all modes of representing or reproducing words in visible form, including in the form of an electronic record, and any requirements as to delivery under the Articles include delivery in the form of an electronic record;
 
(j)                                   any requirements as to execution or signature under the Articles, including the execution of the Articles themselves, can be satisfied in the form of an electronic signature as defined in the Electronic Transactions Law (2003 Revision);
 
5

 
(k)                                the term “clear days” in relation to the period of a notice means that period excluding the day when the notice is received or deemed to be received and the day for which it is given or on which it is to take effect; and
 
(l)                                    the term “holder” in relation to a share means a person whose name is entered in the Register of Members as the holder of such share.
 
1.3                              Subject to the last two preceding Articles, any words defined in the Statute shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.
 
2                                       PRELIMINARY
 
2.1                              The business of the Company may be commenced as soon after incorporation as the Directors see fit, notwithstanding that only part of the shares may have been allotted or issued.
 
2.2                              The registered office of the Company shall be at such address in the Cayman Islands as the Directors shall from time to time determine.  The Company may in addition establish and maintain such other offices and places of business and agencies in such places as the Directors may from time to time determine.
 
3                                        SHARE CAPITAL
 
3.1                              The authorised share capital of the Company at the date of adoption of these Articles is US$2,002.30 divided into 200,000,000 Ordinary Shares of a nominal or par value of US$0.00001 each and 230,000 Preferred Shares of a nominal or par value of US$0.00001 each, with power for the Company insofar as is permitted by law, to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Statute and these Articles and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare, every issue of shares whether declared to be preferred or otherwise shall be subject to the powers hereinbefore contained.
 
3.2                             A total of 230,000 Preferred Shares shall be designated as “Series A Junior Participating Preferred Shares” with the designations, powers, preferences, privileges and other rights set forth in  Exhibit A .
 
4                                        ISSUE OF SHARES
 
4.1                              Subject to the provisions, if any, in the Articles, the Memorandum of Association and applicable law, including the Statute, the Directors may, in their absolute discretion and without approval of the holders of Ordinary Shares, cause the Company to issue such amounts of Ordinary Shares and/or Preferred Shares or similar securities in one or more series, to establish from time to time the number of shares to be included in such series, to grant rights over existing shares as they deem necessary and appropriate and to determine designations, powers, preferences, privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers and rights associated with the Ordinary Shares, at such times and on such other terms as they think proper.  The Company shall not issue shares in bearer form.  The authority of the Directors with respect to each series shall include, but not be limited to, determination of the following:
 
6

 
(a)                                The number of shares constituting that series and the distinctive designation of that series;
 
(b)                                The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
 
(c)                                 whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights;
 
(d)                                whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Directors shall determine;
 
(e)                                 whether or not the shares of that series shall be issued as redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and
 
(f)                                  the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, and the rights of priority, if any, of payment of shares of that series relative to other series of shares.
 
5                                        REGISTER OF MEMBERS AND SHARE CERTIFICATES
 
5.1                              The Company shall maintain a Register of its Members.  Every person whose name is entered as a Member in the Register of Members and whose shares are to be held in certificated form shall, upon request and without payment, be entitled to a certificate within two months after allotment or lodgement of transfer (or within such other period as the conditions of issue shall provide) in the form determined by the Directors.  All certificates shall specify the share or shares held by that person and the amount paid up thereon, provided that in respect of a share or shares held jointly by several persons the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all.  All certificates for shares shall be delivered personally or sent through the post addressed to the member entitled thereto at the Member’s registered address as appearing in the register.  Absent instructions to the contrary from the Company, such member’s shares will be held in uncertificated, book entry form.
 
5.2                              Every share certificate of the Company shall bear any legends required under applicable laws, including the Securities Act.
 
5.3                              Any two or more certificates representing shares of any one class held by any Member may at the Member’s request be cancelled and a single new certificate for such shares issued in lieu on payment (if the Directors shall so require) of US$1.00 or such smaller sum as the Directors shall determine.
 
5.4                             If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same shares may be issued to the relevant Member upon request subject to delivery up of the old certificate or (if alleged to have been lost, stolen or destroyed) compliance with such conditions as to evidence and indemnity and the payment of out-of-pocket expenses of the Company in connection with the request as the Directors may think fit.
 
7

 
5.5                              In the event that shares are held jointly by several persons, any request may be made by any one of the joint holders and if so made shall be binding on all of the joint holders.
 
6                                        TRANSFER OF SHARES
 
6.1                              Subject to these Articles and the rules or regulations of the Designated Stock Exchange or any relevant securities laws (including, but not limited to U.S. securities law provisions related to insider trading), any Member may transfer all or any of his shares by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange or in any other form approved by the Board and may be under hand or, if the transferor or transferee is a clearing house or it nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the Board may approve from time to time.
 
6.2                              The instrument of transfer shall be executed by or on behalf of the transferor.  Without prejudice to the last preceding Article, the Board may also resolve, either generally or in any particular case, upon request by the transferor or transferee to accept mechanically executed transfers.  The transferor shall be deemed to remain the holder of the share until the name of the transferee in entered into the Register in respect thereof.
 
6.3                              The Directors may, in their absolute discretion, decline to register any transfer of Shares, subject to any applicable requirements imposed from time to time by the Commission and the Designated Stock Exchange.
 
6.4                              The Board in so far as permitted by any applicable law and rules of the Designated Stock Exchange may, in its absolute discretion, at any time and from time to time transfer any share upon the Register to any branch register or any share on any branch register to the Register or any other branch register.  In the event of any such transfer, the shareholder requesting such transfer shall bear the cost of effecting such transfer unless the Board otherwise determines.
 
6.5                              Unless the Board otherwise agrees (which agreement may be on such terms and subject to such conditions as the Board in its absolute discretion may from time to time determine, and which agreement the Board shall, without giving any reason therefore, be entitled in its absolute discretion to give or withhold), no shares upon the Register shall be transferred to any branch register nor shall shares on any branch register be transferred to the Register or any other branch register and all transfers and other documents of title shall be lodged for registration, and registered, in the case of any shares on a branch register, at the relevant Registration Office, and, in the case of any shares on the Register, at the Office or such other place at which the Register is kept in accordance with the Statute.
 
6.6                              Without limiting the generality of the last preceding Article, the Board may decline to recognise any instrument of transfer unless:
 
(a)                                a fee of such maximum sum as the Board may from time to time require is paid to the Company in respect thereof;
 
(b)                                the instrument of transfer is in respect of only one class of share;
 
(c)                                 the instrument of transfer is lodged at the Office or such other place as the Register is kept in accordance with the Statute accompanied by the relevant share certificate(s) or such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do); and
 
8

 
(d)                                the instrument of transfer is duly and properly signed.
 
6.7                              If the Board refuses to register a transfer of any share, it shall, within two months after the date on which the transfer was lodged with the Company, send to each of the transferor and the transferee notice of the refusal.
 
6.8                              The registration of transfers may be suspended at such time and for such periods as the Directors may from time to time determine, provided always that such registration shall not be suspended for more than forty five (45) days in any year.
 
7                                        REDEMPTION AND PURCHASE OF OWN SHARES
 
7.1                              Subject to the provisions, if any, in the Articles, the Memorandum of Association, applicable law, including the Statute, and the rules of the Designated Stock Exchange, the Company may:
 
(a)                                issue shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Member on such terms and in such manner as the Directors may, before the issue of such shares, determine;
 
(b)                                purchase its own shares (including any redeemable shares) provided that the manner of purchase is in accordance with the provisions of the Statute, the Memorandum of Association, the Articles and any applicable requirements imposed from time to time by the Commission of the Designated Stock Exchange; and
 
(c)                                 make a payment in respect of the redemption or purchase of its own shares otherwise than out of profits or the proceeds of a fresh issue of shares.
 
7.2                              Any share in respect of which notice of redemption has been given shall not be entitled to participate in the profits of the Company in respect of the period after the date specified as the date of redemption in the notice of redemption.
 
7.3                              The redemption or purchase of any share shall not be deemed to give rise to the redemption or purchase of any other share.
 
7.4                              The Directors may when making payments in respect of redemption or purchase of shares, if authorised by the terms of issue of the shares being redeemed or purchased or with the agreement of the holder of such shares, make such payment in any form of consideration permitted by the Statute.
 
8                                        VARIATION OF RIGHTS ATTACHING TO SHARES
 
8.1                              Subject to the provisions, if any, in the Articles, the Memorandum of Association and applicable law, including the Statute, all or any of the special rights attached to shares of any class (unless otherwise provided for by the terms of issue of the shares of that class) may be varied, modified or abrogated with the sanction of a resolution passed by a majority of not less than two-thirds of the votes cast passed at a separate meeting of the holders of the shares of that class at which a quorum is present.
 
8.2                              The provisions of these Articles relating to general meetings shall apply to every such general meeting of the holders of one class of shares except that the necessary quorum shall be at least one person holding or representing by proxy at least a majority of the par value of the issued shares of the class.  Every holder of Shares of the class shall be entitled on a poll to one vote for
 
9

 
every such Share held by such holder and any holder of Shares of that class present in person or by proxy may demand a poll.
 
8.3                              The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking in priority to or pari passu therewith.
 
9                                        COMMISSION ON SALE OF SHARES
 
9.1                              The Company may in so far as the Statute from time to time permits pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares of the Company.  Such commissions may be satisfied by the payment of cash or the lodgement of fully or partly paid-up shares or partly in one way and partly in the other.  The Company may also on any issue of shares pay such brokerage as may be lawful.
 
10                                 NON-RECOGNITION OF TRUSTS
 
10.1                       No person shall be recognized by the Company as holding any share upon any trust and the Company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interest in any share, or any interest in any fractional part of a share, or (except only as is otherwise provided by these Articles or the Statute) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.
 
11                                 REGISTRATION OF EMPOWERING INSTRUMENTS
 
11.1                       The Company shall be entitled to charge a fee not exceeding one dollar (US$1.00) on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, or other instrument.
 
12                                 TRANSMISSION OF SHARES
 
12.1                       If a Member dies the survivor or survivors (where he was a joint holder) or his legal personal representatives (where he was a sole holder), shall be the only persons recognised by the Company as having any title to his shares.  The estate of a deceased Member is not thereby released from any liability in respect of any share, for which he was a joint or sole holder.
 
12.2                       Any person becoming entitled to a share in consequence of the death or bankruptcy or liquidation or dissolution of a Member (or in any other way than by transfer) may, upon such evidence being produced as may be required by the Directors, elect, by a notice in writing sent by him to the Company, either to become the holder of such share or to have some person nominated by him registered as the holder of such share.  If he elects to have another person registered as the holder of such share he shall sign an instrument of transfer of that share to that person.  The Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the relevant Member before his death or bankruptcy or liquidation or dissolution, as the case may be.
 
12.3                       A person becoming entitled to a share by reason of the death or bankruptcy or liquidation or dissolution of a Member (or in any other case than by transfer) shall be entitled to the same dividends, other distributions and other advantages to which he would be entitled if he were the
 
10

 
holder of such share.  However, he shall not, before becoming a Member in respect of a share, be entitled in respect of it to exercise any right conferred by membership in relation to general meetings of the Company and the Directors may at any time give notice requiring any such person to elect either to be registered himself or to have some person nominated by him be registered as the holder of the share (but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the relevant Member before his death or bankruptcy or liquidation or dissolution or any other case than by transfer, as the case may be).  If the notice is not complied with within ninety (90) calendar days of being received or deemed to be received (as determined pursuant to the Articles)  the Directors may thereafter withhold payment of all dividends, other distributions, bonuses or other monies payable in respect of the share until the requirements of the notice have been complied with.
 
13                                 LIEN
 
13.1                       The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share.  The Company shall also have a first and paramount lien on every share (not being a fully paid share) registered in the name of a Member (whether or not jointly with other Members) for all amounts of money presently payable by such Member or his estate to the Company whether the same shall have been incurred before or after notice to the Company of any equitable or other interest of any person other than such Member, and whether the period for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Member or his or her estate and any other person, whether a Member or not.  The Company’s lien on a share shall extend to all dividends or other moneys payable thereon or in respect thereof.  The Board may at any time, generally or in any particular case, waive any lien that has arisen or declare any share exempt in whole or in part, from the provisions of this Article.
 
13.2                       Subject to these Articles, the Company may sell in such manner as the Board determines any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, or the liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged nor until the expiration of fourteen (14) clear days after a notice in writing, stating and demanding payment of the sum presently payable, or specifying the liability or engagement and demanding fulfillment or discharge thereof and giving notice of the intention to sell in default, has been served on the registered holder for the time being of the share or the person entitled thereto by reason of his or her death or bankruptcy.
 
13.3                       The net proceeds of the sale shall be received by the Company and applied in or towards payment or discharge of the debt or liability in respect of which the lien exists, so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the person entitled to the share at the time of the sale.  To give effect to any such sale the Board may authorise some person to transfer the shares sold to the purchaser thereof.  The purchaser shall be registered as the holder of the shares so transferred and he or she shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.
 
11

 
14                                 CALLS ON SHARES
 
14.1                      Subject to these Articles and to the terms of allotment, the Board may from time to time make calls upon the Members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium), and each Member shall (subject to being given at least fourteen (14) clear days’ notice specifying the time and place of payment) pay to the Company as required by such notice the amount called on his shares.  A call may be extended, postponed or revoked in whole or in part as the Board determines but no Member shall be entitled to any such extension, postponement or revocation except as a matter of grace and favour.
 
14.2                       A call shall be deemed to have been made at the time when the resolution of the Board authorizing the call was passed and may be made payable either in one lump sum or by installments.
 
14.3                       A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect of which the call was made.  The joint holders of a share shall be jointly and severally liable to pay all calls and installments due in respect thereof or other moneys due in respect thereof.
 
14.4                       If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the amount unpaid from the day appointed for payment thereof to the time of actual payment at such rate (not exceeding twenty percent (20%) per annum) as the Board may determine, but the Board may in its absolute discretion waive payment of such interest wholly or in part.
 
14.5                       No Member shall be entitled to receive any dividend or to be present and vote (save as proxy for another Member) at any general meeting either personally or by proxy, or be reckoned in a quorum, or exercise any other privilege as a Member until all calls or installments due by him to the Company, whether alone or jointly with any other person, together with interest and expenses (if any) shall have been paid.
 
14.6                       On the trial or hearing of any action or other proceedings for the recovery of any money due for any call, it shall be sufficient to prove that the name of the Member sued is entered in the Register of Members as the holder, or one of the holders, of the shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book, and that notice of such call was duly given to the Member sued, in pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.
 
14.7                       Any amount payable in respect of a share upon allotment or at any fixed date, whether in respect of nominal value or premium or as an installment of a call, shall be deemed to be a call duly made and payable on the date fixed for payment and if it is not paid the provisions of these Articles shall apply as if that amount had become due and payable by virtue of a call duly made and notified.
 
14.8                      On the issue of shares, the Board may differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment.
 
14.9                       The Board may, if it thinks fit, receive from any Member willing to advance the same, and either in money or money’s worth, all or any part of the moneys uncalled and unpaid or installments
 
12

 
payable upon any shares held by him and upon all or any of the moneys so advanced (until the same would, but for such advance, become presently payable) pay interest at such rate (if any) as the Board may decide.  The Board may at any time repay the amount so advanced upon giving to such Member not less than one (1) month’s notice of its intention in that behalf, unless before the expiration of such notice the amount so advanced shall have been called up on the shares in respect of which it was advanced.  Such payment in advance shall not entitle the holder of such share or shares to participate in respect thereof in a dividend subsequently declared.
 
15                                 FORFEITURE OF SHARES
 
15.1                       If a call remains unpaid after it has become due and payable the Board may give to the person from whom it is due not less than fourteen (14) clear days’ notice:
 
(a)                                requiring payment of the amount unpaid together with any interest which may have accrued and which may still accrue up to the date of actual payment; and
 
(b)                                stating that if the notice is not complied with the shares on which the call was made will be liable to be forfeited.
 
15.2                       If the requirements of any such notice are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls and interest due in respect thereof has been made, be forfeited by a resolution of the Board to that effect, and such forfeiture shall include all dividends declared in respect of the forfeited share but not actually paid before the forfeiture.
 
15.3                       When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the share.  No forfeiture shall be invalidated by any omission or neglect to give such notice.
 
15.4                      The Board may accept the surrender of any share liable to be forfeited hereunder and, in such case, references in these Articles to forfeiture will include surrender.
 
15.5                       Any share so forfeited shall be deemed the property of the Company and may be sold, re-allotted or otherwise disposed of to such person, upon such terms and in such manner as the Board determines, and at any time before a sale, re-allotment or disposition the forfeiture may be annulled by the Board on such terms as the Board determines.
 
15.6                       A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares but nevertheless shall remain liable to pay the Company all moneys which at the date of forfeiture were presently payable by him to the Company in respect of the shares, with (if the Directors shall in their discretion so require) interest thereon from the date of forfeiture until payment at such rate (not exceeding twenty percent (20%) per annum) as the Board determines.  The Board may enforce payment thereof if it thinks fit, and without any deduction or allowance for the value of the forfeited shares, at the date of forfeiture, but his liability shall cease if and when the Company shall have received payment in full of all such moneys in respect of the shares.  For the purposes of this Article any sum which, by the terms of issue of a share, is payable thereon at a fixed time which is subsequent to the date of forfeiture, whether on account of the nominal value of the share or by way of premium, shall notwithstanding that time has not yet arrived be deemed to be payable at the date of forfeiture, and the same shall become due and payable immediately upon the forfeiture, but interest thereon shall only be payable in respect of any period between the said fixed time and the date of actual payment.
 
13

 
15.7                       A declaration by a Director or the Secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and such declaration shall (subject to the execution of an instrument of transfer by the Company if necessary) constitute a good title to the share, and the person to whom the share is disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the consideration (if any), nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture, sale or disposal of the share.  When any share shall have been forfeited, notice of the declaration shall be given to the Member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith be made in the register, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or make any such entry.
 
15.8                       Notwithstanding any such forfeiture as aforesaid the Board may at any time, before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, permit the shares forfeited to be bought back upon the terms of payment of all calls and interest due upon and expenses incurred in respect of the share, and upon such further terms (if any) as it thinks fit.
 
15.9                       The forfeiture of a share shall not prejudice the right of the Company to any call already made or installment payable thereon.
 
15.10                The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
 
16                                 ALTERATION OF CAPITAL
 
16.1                       Subject to these Articles, the Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe.
 
16.2                       Subject to these Articles, including Article 4.1, the Company may by Ordinary Resolution:
 
(a)                                consolidate and divide all or any of its share capital into shares of larger amount than its existing shares, provided that any fractions of a share that result from such a consolidation or division of its share capital shall be automatically repurchased by the Company (i) at the Market Price on the date of such consolidation or division, in the case of any shares listed on a Designated Stock Exchange and (ii) at a price to be agreed between the Company and the applicable Member in the case of any shares not listed on a Designated Stock Exchange;
 
(b)                                sub-divide its existing shares, or any of them into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived;
 
(c)                                 divide shares into multiple classes; or
 
(d)                                cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled.
 
14

 
16.3                       Subject to these Articles, the Company may by Special Resolution:
 
(a)                                change its name;
 
(b)                                alter or add to these Articles;
 
(c)                                 alter or add to the Memorandum of Association with respect to any objects, powers or other matters specified therein; or
 
(d)                                reduce its share capital and any capital redemption reserve in any manner authorised by law.
 
16.4                       Except as otherwise provided by the Directors pursuant to Article 4.1, all new shares created hereunder shall be subject to the same provisions with reference to the payment of calls, liens, transfer, transmission, forfeiture and otherwise as the shares in the original share capital.
 
17                                 CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
 
17.1                       For the purpose of determining those Members that are entitled to receive notice of, attend or vote at any meeting of Members or any adjournment thereof, or those Members that are entitled to receive payment of any dividend, or in order to make a determination as to who is a Member for any other purpose, the Directors may provide that the Register of Members shall be closed for transfers for a stated period but not to exceed in any case sixty (60) calendar days.  If the Register of Members shall be so closed for the purpose of determining those Members that are entitled to receive notice of, attend or vote at a meeting of Members such register shall be so closed for at least ten (10) calendar days (but not more than sixty (60) calendar days) immediately preceding such meeting and the record date for such determination shall be the date of the closure of the Register of Members, which such date shall not precede the date upon which the resolution fixing the record date is adopted by the Directors.  The Directors shall prepare, or cause to be prepared, at least ten (10) days before every general meeting, a complete list of the Members entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each Member and the number of shares registered in the name of each Member.  Such list shall be open to the examination of any Member, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Member who is present.
 
17.2                       In lieu of or apart from closing the Register of Members, the Directors may fix in advance a date as the record date for any such determination of those Members that are entitled to receive notice of, attend or vote at a meeting of the Members and for the purpose of determining those Members that are entitled to receive payment of any dividend the Directors may, at or within ninety (90) calendar days prior to the date of declaration of such dividend, fix a subsequent date as the record date of such determination.
 
17.3                       If the Register of Members is not so closed and no record date is fixed for the determination of those Members entitled to receive notice of, attend or vote at a meeting of Members or those Members that are entitled to receive payment of a dividend, the record date for such determination of Members shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.  When a determination of those
 
15

 
Members that are entitled to receive notice of, attend or vote at a meeting of Members has been made as provided in this Article, such determination shall apply to any adjournment thereof.
 
18                                 GENERAL MEETINGS
 
18.1                       All general meetings of the Company other than annual general meetings shall be called extraordinary general meetings.
 
18.2                       The Company shall, in each year hold a general meeting as its annual general meeting at such time and place as may be determined by the Directors.
 
18.3                       Extraordinary general meetings may be called by the Chairperson of the Board, the chief executive officer of the Company or by the Board acting pursuant to a resolution adopted by the Whole Board.  Any extraordinary general meeting shall be held at such time and place as may be determined by the Directors.
 
18.4                       If an extraordinary general meeting is called by or at the request of anyone other than the Whole Board, then the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Directors.
 
18.5                       In the absence of a designation of the location of a general meeting by the Board, such meeting shall be held at the principal executive office of the Company.
 
18.6                      The Directors may, subject to such guidelines and procedures as they may adopt, allow any person to participate at a general meeting by conference telephone or other communications equipment by means of which all the persons participating in the meeting can communicate with each other.  Participation by a person in a general meeting in this manner is treated as presence in person at that meeting.
 
19                                 NOTICE OF GENERAL MEETINGS
 
19.1                       At least ten (10) calendar days’ notice (but not more than sixty (60) calendar days’ notice) shall be given for any general meeting.  Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given.  Every notice shall (i) specify the place, the day and the hour of the meeting, (ii) the matters that are intended to be presented at the meeting, and, (iii) in the case of annual general meetings, the name of any nominee who the Directors intend to present for election, and shall be given in the manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company, provided that a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether or not the provisions of Articles regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed:
 
(a)                                in the case of an annual general meeting by all the Members (or their proxies) entitled to attend and vote thereat; and
 
(b)                                in the case of an extraordinary general meeting by the Members (or their proxies) having a right to attend and vote at the meeting, together holding not less than ninety-five percent (95%) in of the voting shares.
 
19.2                       The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a Special Resolution shall specify the intention to propose
 
16

 
the resolution as a Special Resolution.  Notice of every general meeting shall be given to all Members other than such as, under the provisions hereof or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company.
 
19.3                       Written notice of any general meeting shall be given either personally or by first-class mail or by telegraphic or other written communication.  Notices not personally delivered shall be sent charges prepaid and shall be addressed to the Member at the address of that Member appearing on the books of the Company or given by the Member to the Company for the purpose of notice.  An affidavit of the mailing or other means of giving any notice of any general meeting, executed by the Secretary, Assistant Secretary or any transfer agent of the Company giving the notice, shall be prima facie evidence of the giving of such notice.
 
19.4                       In cases where instruments of proxy are sent out with notices, the accidental omission to send such instrument of proxy to, or the non-receipt of any such instrument of proxy by, any person entitled to receive notice shall not invalidate any resolution passed or any proceeding at any such meeting.
 
19.5                       No business may be transacted at any general meeting, other than business that is either (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (B) otherwise properly brought before an annual general meeting by or at the direction of the Board (or any duly authorized committee thereof) or (C) in the case of an annual general meeting, otherwise properly brought before such general meeting by any Member of the Company who (1) is a Member of record on both (x) the date of the giving of the notice by such Member provided for in this Article and (y) the record date for the determination of Members entitled to vote at such annual general meeting and (2) complies with the notice procedures set forth in this Article 19.5.
 
(a)                                In addition to any other applicable requirements, for a proposal for business to be brought properly before an annual general meeting by a Member,:
 
(i)                                    such Member must have given timely notice of such proposal in proper written form to the Secretary of the Company; and
 
(ii)                                 subject to Article 19.5(i), the Board of Directors shall have resolved to include such proposal in the notice of such general meeting.  The Board of Directors may at their absolute discretion resolve not to include any proposal for business made by a Member, save that the Board of Directors shall not be entitled to refuse to include a proposal related to the nomination of a Director made by a Member in accordance with Article 19.5(f).
 
(b)                                The Board shall cause notice to be given pursuant to the Articles.  No business other than as set forth in such notice may be transacted at a general meeting, except in the case of an annual general meeting, where matters may be presented for consideration by Members, provided they comply with the requirements of the Articles, including those set forth in this Article 19.5.
 
(c)                                 For matters other than for the nomination for election of a Director to be made by a Member of the Company at an annual general meeting, to be timely, such Member’s notice shall be delivered to the Secretary at the principal executive offices of the Company at least forty-five (45) days and not more than seventy-five (75) days prior to the one year anniversary of the date on which the Company first mailed proxy materials for the prior year’s annual general meeting; provided, however, that if the Company’s
 
17

 
annual general meeting occurs on a date more than twenty-five (25) days earlier or later than the Company’s prior year’s annual general meeting, then the Board shall determine a date a reasonable period prior to the Company’s annual general meeting by which date the Members notice must be delivered and publicize such date in a filing pursuant to the Exchange Act, or via press release.  Such publication shall occur at least ten (10) days prior to the date set by the Board.
 
(d)                                To be in proper written form, a Member’s notice to the Secretary must set forth as to such matter such Member proposes to bring before the annual general meeting (1) a brief description of the business desired to be brought before the annual general meeting and the proposed text of any proposal regarding such business (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend these Articles or the Memorandum of the Company, the text of the proposed amendment) and the reasons for conducting such business at the annual general meeting, (2) the name and address, as they appear on the Company’s books, of the Member proposing such business and any Member Associated Person (as defined below), (3) the class or series and number of shares of the Company that are held of record or are beneficially owned by such Member or any Member Associated Person and any derivative positions held or beneficially held by the Member or any Member Associated Person, (4) the name of each nominee holder of shares of the Company owned beneficially but not of record by the Member or any Member Associated Person, and the number of such shares of the Company held by each such nominee holder, (5) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such Member or any Member Associated Person with respect to any securities of the Company, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such Member or any Member Associated Person with respect to any securities of the Company, (6) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such Member or a Member Associated Person and any other person or persons (including their names) in connection with or relating to (A) the Company or any securities of the Company or (B) the proposal, including any material interest or anticipated benefit of the Member or a Member Associated Person in such business, (6) a statement whether either such Member or any Member Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the Company’s voting shares required under the Memorandum and Articles of the Company, applicable law and the rules of the Designated Stock Exchange to carry the proposal and a representation that the Member giving notice intends to appear in person or by proxy at the annual general meeting to bring such business before the meeting, and (7) any other information relating to such Member that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the Annual General Meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. A Member providing notice of business proposed to be brought before a general meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Article 19.5(e) shall be true and correct as of the record date for determining the Members entitled to receive notice of the general meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the
 
18

 
Company not later than five (5) business days after the record date for determining the Members entitled to receive notice of the general meeting.  For purposes of this Article 19.5, a “ Member Associated Person ” of any Member shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such Member, (ii) any beneficial owner of shares of the Company owned of record or beneficially by such Member and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by, under common control or acting in concert with such person referred to in the preceding clauses (i) and (ii).
 
(e)                                 No business shall be conducted at the annual general meeting except business brought before the annual general meeting in accordance with the procedures set forth in this Article 19.5, provided, however, that once business has been properly brought before the annual general meeting in accordance with such procedures, nothing in this Article shall be deemed to preclude discussion by any Member of any such business.  If the Chairperson of an annual general meeting determines that business was not properly brought before the annual general meeting in accordance with the foregoing procedures, the Chairperson shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.
 
(f)                                  In addition to any other applicable requirements, for a nomination for election of a Director to be made by a Member of the Company, such Member must (A) be a Member of record on both (x) the date of the giving of the notice by such Member provided for in this Article and (y) the record date for the determination of Members entitled to vote at such annual general meeting and (B) have given timely notice thereof in proper written form to the Secretary of the Company.  If a Member is entitled to vote only for a specific class or category of directors at a meeting of the Members, such Member’s right to nominate one or more persons for election as a director at the meeting shall be limited to such class or category of directors.
 
(g)                                 To be timely for purposes of Article 19.5(f), a Member’s notice shall be delivered to or mailed and received at the principal executive offices of the Company not less than one hundred twenty (120) days and not more than one hundred fifty (150) days prior to the meeting; provided, however, that in the event less than one hundred thirty (130) days’ notice or prior public disclosure of the date of the meeting is given or made to Members, notice by the Member to be timely must be so received not later than the close of business on the tenth (10 th ) day following the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made.
 
(h)                                To be in proper written form for purposes of Article 19.5(f), a Member’s notice to the Secretary must be set forth (A) as to each person whom the Member proposes to nominate for election as a director (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment of the person, (3) (A) the class or series and number of shares of the Company, if any, which are owned beneficially or of record by the person and any affiliates and associates of the person and any derivative positions held or beneficially held by the such person or any affiliates or associates of such person, (B) the name of each nominee holder of shares of the Company owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of the Company held by each such nominee holder, and (C) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such person or any affiliates or associates of such person with respect to any securities of the Company, and a description of any other agreement, arrangement or understanding
 
19

 
(including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such such person or any affiliates or associates of such person with respect to any securities of the Company, and (4) any other information relating to the person that would be required to be disclosed pursuant to any applicable law and rules of the Designated Stock Exchange; and (B) as to the Member giving notice (1) the name and record address of such Member, (2) the class or series and number of shares of the Company which are owned beneficially or of record by such Member or any Member Associated Person and any derivative positions held or beneficially held by the Member or any Member Associated Person, (3) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such Member or any Member Associated Person with respect to any securities of the Company, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such Member or any Member Associated Person with respect to any securities of the Company, (4) a description of all agreements, arrangements or understandings (whether written or oral) between such Member or any Member Associated Person and each proposed nominee (and any affiliates and associates of any proposed nominee) and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such Member or otherwise relating to the Company or any securities of the Company, (5) a representation that such Member intends to appear in person or by proxy at the annual meeting to nominate the person(s) named in its notice and (6) any other information relating to such Member that would be required to be disclosed pursuant to any applicable law and rules of the Designated Stock Exchange.  Such notice must be accompanied by each proposed nominee’s written representation and agreement that such proposed nominee: (A) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Company, will act or vote on any issue or question, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Company that has not been disclosed to the Company in such representation and agreement, (C) in such person’s individual capacity, would be in compliance with, if elected as a director of the Company, and will comply with and, upon election, execute any requisite documentation pertaining to all applicable publicly disclosed confidentiality, corporate governance, conflict of interest, Regulation FD, code of conduct and ethics, and stock ownership and trading policies and guidelines of the Company, and (D) consents to being named as a nominee by the Member and in any proxy statement of the Company, or other filings required to be made by the Company in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder and to serve as a director if elected.  A Member providing notice pursuant to this Section 19.5(i) shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Article 19.5(i) shall be true and correct as of the record date for determining the Members entitled to receive notice of the annual general meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Company not later than five (5) business days after the record date for determining the Members entitled to receive notice of the annual general meeting.
 
20

 
(i)                                    Nothing contained in this Article 19.5 shall be deemed to affect any rights of Members to request inclusion of proposals in the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law).
 
19.6                       No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in the Articles under this heading of “ NOTICE OF GENERAL MEETINGS ”.  If the Chairperson of an annual general meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairperson shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.  This Article shall not apply to any nomination of a director in an election in which only the holders of one or more series of Preferred Shares of the Company are entitled to vote (unless otherwise provided in the terms of such series of Preferred Shares).
 
19.7                       The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Member shall not invalidate the proceedings at any meeting.
 
20                                 PROCEEDINGS AT GENERAL MEETINGS
 
20.1                       No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business.  Members holding in aggregate not less than a majority of the shares of all voting share capital of the Company in issue present in person or by proxy and entitled to vote shall be a quorum for all purposes.  If, however, such quorum is not present or represented at any general meeting, then the Chairperson of the meeting.
 
20.2                       When a meeting is adjourned to another time and place, unless these Articles of Association otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the Company may transact any business that might have been transacted at the original meeting.  If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting.
 
20.3                      A determination of the Members of record entitled to notice of or to vote at a general meeting shall apply to any adjournment of such meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.
 
20.4                       The Chairperson of the Board of Directors shall preside as Chairperson at every general meeting of the Company.  If at any meeting the Chairperson of the Board of Directors is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as Chairperson, the Directors present shall elect one of their number to be Chairperson of the meeting or if all the Directors present decline to take the chair, the Members present shall choose one of their own number to be the Chairperson of the meeting.
 
20.5                       At any general meeting a resolution put to the vote of the meeting shall be decided on a poll.
 
20.6                       A poll shall be taken in such manner as the Chairperson of the meeting directs, and the result of the poll shall be deemed to be the resolution of the meeting.
 
20.7                       In the case of an equality of votes, the Chairperson of the meeting shall not be entitled to a second or casting vote.
 
21

 
21                                 VOTES OF MEMBERS
 
21.1                       Subject to any rights and restrictions for the time being attached to any class or classes of shares (including for the avoidance of doubt any super voting rights), every Member present in person and every person representing a Member by proxy at a general meeting of the Company shall have one vote for each share registered in such Member’s name in the Register of Members.  No cumulative voting shall be allowed.
 
21.2                       In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.
 
21.3                      A Member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote on a poll by his committee, or other person in the nature of a committee appointed by that court, and any such committee or other person, may on a poll, vote by proxy.
 
21.4                       No Member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.
 
21.5                       On a poll, votes may be given either personally or by proxy.
 
21.6                       The instrument appointing a proxy shall be in writing (whether by manual signature, typewriting, telegraphic transmission, telefacsimile or otherwise) under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorized authorized in that behalf provided however, that a Member may also authorize the casting of a vote by proxy pursuant to telephonic or electronically transmitted instructions (including, without limitation, instructions transmitted over the internet) obtained pursuant to procedures approved by the Board which are reasonably designed to verify that such instructions have been authorized by such Member.  A proxy need not be a Member of the Company.  Notwithstanding the foregoing, no proxy shall be voted or acted upon after three (3) years from its date unless the proxy provides for a longer period.
 
21.7                       An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve.
 
21.8                       The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.
 
21.9                       Any Ordinary Resolution or Special Resolution must be passed at a general meeting, and written resolutions of the Members shall not be permitted.
 
22                                 CORPORATIONS ACTING BY REPRESENTATIVES AT MEETING
 
22.1                       Any corporation which is a Member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Member.
 
22

 
23                                 CLEARING HOUSES
 
23.1                       If a clearing house or depository (or its nominee) is a member of the Company it may, by resolution of its directors or other governing body or by power of attorney, authorize such person or persons as it thinks fit to act as its representative or representatives at any general meeting of the Company or at any general meeting of any class of members of the Company provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized.  A person so authorized pursuant to this provision shall be entitled to exercise the same powers on behalf of the clearing house (or its nominee) which he represents as that clearing house (or its nominee) could exercise if it were an individual member of the Company holding the number and class of shares specified in such authorization.
 
24                                 DIRECTORS
 
24.1                       Subject to the requirements of Section B.2(c) of Exhibit A, there shall be a Board of Directors consisting of no less than three (3) and not more than fifteen (15) Directors, as shall be fixed from time to time by the Directors.  The Directors shall be elected or appointed in the first place by the subscribers to the Memorandum of Association or by a majority of them and thereafter by the Board, subject to Article 24.2.
 
24.2                       The Directors shall be divided into three (3) classes designated as Class I, Class II and Class III, respectively.  Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors, provided that the foregoing classification shall not apply to Directors elected pursuant to Section B.2(c) of  Exhibit A .  At the 2015 annual general meeting of Members, the term of office of the Class I Directors shall expire and Class I Directors shall be elected for a full term of three (3) years.  At the 2016 annual general meeting of Members, the term of office of the Class II Directors shall expire and Class II Directors shall be elected for a full term of three (3) years.  At the 2017 annual general meeting of Members, the term of office of the Class III Directors shall expire and Class III Directors shall be elected for a full term of three (3) years.  At each succeeding annual general meeting of Members, Directors shall be elected for a full term of three (3) years to succeed the Directors of the class whose terms expire at such annual general meeting.  Notwithstanding the foregoing provisions of this Article, each Director shall hold office until the expiration of his term, until his successor shall have been duly elected and qualified or until his earlier death, resignation or removal.  No decrease in the number of Directors constituting the Board shall shorten the term of any incumbent Director.
 
24.3                       The Board of Directors shall have a Chairperson of the Board of Directors (the “Chairperson”) elected and appointed by a majority of the Directors then in office.  The Directors may also elect a Vice-Chairperson of the Board of Directors (the “ Vice-Chairperson ”).  The Chairperson shall preside as Chairperson at every meeting of the Board of Directors.  To the extent the Chairperson is not present at a meeting of the Board of Directors, the Vice-Chairperson, or in his absence, the attending Directors, may choose one Director to be the Chairperson of the meeting.  The Chairperson’s voting right as to the matters to be decided by the Board of Directors shall be the same as other Directors.  In the case of an equality of votes, the Chairperson shall not have an additional tie-breaking vote.
 
24.4                       The Directors by the affirmative vote of a simple majority of the remaining Directors present and voting at a Board meeting, even if less than a quorum, shall have the power from time to time and at any time to appoint any person as a Director to fill a casual vacancy on the Board or as an addition to the existing Board, subject to these Articles, applicable law and the listing rules of
 
23

 
the Designated Stock Exchange; provided, that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of these Articles of Association, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by a sole remaining Director so elected.  Any Director so appointed shall hold office until the end of the then current term of the class of Directors to which he is elected or until his earlier death, resignation or removal.
 
24.5                       Subject to Article 27.1, a Director may only be removed from office by Special Resolution for cause at any time before the expiration of his term notwithstanding anything in these Articles or in any agreement between the Company and such Director (but without prejudice to any claim for damages under such agreement).
 
24.6                       A vacancy on the Board created by the removal of a Director under the provisions of these Articles may be filled by the election or appointment by Ordinary Resolution at the meeting at which such Director is removed or by the affirmative vote of a simple majority of the remaining Directors present and voting at a Board meeting, subject to these Articles, applicable law and the listing rules of the Designated Stock Exchange.  Any Director so appointed shall hold office until the end of the then current term of the class of Directors to which he is elected or until his earlier death, resignation or removal.
 
24.7                       The Board may, from time to time, and except as required by applicable law or the listing rules of the Designated Stock Exchange, adopt, institute, amend, modify or revoke the corporate governance policies or initiatives, which shall be intended to set forth the policies of the Company and the Board on various corporate governance related matters, as the Board shall determine by resolution from time to time.
 
24.8                      A Director shall not be required to hold any shares in the Company by way of qualification.  A Director who is not a member of the Company shall nevertheless be entitled to receive notice of and to attend and speak at general meetings of the Company and all classes of shares of the Company.
 
25                                 DIRECTORS’ FEES AND EXPENSES
 
25.1                       The Directors may receive such remuneration as the Board may from time to time determine.  The Directors may be entitled to be repaid all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred by him in attending meetings of the Board or committees of the Board or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of his duties as a Director.
 
25.2                       Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Article.
 
26                                 POWERS AND DUTIES OF DIRECTORS
 
26.1                       Subject to the provisions of the Statute, these Articles and to any resolutions made in a general meeting, the business of the Company shall be managed by the Directors, who may pay all
 
24

 
expenses incurred in setting up and registering the Company and may exercise all powers of the Company.  No resolution made by the Company in a general meeting shall invalidate any prior act of the Directors that would have been valid if that resolution had not been made.
 
26.2                       Subject to these Articles, the Directors may from time to time appoint any person, whether or not a director of the Company, to hold the office of the Chief Executive Officer as the Directors may think necessary for the administration of the Company, for such term and at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such powers and duties as the Directors may think fit.  The Chief Executive Officer may from time to time appoint any person to hold such office in the Company as he or she may think necessary for the administration of the Company, including without prejudice to the foregoing generality, the office of one or more Vice Presidents, Chief Financial Officer, Manager or Controller, and for such term and at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such powers and duties as the Chief Executive Officer may think fit.
 
26.3                       The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; provided that any committee so formed shall include amongst its members at least two Directors unless otherwise required by applicable law, rules and regulations and the rules of the Designated Stock Exchange; provided further that no committee shall have the power of authority to (a) recommend to the Members an amendment of these Articles of Association (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided under the laws of the Cayman Islands, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Company or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Company); (b) adopt an agreement of merger or consolidation; (c) recommend to the Members the sale, lease or exchange of all or substantially all of the Company’s property and assets; (d) recommend to the Members a dissolution of the Company or a revocation of a dissolution; (e) recommend to the Members an amendment of the Memorandum of Association of the Company; or (f) declare a dividend or authorize the issuance of Shares unless the resolution establishing such committee or the Memorandum or Articles of Association of the Company so provide.  Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors.  The Directors may also delegate to any Director holding any executive office such of their powers as they consider desirable to be exercised by him or her.  Any such delegation may be made subject to any conditions the Board may impose, and either collaterally with or to the exclusion of their own powers, and may be revoked or altered.
 
26.4                       The Directors may from time to time and at any time by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to delegate all or any of the powers, authorities and discretion vested in him.
 
26.5                       The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the following paragraphs shall be without prejudice to the general powers conferred by this paragraph.
 
25

 
26.6                       The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the Company and may appoint any persons to be members of such committees or local boards and may appoint any managers or agents of the Company and may fix the remuneration of any of the aforesaid.
 
26.7                       The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities and discretions for the time being vested in the Directors and may authorise the members for the time being of any such local board, or any of them to fill up any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject to such conditions as the Directors may think fit and the Directors may at any time remove any person so appointed and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.
 
26.8                       Any such delegates as aforesaid may be authorised by the Directors to subdelegate all or any of the powers, authorities, and discretions for the time being vested to them.
 
26.9                       The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.
 
27                                 DISQUALIFICATION OF DIRECTORS
 
27.1                       Subject to these Articles, the office of Director shall be vacated, if the Director:
 
(a)                                becomes bankrupt or makes any arrangement or composition with his creditors;
 
(b)                                is found to be or becomes of unsound mind;
 
(c)                                 resigns his office by notice in writing to the Company;
 
(d)                                is prohibited by applicable law or the Designated Stock Exchange from being a director;
 
(e)                                 without special leave of absence from the Board, is absent from meetings of the Board for six consecutive months and the Board resolves that his office be vacated; or
 
(f)                                  if he or she shall be removed from office pursuant to these Articles.
 
28                                 PROCEEDINGS OF DIRECTORS
 
28.1                       Subject to these Articles, the Directors may meet together for the dispatch of business, adjourn, and otherwise regulate their meetings and proceedings as they think fit.  Such meetings may be held at any place within or outside the Cayman Islands that has been designated by the Board of Directors.  In the absence of such a designation, meetings of the Board of Directors shall be held at the principal executive office of the Company.  Questions arising at any meeting of the Directors shall be decided by a majority of votes.  In the case of an equality of votes, the Chairperson of the Board shall not have an additional tie-breaking vote.
 
28.2                       The Chairperson of the Board, the chief executive officer of the Company or a majority of the Directors may, at any time summon a meeting of the Board by notice to each Director.  Notice of such meeting shall be given to each director at his business or residence in writing, or by
 
26

 
telegram, facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed).  If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting.  If by telegram, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company at least twenty-four (24) hours before such meeting.  If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting.  The accidental omission to give notice of a meeting of the Board to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings of that meeting.  Notice of a meeting need not be given to any Director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Directors.  All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting.  A waiver of notice need not specify the purpose of any regular or special meeting of the Board of Directors.
 
28.3                       A Director or Directors may participate in any meeting of the Board of Directors, or of any committee appointed by the Board of Directors of which such Director or Directors are members, by means of telephone or similar communication equipment by way of which all persons participating in such meeting can hear each other and such participation shall be deemed to constitute presence in person at the meeting.
 
28.4                       The quorum necessary for the transaction of the business of the Directors shall be a majority of the authorized number of Directors.  If at any time there is only a sole Director, the quorum shall be one (1) Director.  Every act or decision done or made by a majority of the Directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of these Articles of Association and other applicable law.
 
28.5                       A meeting of the Directors may be held by means of telephone or teleconferencing or any other telecommunications facility provided that all participants are thereby able to communicate immediately by voice with all other participants.
 
28.6                       Subject to these Articles, a Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company shall declare the nature of his interest at a meeting of the Directors.  A general notice given to the Directors by any Director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made.  A Director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the Directors at which any such contract or proposed contract or arrangement shall come before the meeting for consideration.
 
28.7                       A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so
 
27

 
contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established.  A Director, notwithstanding his interest, may be counted in the quorum present at any meeting whereat he or any other Director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote on any such appointment or arrangement.  Any Director who enters into a contract or arrangement or has a relationship that is reasonably likely to be implicated under this Article 28.7 or that would reasonably be likely to affect a Director’s status as an “Independent Director” under applicable law or the rules of the Designated Stock Exchange shall disclose the nature of his or her interest in any such contract or arrangement in which he is interested or any such relationship.
 
28.8                       Any Director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to reasonable expense reimbursement consistent with the Company’s policies in connection with such Directors service in his or her official capacity; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to the Company.
 
28.9                       The Directors shall cause minutes to be made in books or loose-leaf folders provided for the purpose of recording:
 
(a)                                all appointments of officers made by the Directors;
 
(b)                                the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and
 
(c)                                 all resolutions and proceedings at all meetings of the Company, and of the Directors and of committees of Directors.
 
28.10                When the Chairperson of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings.
 
28.11                A resolution signed by all the Directors shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and constituted.  When signed a resolution may consist of several documents each signed by one or more of the Directors.
 
28.12                The continuing Directors may act notwithstanding any vacancy in their body but if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number, or of summoning a general meeting of the Company, but for no other purpose.
 
28.13                A committee appointed by the Directors may elect a Chairperson of its meetings.  If no such Chairperson is elected, or if at any meeting the Chairperson is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be Chairperson of the meeting.
 
28.14                A committee appointed by the Directors may meet and adjourn as it thinks proper.  Questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the Chairperson shall not have a second or casting vote.
 
28

 
28.15                Meetings and actions of committees of the Board of Directors shall be governed by, and held and taken in accordance with, the provisions of Article 28.1 (place of meetings), Article 28.2 (notice), Article 28.3 (telephonic meetings), and Article 28.4 (quorum), with such changes in the context of these Articles of Association as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee.  The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Articles of Association.
 
28.16                All acts done by any meeting of the Directors or of a committee of Directors, or by any person acting as a Director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.
 
29                                 PRESUMPTION OF ASSENT
 
29.1                       A Director of the Company who is present at a meeting of the Board of Directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the Minutes of the meeting or unless he shall file his written dissent or abstention from such action with the person acting as the Chairperson or Secretary of the meeting before the adjournment thereof or shall forward such dissent or abstention by registered post to such person immediately after the adjournment of the meeting.  Such right to dissent or abstain shall not apply to a Director who voted in favour of such action.
 
30                                 DIVIDENDS, DISTRIBUTIONS AND RESERVE
 
30.1                       Subject to any rights and restrictions for the time being attached to any class or classes of shares and these Articles, the Directors may from time to time declare dividends (including interim dividends) and other distributions on shares in issue and authorise payment of the same out of the funds of the Company lawfully available therefor.  All dividends unclaimed for one (1) year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed.  Any dividend unclaimed after a period of six (6) years from the date of declaration shall be forfeited and shall revert to the Company.  The payment by the Board of any unclaimed dividend or other sums payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof.
 
30.2                       The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors be applicable for meeting contingencies, or for equalizing dividends or for any other purpose to which those funds be properly applied and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the Company) as the Directors may from time to time think fit.  The Board shall establish an account to be called the “Share Premium Account” and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any share in the Company.  Unless otherwise provided by the provisions of these Articles, the Board may apply the share premium account in any manner permitted by the Statute and the rules of the Designated Stock Exchange.  The
 
29

 
Company shall at all times comply with the provisions of these Articles, the Statute and the rules of the Designated Stock Exchange in relation to the share premium account.
 
30.3                       Any dividend may be paid by cheque or warrant sent through the post to the registered address of the Member or person entitled thereto, or in the case of joint holders, to any one of such joint holders at his registered address or to such person and such address as the Member or person entitled, or such joint holders as the case may be, may direct.  Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to the order of such other person as the Member or person entitled, or such joint holders as the case may be, may direct.
 
30.4                       The Directors when paying dividends to the Members in accordance with the foregoing provisions may make such payment either in cash or in specie.
 
30.5                       No dividend shall be paid otherwise than out of profits or, subject to the restrictions of the Statute, the share premium account.
 
30.6                       Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid or credited as fully paid on the shares, but if and so long as nothing is paid up on any of the shares in the Company dividends may be declared and paid according to the amounts of the shares.  No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this Article as paid on the share.
 
30.7                       If several persons are registered as joint holders of any share, any of them may give effectual receipts for any dividend or other moneys payable on or in respect of the share.
 
30.8                       No dividend shall bear interest against the Company.
 
31                                 BOOK OF ACCOUNTS
 
31.1                       The books of account relating to the Company’s affairs shall be kept in such manner as may be determined from time to time by the Directors.
 
31.2                       The books of account shall be kept at such place or places as the Directors think fit, and shall always be open to the inspection of the Directors.
 
31.3                       Except as provided in Article 17.1, the Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors, and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by Statute or authorised by the Directors or by the Company by Ordinary Resolution.
 
31.4                       The accounts relating to the Company’s affairs shall be audited in such manner and with such financial year end as may be determined from time to time by the Company by Ordinary Resolution or failing any such determination by the Directors or failing any determination as aforesaid shall not be audited.
 
32                                 ANNUAL RETURNS AND FILINGS
 
32.1                       The Board shall make the requisite annual returns and any other requisite filings in accordance with the Statute.
 
30

 
33                                 AUDIT
 
33.1                       The Directors may appoint an auditor of the Company who shall hold office until removed from office by a resolution of the Directors and may fix his or their remuneration.
 
33.2                       Every Auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and officers of the Company such information and explanation as may be necessary for the performance of the duties of the auditors.
 
33.3                       Auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at the next annual general meeting following their appointment in the case of a company which is registered with the Registrar of Companies as an ordinary company, and at the next extraordinary general meeting following their appointment in the case of a company which is registered with the Registrar of Companies as an exempted company, and at any other time during their term of office, upon request of the Directors or any general meeting of the Members.
 
34                                 THE SEAL
 
34.1                       The Seal of the Company shall not be affixed to any instrument except by the authority of a resolution of the Board of Directors, provided always that such authority may be given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixings of the Seal.  The Seal shall be affixed in the presence of any one or more persons as the Directors may appoint for the purpose and every person as aforesaid shall sign every instrument to which the Seal of the Company is so affixed in their presence.
 
34.2                       The Company may maintain a facsimile of its Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of a resolution of the Board of Directors provided always that such authority may be given prior to or after the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal.  The facsimile Seal shall be affixed in the presence of such person or persons as the Directors shall for this purpose appoint and such person or persons as aforesaid shall sign every instrument to which the facsimile Seal of the Company is so affixed in their presence of and the instrument signed by a Director or the Secretary (or an Assistant Secretary) of the Company or in the presence of any one or more persons as the Directors may appoint for the purpose.
 
34.3                       Notwithstanding the foregoing, a Director shall have the authority to affix the Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the Company.
 
35                                 OFFICERS
 
35.1                       The Company shall have a President, Secretary, and Chief Financial Officer, and may have one or more Vice Presidents, a Manager or a Controller, appointed by the Directors; provided, however, that there may exist a vacancy in any such office from time to time because of death, resignation, removal, disqualification or any other cause which shall be filled by the Board of Directors as soon as reasonably practicable.  The Directors may also from time to time appoint such other officers as they consider necessary, all for such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors from time to time subscribe.
 
31

 
36                                 REGISTER OF DIRECTORS AND OFFICERS
 
36.1                       The Company shall cause to be kept in one or more books at its office a Register of Directors and Officers in which there shall be entered the full names and addresses of the Directors and Officers and such other particulars as required by the Statute.  The Company shall send to the Registrar of Companies in the Cayman Islands a copy of such register, and shall from time to time notify the said Registrar of any change that takes place in relation to such Directors and Officers as required by the Statute.
 
37                                 CAPITALISATION OF PROFITS
 
37.1                       Subject to the Statute and these Articles, the Board may capitalize any sum standing to the credit of any of the Company’s reserve accounts (including a share premium account or a capital redemption reserve fund) or any sum standing to the credit of profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their behalf in paying up in full unissued shares for allotment and distribution credited as fully paid up to and amongst them in the proportion aforesaid.  In such event, the Directors shall do all acts and things required to give effect to such capitalization, with full power to the Directors to make such provisions as they think fit for the case of shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned).  The Directors may authorize any person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalization and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.
 
38                                 NOTICES
 
38.1                       Except as otherwise provided in these Articles, any notice or document may be served by the Company or by the person entitled to give notice to any Member either personally, by facsimile or by sending it through the post in a prepaid letter or via a recognized courier service, fees prepaid, addressed to the Member at his address as appearing in the Register of Members or, to the extent permitted by all applicable laws and regulations, by electronic means by transmitting it to any electronic number or address or website supplied by the member to the Company or by placing it on the Company’s Website provided that, with respect to notification via electronic means or posting to Company’s Website, the Company has obtained the Member’s prior express positive confirmation in writing to receive or otherwise have made available to him notices in such fashion.  In the case of joint holders of a share, all notices shall be given to that one of the joint holders whose name stands first in the Register of Members in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders.
 
38.2                       Notices posted to addresses outside the Cayman Islands shall be forwarded by prepaid airmail.
 
38.3                       Any Member present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened.
 
38.4                       Any notice or other document, if served by (a) post, shall be deemed to have been served when the letter containing the same is posted and if served by courier, shall be deemed to have been served when the letter containing the same is delivered to the courier (in proving such service it shall be sufficient to prove that the letter containing the notice or document was properly addressed and duly posted or delivered to the courier), or (b) facsimile, shall be deemed to have
 
32

 
been served upon confirmation of successful transmission, or (c) recognised delivery service, shall be deemed to have been served when the letter containing the same is delivered to the courier service and in proving such service it shall be sufficient to provide that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier or (d) electronic means as provided herein shall be deemed to have been served and delivered on the day on which it is successfully transmitted or at such later time as may be prescribed by any applicable laws or regulations.
 
38.5                       Any notice or document delivered or sent to any Member in accordance with the terms of these Articles shall notwithstanding that such Member be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been duly served in respect of any share registered in the name of such Member as sole or joint holder, unless his name shall at the time of the service of the notice or document, have been removed from the Register of Members as the holder of the share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share.
 
38.6                       Notice of every general meeting shall be given to:
 
(a)                                all Members who have supplied to the Company an address for the giving of notices to them, except that in case of joint holders, the notice shall be sufficient if given to the joint holder first named in the Register of Members;
 
(b)                                every person entitled to a share in consequence of the death or bankruptcy of a Member, who but for his death or bankruptcy would be entitled to receive notice of the meeting;
 
(c)                                 the Auditors; and
 
(d)                                each Director.
 
38.7                       No other person shall be entitled to receive notices of general meetings.
 
39                                 INFORMATION
 
39.1                       No Member shall be entitled to require discovery of any information in respect of any detail of the Company’s trading or any information which is or may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Board would not be in the interests of the members of the Company to communicate to the public.
 
39.2                       The Board shall be entitled to release or disclose any information in its possession, custody or control regarding the Company or its affairs to any of its members including, without limitation, information contained in the Register of Members and transfer books of the Company.
 
40                                 INDEMNITY
 
40.1                       The Company shall indemnify every Director and officer of the Company or any predecessor to the Company (which for the avoidance of doubt, shall not include auditors of the Company), together with every former Director and former officer of the Company or any predecessor to the Company, and may indemnify any person (other than current and former Directors and officers) (any such Director, officer or other person, an “ Indemnified Person ”), out of the assets of the Company against any liability, action, proceeding, claim, demand, costs, damages or expenses,
 
33

 
including legal expenses, whatsoever which they or any of them may incur as a result of any act or failure to act in carrying out their functions other than such liability (if any) that they may incur by reason of their own actual fraud or wilful default.  No Indemnified Person shall be liable to the Company for any loss or damage incurred by the Company as a result (whether direct or indirect) of the carrying out of their functions unless that liability arises through the actual fraud or wilful default of such Indemnified Person.  No person shall be found to have committed actual fraud or wilful default under this Article unless or until a court of competent jurisdiction shall have made a finding to that effect.  Each Member agrees to waive any claim or right of action he or she might have, whether individually or by or in the right of the Company, against any Director on account of any action taken by such Director, or the failure of such Director to take any action in the performance of his or her duties with or for the Company; provided that such waiver shall not extend to any matter in respect of any fraud or wilful default which may attach to such Director.
 
40.2                       The Company shall advance to each Indemnified Person reasonable attorneys’ fees and other costs and expenses incurred in connection with the defense of any action, suit, proceeding or investigation involving such Indemnified Person for which indemnity will or could be sought.  In connection with any advance of any expenses hereunder, the Indemnified Person shall execute an undertaking to repay the advanced amount to the Company if it shall be determined by final judgment or other final adjudication that such Indemnified Person was not entitled to indemnification pursuant to this Article.  If it shall be determined by a final judgment or other final adjudication that such Indemnified Person was not entitled to indemnification with respect to such judgment, costs or expenses, then such party shall not be indemnified with respect to such judgment, costs or expenses and any advancement shall be returned to the Company (without interest) by the Indemnified Person.
 
40.3                       The Directors, on behalf of the Company, may purchase and maintain insurance for the benefit of any Director or other officer of the Company against any liability which, by virtue of any rule of law, would otherwise attach to such person in respect of any negligence, default, breach of duty or breach of trust of which such person may be guilty in relation to the Company.
 
40.4                       Neither any amendment nor repeal of the Articles set forth under this heading of “INDEMNITY” (the “ Indemnification Articles ”), nor the adoption of any provision of the Company’s Articles or Memorandum of Association inconsistent with the Indemnification Articles, shall eliminate or reduce the effect of the Indemnification Articles, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for these Indemnification Articles, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
 
41                                 FINANCIAL YEAR
 
41.1                       Unless the Directors otherwise prescribe, the financial year of the Company shall end on December 31st in each year and shall begin on January 1st in each year.
 
42                                 WINDING UP
 
42.1                       If the Company shall be wound up, the liquidator shall apply the assets of the Company in satisfaction of creditors’ claims in such manner and order as such liquidator thinks fit.  Subject to the rights attaching to any shares, including the rights of the Series A Preferred Shares set forth in Section B.5 of  Exhibit A , in a winding up:
 
(a)                                if the assets available for distribution amongst the Members shall be insufficient to repay the whole of the Company’s issued share capital, such assets shall be distributed so
 
34

 
that, as nearly as may be, the losses shall be borne by the Members in proportion to the par value of the shares held by them; or
 
(b)                                if the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the Company’s issued share capital at the commencement of the winding up, the surplus shall be distributed amongst the Members in proportion to the par value of the shares held by them at the commencement of the winding up subject to a deduction from those shares in respect of which there are monies due, of all monies payable to the Company for unpaid calls or otherwise.
 
42.2                       If the Company shall be wound up, the liquidator may, subject to the rights attaching to any shares and with the sanction of a Special Resolution of the Company and any other sanction required by the Statute, divide amongst the Members in kind the whole or any part of the assets of the Company (whether such assets shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the Members or different classes of Members.  The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any asset upon which there is a liability.
 
43                                 AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION AND NAME OF COMPANY
 
43.1                       Subject to the provisions, if any, in the Articles, the Memorandum of Association and applicable law, including the Statute, the Company may at any time and from time to time by Special Resolution alter, amend, change or repeal these Articles or the Memorandum of Association of the Company, in whole or in part, or change the name of the Company.
 
44                                 REGISTRATION BY WAY OF CONTINUATION
 
44.1                       Subject to these Articles, the Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing.  In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company.
 
35

 
EXHIBIT A
 
TO
 
AMENDED AND RESTATED MEMORANDUM AND ARTICLES OF ASSOCIATION
 
OF
 
THERAVANCE BIOPHARMA, INC.
 
A.                                   Designations, Powers, Preferences, Privileges and Other Rights of Series A Preferred Shares.  The Series A Preferred Shares shall have the designations, powers, preferences, privileges and other rights set forth in this Exhibit A (“ Exhibit A ”) to the Amended and Restated Memorandum and Articles of Association of the Company (the “ Memorandum ”).  Exhibit A shall be incorporated into the Memorandum as if set forth therein.  Terms not otherwise defined herein shall the meanings given to them in the Memorandum.
 
B.                                   Preferred Shares.
 
1.                                     Dividends and Distributions.
 
(a)                                Subject to the prior and superior rights of the holders of any class or series of shares of the Company ranking prior and superior to the Series A Preferred Shares with respect to dividends, the holders Series A Preferred Shares, in preference to the holders of any class or series of shares of the Company ranking junior to the Series A Preferred Shares in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December, in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a Series A Preferred Share, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in Ordinary Shares or a subdivision of the outstanding Ordinary Shares (by reclassification or otherwise), declared on the Ordinary Shares, since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a Series A Preferred Share.  The “ Adjustment Number ” shall initially be 1,000.  In the event the Company shall at any time after the date upon which the Memorandum is filed with the Registrar of Companies (i) declare and pay any dividend on Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares or (iii) combine the outstanding Ordinary Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Ordinary Shares, outstanding immediately after such event and the denominator of which is the number of Ordinary Shares, that were outstanding immediately prior to such event.
 
E-1

 
(b)                                The Company shall declare a dividend or distribution on the Series A Preferred Shares as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Ordinary Shares (other than a dividend payable in Ordinary Shares).
 
(c)                                 Dividends shall begin to accrue and be cumulative on outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Preferred Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series A Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the Series A Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of Series A Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.
 
2.                                     Voting Rights.  The holders of Series A Preferred Shares shall have the following voting rights:
 
(a)                                Each Series A Preferred Share shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the Members.
 
(b)                                Except as required by law, by this Section B.2 and by Section B.9 of this Exhibit A, holders of Series A Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Ordinary Shares as set forth in the Memorandum) for taking any corporate action.
 
(c)                                 If, at the time of any general meeting of Members for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any Series A Preferred Shares are in default, the number of directors constituting the Board of Directors of the Company shall be increased automatically by two.  In addition to voting together with the holders of Ordinary Shares for the election of other directors of the Company, the holders of record of the Series A Preferred Shares, voting separately as a class to the exclusion of the holders of Ordinary Shares, shall be entitled at said meeting of Members (and at each subsequent annual meeting of Members), unless all dividends in arrears on the Series A Preferred Shares have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Company, the holders of any Series A Preferred Shares being entitled to cast a number of votes per share of Series A Preferred Shares as is specified in Section B.2(a).  Each such additional director shall serve until the next general meeting of Members for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section B.2(c).  Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the provisions of this Section B.2(c) may be removed at any time, without cause, only by the affirmative vote of the holders of the Series A Preferred Shares at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled
 
E-2

 
by the vote of such holders.  If and when such default shall cease to exist, the holders of the Series A Preferred Shares shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends.  Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced automatically by two.  The voting rights granted by this Section B.2(c) shall be in addition to any other voting rights granted to the holders of the Series A Preferred Shares in this Section B.
 
3.                                     Certain Restrictions.
 
(a)                                Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Shares as provided in Section B.1 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series A Preferred Shares outstanding shall have been paid in full, the Company shall not:
 
(i)                                    declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares;
 
(ii)                                 declare or pay dividends on or make any other distributions on any shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Shares, except dividends paid ratably on the Series A Preferred Shares and all such parity shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or
 
(iii)                              purchase or otherwise acquire for consideration any Series A Preferred Shares, or any shares ranking on a parity with the Series A Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Preferred Shares, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
 
(b)                                The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of the Company unless the Company could, under Section B.3(a), purchase or otherwise acquire such shares at such time and in such manner.
 
4.                                     Reacquired Shares.  Any Series A Preferred Shares purchased or otherwise acquired by the Company in any manner whatsoever shall be retired promptly after the acquisition thereof.  All such shares shall upon their retirement become authorized but unissued Preferred Shares and may be reissued as part of a new series of Preferred Shares to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein.
 
E-3

 
5.                                     Liquidation, Dissolution or Winding Up.
 
(a)                                Upon any liquidation, dissolution or winding up of the Company, voluntary or otherwise, no distribution shall be made to the holders of shares of the Company ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares unless, prior thereto, the holders of Series A Preferred Shares shall have received an amount per share (the “ Series A Liquidation Preference ”) equal to the greater of (i) $10.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed in respect of the Ordinary Shares upon such liquidation, dissolution or winding up of the Company.
 
(b)                                In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other classes and series of shares of the Company, if any, that rank on a parity with the Series A Preferred Shares in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Preferred Shares and the holders of such parity shares in proportion to their respective liquidation preferences.
 
(c)                                 Neither the merger or consolidation of the Company into or with another entity nor the merger or consolidation of any other entity into or with the Company shall be deemed to be a liquidation, dissolution or winding up of the Company within the meaning of this Section 6.
 
6.                                     Consolidation, Merger, Etc.  In case the Company shall enter into any consolidation, merger, combination or other transaction in which the outstanding Ordinary Shares are exchanged for or changed into other shares or securities, cash and/or any other property, then in any such case each Series A Preferred Share shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Ordinary Share is changed or exchanged.
 
7.                                     No Redemption.  The Series A Preferred Shares shall not be subject to redemption by the Company.
 
8.                                     Ranking.  The Series A Preferred Shares shall rank junior to all other series of the Preferred Shares as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Ordinary Shares as to such matters.
 
9.                                     Amendment.  Notwithstanding any other provision of the Memorandum or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the shares of this Company required by law or by the Memorandum, at any time that any Series A Preferred Shares are outstanding, the Memorandum shall not be amended. by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series A Preferred Shares so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding Series A Preferred Shares, voting separately as a class.
 
E-4

 
10.                              Fractional Shares.  Series A Preferred Shares may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Shares.
 
E-5

Exhibit 4.2
 
THERAVANCE BIOPHARMA, INC.
 
REGISTRATION RIGHTS AGREEMENT
 
March 3, 2014

 
TABLE OF CONTENTS
 
 	 	 	Page	
 	 	 	 	
1.	Registration Rights	1	
 	 	 	
 	1.1	Definitions	1	
 	1.2	Request for Registration	3	
 	1.3	Company Registration	4	
 	1.4	Form S-3 Registration	5	
 	1.5	Obligations of the Company	7	
 	1.6	Information from Holder	8	
 	1.7	Expenses of Registration	8	
 	1.8	Delay of Registration	8	
 	1.9	Indemnification	9	
 	1.10	Reports Under Securities Exchange Act of 1934	11	
 	1.11	Assignment of Registration Rights	11	
 	1.12	“Market Stand-Off” Agreement	12	
 	1.13	Termination of Registration Rights	12	
 	1.14	Limitation on Subsequent Registration Rights	12	
 	 	 	
2.	Miscellaneous	12	
 	 	 	
 	2.1	Successors and Assigns	12	
 	2.2	Governing Law	13	
 	2.3	Counterparts	13	
 	2.4	Titles and Subtitles	13	
 	2.5	Notices	13	
 	2.6	Expenses	13	
 	2.7	Entire Agreement: Amendments and Waivers	13	
 	2.8	Severability	13	
 	2.9	Aggregation of Shares	14	

i

 
REGISTRATION RIGHTS AGREEMENT
 
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 3rd day of March, 2014, by and among Theravance Biopharma, Inc., a Cayman Islands exempted company (the “Company”) and Glaxo Group Limited (“Investor”).
 
RECITALS
 
WHEREAS, the Company is a wholly-owned subsidiary of Theravance, Inc., a Delaware corporation (“Parent”), and Parent plans to distribute via a pro rata stock dividend to holders of Parent common stock all of the outstanding Ordinary Shares of the Company (the “Spin-Off”);
 
WHEREAS, Investor, GlaxoSmithKline, SmithKline Beecham Corporation and Parent are parties to that certain Amended and Restated Investors’ Rights Agreement, dated as of May 11, 2004, as amended (the “Parent Investors’ Rights Agreement”) that provided, among other matters, for certain terms and conditions concerning the registration of the securities of Parent beneficially owned by Investor and its Affiliates (as defined herein);
 
WHEREAS, GSK holds shares of the common stock of Parent and will receive Ordinary Shares of the Company upon the Spin-Off;
 
WHEREAS, the Company and Investor desire to agree on terms and conditions concerning the registration of securities of the Company beneficially owned by Investor and its Affiliates that are similar to the terms and conditions set forth in the Parent Investors’ Rights Agreement with respect to the securities of Parent; and
 
WHEREAS, the Company and Investor are entering into a Governance Agreement of even date herewith providing for various rights and obligations applicable to each of the Company and Investor.
 
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto further agree as follows:
 
1.                                     Registration Rights.  The Company covenants and agrees as follows:
 
1.1                              Definitions.  For purposes of this Section 1:
 
(a)                                The term “Act” means the Securities Act of 1933, as amended.
 
(b)                                “Affiliate” of a party means any Person, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with

 
such Person, where “control” means the decision-making authority as to such Person and, further, where such control shall be presumed to exist where a Person owns more than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity; it being specified that for purposes of this Agreement, the Company and its direct and indirect subsidiaries, if any, shall not be deemed to be Affiliates of GSK.
 
(c)                                 The term “Effective Date” means the date that Ordinary Shares of the Company are distributed to stockholders of Parent in the Spin-Off.
 
(d)                                The term “Form S-3” means such form under the Act as in effect on the date hereof or Form F-3 under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
 
(e)                                 The term “Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405.
 
(f)                                  The term “Holder” means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof.
 
(g)                                 The term “Initial Offering” means the Company’s first firm commitment underwritten public offering of its Ordinary Shares under the Act, if any, that closes on or before the one-year anniversary of the Effective Date.
 
(h)                                The term “1934 Act” means the Securities Exchange Act of 1934, as amended.
 
(i)                                    “Ordinary Shares” shall mean the ordinary shares, par value $0.00001 per share, of the Company.
 
(j)                                   The term “Person” shall mean any individual, corporation, partnership, trust, limited liability company, association or other entity
 
(k)                                The term “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.
 
(l)                                    The term “Registrable Securities” means (i) the Ordinary Shares held by the Investor at any time following the Spin-Off and (ii) any Ordinary Shares of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, excluding in all cases, however, any
 
2

 
Registrable Securities sold by a Person in a transaction in which his rights under this Section 1 are not assigned.
 
(m)                            The number of shares of “Registrable Securities” outstanding shall be determined by the number of Ordinary Shares outstanding that are, and the number of Ordinary Shares issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.
 
(n)                                The term “SEC” shall mean the Securities and Exchange Commission.
 
1.2                              Request for Registration.
 
(a)                                Subject to the conditions of this Section 1.2, if the Company shall receive at any time six (6) months after the Effective Date, a written request from the Holders of fifty percent (50%) or more of the Registrable Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price of at least $10,000,000, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 1.2, use all reasonable efforts to effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty (20) days of the mailing of the Company’s notice pursuant to this Section 1.2(a).
 
(b)                                If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a).  In such event the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority of the participating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company).  Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Company that marketing factors require a limitation of the number of securities underwritten (including Registrable Securities), then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the
 
3

 
underwriting and registration.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.
 
(c)                                 The Company shall not be required to effect a registration pursuant to this Section 1.2:
 
(i)                                    in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Act; or
 
(ii)                                 after the Company has effected one (1) registration pursuant to this Section 1.2, and such registration has been declared or ordered effective (provided, however, that beginning twelve (12) months following the Effective Date, for so long as the Company does not satisfy the eligibility requirements for utilization of a registration statement on Form S-3, the Company shall be required to effect a registration pursuant to this Section 1.2 unless the Company has, within the twelve (12) month period preceding the date of such request, already effected two registrations for the Holders pursuant to this Section 1.2); or
 
(iii)                              during the period starting with the date of the filing of, and ending on a date one hundred eighty (180) days following the effective date of, a Company-initiated registration subject to Section 1.3 below, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or
 
(iv)                             if the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to Section 1.4 hereof; or
 
(v)                                if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company (the “Board”), it would be seriously detrimental to the Company and its shareholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders, provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12)-month period.
 
1.3                              Company Registration.
 
(a)                                If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its shares or other securities under the Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration relating to a corporate reorganization or other transaction under Rule 145 of the Act, a registration on any new form enacted by the SEC after the date hereof that requires substantially less information (other than
 
4

 
information regarding the Holder or the Registrable Shares or the sale thereof) than would be required to be included in a registration statement also covering the sale of the Registrable Securities, or a registration in which the only Ordinary Shares being registered are Ordinary Shares issuable upon conversion of debt securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration.  Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section 1.3(c), use all reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder requests to be registered.
 
(b)                                Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration.  The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 1.7 hereof.
 
(c)                                 Underwriting Requirements.  In connection with any offering involving an underwriting of shares of the Company’s share capital, the Company shall not be required under this Section 1.3 to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company (or by other Persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company.  If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling Holders according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders).  If the underwriters determine in good faith to so limit the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated first to the Company, second, to the Holders on a pro rata basis; and third, to any shareholder of the Company other than a Holder on a pro rata basis.  No such reduction shall reduce the amount of securities of the selling Holders below 25% of the total amount of securities included in such registration.
 
1.4                              Form S-3 Registration.  In case the Company shall receive from the Holders of at least ten percent (10%) of the Registrable Securities a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company shall:
 
5

 
(a)                                promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and
 
(b)                                use all reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company, provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4:
 
(i)                                    if Form S-3 is not available for such offering by the Holders;
 
(ii)                                 if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $10,000,000;
 
(iii)                              if the Company shall furnish to the Holders requesting a registration statement pursuant to this Section 1.4 a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its shareholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Company shall not utilize this right more than once in any twelve month period;
 
(iv)                             if the Company has, within the twelve (12) month period preceding the date of such request, already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.4; or
 
(v)                                in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.
 
(c)                                 Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders.  Registrations effected pursuant to this Section 1.4 shall not be counted as requests for registration effected pursuant to Sections 1.2.
 
6

 
1.5                              Obligations of the Company.  Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
 
(a)                                prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed;
 
(b)                                prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement;
 
(c)                                 notify each holder of Registrable Securities of (A) the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose, (B) the receipt by the Company or its counsel of any written notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening in writing of any proceeding for such purpose, and (C) the effectiveness of each registration statement filed hereunder;
 
(d)                                take all reasonable actions to ensure that any Free Writing Prospectus (to the extent prepared by or on behalf of the Company) complies in all material respects with the Act, is filed in accordance with the Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby;
 
(e)                                 furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus and any Free Writing Prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
 
(f)                                  use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;
 
(g)                                 in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement (including, but not limited to, reasonable due diligence), in usual and customary form, with the managing underwriter of such offering;
 
7

 
(h)                                notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus or Free Writing Prospectus (to the extent prepared by or on behalf of the Company) relating thereto is required to be delivered under the Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and the Company shall amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of material fact or omit to statement a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
 
(i)                                    cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; and
 
(j)                                   provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.
 
1.6                              Information from Holder.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities.
 
1.7                              Expenses of Registration.  All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Sections 1.2, 1.3 and 1.4, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and reasonable fees of one special counsel for the selling Holders not to exceed $35,000 shall be borne by the Company.  Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or Section 1.4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be requested in the withdrawn registration), provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses.
 
1.8                              Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.
 
8

 
1.9                              Indemnification.  In the event any Registrable Securities are included in a registration statement under this Section 1:
 
(a)                                To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners or officers, directors and shareholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus, final prospectus or Free Writing Prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws; and the Company will reimburse each such Holder, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection l.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; provided further, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any Person controlling such Holder or underwriter, from whom the Person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) is provided to the Holder but was not sent or given by or on behalf of such Holder or underwriter to such Person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.
 
(b)                                To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing Persons may become subject, under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect
 
9

 
thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any Person intended to be indemnified pursuant to this subsection l.9(b), for any legal or other expenses reasonably incurred by such Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection l.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld), provided further that in no event shall any indemnity under this subsection l.9(b) exceed the net proceeds from the offering received by such Holder.
 
(c)                                 Promptly after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9.
 
(d)                                If the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided, however, that such contribution shall not exceed the net proceeds from the offering received by such Holder.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
 
10

 
(e)                                 Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, with the consent of the holders of a majority of the Registrable Securities, the provisions in the underwriting agreement shall control.
 
(f)                                  The obligations of the Company and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise.
 
1.10                       Reports Under Securities Exchange Act of 1934.  With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
 
(a)                                make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the Effective Date;
 
(b)                                file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and
 
(c)                                 furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.
 
1.11                       Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (i) is an Affiliate, subsidiary, parent, partner, limited partner, retired partner or shareholder of a Holder or (ii) after such assignment or transfer, holds that number of shares of Registrable Securities equal to at least one and one-half percent (1.5%) of the then outstanding shares of the Company, provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.12 below.
 
11

 
1.12                       “Market Stand-Off” Agreement.  Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Initial Offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed ninety (90) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or any securities convertible into or exercisable or exchangeable for Ordinary Shares (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Ordinary Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise.  This Section 1.12 shall not apply to transactions relating to Ordinary Shares acquired in open market transactions after completion of the Initial Offering or any private transaction that is between a Holder and an Affiliate of such Holder.  The foregoing provisions of this Section 1.12 shall only be applicable to the Holders if all officers and directors of the Company enter into similar agreements.  The underwriters in connection with the Initial Offering are intended third party beneficiaries of this Section 1.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
 
In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other Person subject to the foregoing restriction) until the end of such period.
 
1.13                       Termination of Registration Rights.  No Holder shall be entitled to exercise any right provided for in this Section 1 after December 31, 2024 or, as to any Holder holding one and one-half percent (1.5%) or less of the outstanding shares of the Company, such earlier time at which all Registrable Securities held by such Holder (and any Affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in a single transaction without registration in compliance with Rule 144 of the Act.
 
1.14                       Limitation on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights senior to those granted to the Holders hereunder.
 
2.                                     Miscellaneous.
 
2.1                              Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities); provided that, except as explicitly provided herein, the rights hereunder may not be assigned to a Person without a corresponding transfer of shares to such Person.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than
 
12

 
the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
 
2.2                              Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware.  Any action with respect to this Agreement shall be brought in the state courts of Delaware or the US District Court for the District of Delaware.
 
2.3                              Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
2.4                              Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
2.5                              Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given upon the earlier to occur of actual receipt or: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All notices and certificates will be addressed to an Investor at the address set forth in the books and records of the Company or at such other address as the Company or the Investor may designate by ten (10) days advance written notice to the other parties hereto
 
2.6                              Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
 
2.7                              Entire Agreement: Amendments and Waivers.  This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof.  The parties agree that this Agreement shall become effective on the Effective Date.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities and each future holder of all such Registrable Securities.
 
2.8                              Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
 
13

 
2.9                              Aggregation of Shares.  All shares of Registrable Securities held or acquired by affiliated entities or Persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, including, but not limited to, for purposes of Section 1.3(c).
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
14

 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
 
 	THERAVANCE BIOPHARMA, INC.	

 	By:	/s/ Rick E Winningham	
 	 	Rick E Winningham	
 	 	Chief Executive Officer	
 
SIGNATURE PAGE TO THERAVANCE BIOPHARMA, INC.
REGISTRATION RIGHTS AGREEMENT

 
 	INVESTOR:	

 	GLAXO GROUP LIMITED	
 	Name of Investor	
 	 	
 	By:	/s/ Paul Williamson	
 	 	Signature of Authorized Person	
 	 	 	
 	Name:	Paul Williamson	
 	 	 	
 	Title:	Authorized Signatory
For and on behalf of
Edinburgh Pharmaceutical Industries Limited
Corporate Director	
 	 	
 	Address:	 	

 	 	 	 	
 
SIGNATURE PAGE TO THERAVANCE BIOPHARMA, INC.
REGISTRATION RIGHTS AGREEMENT

Exhibit 4.3
 
THERAVANCE BIOPHARMA, INC.
 
and
 
Computershare Inc.,
 
as Rights Agent
 
RIGHTS AGREEMENT
 
Dated as of                           , 2014

 
RIGHTS AGREEMENT
 
This Rights Agreement, dated as of                         , 2014 (“Agreement”), is between Theravance Biopharma, Inc., a Cayman Islands exempted company (the “Company”), and Computershare Inc., a Delaware corporation, as Rights Agent (the “Rights Agent”).
 
The Board of Directors of the Company (the “Board”) has authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Ordinary Share (as hereinafter defined) of the Company outstanding as of the Close of Business (as defined below) on                         , 2014 (the “Record Date”), each Right representing the right to purchase one one-thousandth (subject to adjustment) of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each Ordinary Share that shall become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined);  provided ,  however , that Rights may be issued with respect to Ordinary Shares that shall become outstanding after the Distribution Date and prior to the Expiration Date in accordance with Section 22.
 
Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
 
Section 1.              Certain Definitions.  For purposes of this Agreement, the following terms have the meaning indicated:
 
(a)           “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 19% or more of the Ordinary Shares then outstanding, but shall not include an Exempt Person (as such term is hereinafter defined);  provided ,  however , that (i) if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person” became the Beneficial Owner of a number of Ordinary Shares such that the Person would otherwise qualify as an “Acquiring Person” inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of Ordinary Shares that would otherwise cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent of its Beneficial Ownership of Ordinary Shares but had no actual knowledge of the consequences of such Beneficial Ownership under this Agreement) and without any intention of changing or influencing control of the Company, then such Person shall not be deemed to be or to have become an “Acquiring Person” for any purposes of this Agreement unless and until such Person shall have failed to divest itself, as soon as practicable (as determined, in good faith, by the Board of Directors of the Company), of Beneficial Ownership of a sufficient number of Ordinary Shares so that such Person would no longer otherwise qualify as an “Acquiring Person”; (ii) if, as of the date hereof or prior to the first public announcement of the adoption of this Agreement, any Person is or becomes the Beneficial Owner of 19% or more of the Ordinary Shares outstanding, such Person shall not be deemed to be or to become an “Acquiring Person” unless and until such time as such Person shall, after the first public announcement of the adoption of this Agreement, become the Beneficial Owner of additional Ordinary Shares (other than pursuant to a dividend or distribution
 
1

 
paid or made by the Company on the outstanding Ordinary Shares or pursuant to a split or subdivision of the outstanding Ordinary Shares), unless, upon becoming the Beneficial Owner of such additional Ordinary Shares, such Person is not then the Beneficial Owner of 19% or more of the Ordinary Shares then outstanding; (iii) no Person shall become an “Acquiring Person” as the result of an acquisition of Ordinary Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of Ordinary Shares beneficially owned by such Person to 19% or more of the Ordinary Shares then outstanding,  provided ,  however , that if a Person shall become the Beneficial Owner of 19% or more of the Ordinary Shares then outstanding by reason of such share acquisitions by the Company and shall thereafter become the Beneficial Owner of any additional Ordinary Shares (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Ordinary Shares or pursuant to a split, subdivision or recapitalization of the outstanding Ordinary Shares), then such Person shall be deemed to be an “Acquiring Person” unless upon becoming the Beneficial Owner of such additional Ordinary Shares such Person does not beneficially own 19% or more of the Ordinary Shares then outstanding; (iv) no Person shall become an “Acquiring Person” solely as a result of any unilateral grant of any security by the Company or through the exercise of any options, warrants, rights or similar interests (including restricted shares) granted by the Company to its directors, officers and employees; (v) no Person shall become an “Acquiring Person” as the result of the acquisition of Beneficial Ownership of the Ordinary Shares from an individual who, on the later of the date hereof or the first public announcement of this Agreement, is the Beneficial Owner of 19% or more of the Ordinary Shares then outstanding if such Ordinary Shares are received by such Person upon such individual’s death pursuant to such individual’s will or pursuant to a charitable trust created by such individual for estate planning purposes and (vi) Glaxo Group Limited (“GGL”) and GlaxoSmithKline plc (together with GGL, “GSK”), together with its Affiliates and Associates, shall not be deemed an “Acquiring Person” for purposes of this Agreement (x) for so long as GGL is in compliance with the terms of that certain Governance Agreement dated March 3, 2014 by and among the Company and GGL (the “Governance Agreement”), and (y) if on the date of termination of the Governance Agreement, GSK, together with its Affiliates and Associates, is the Beneficial Owner of 19% or more of the Ordinary Shares outstanding, GSK, together with its Affiliates and Associates, shall not be deemed to be or to become an “Acquiring Person” unless and until such time as GSK or any of its Affiliates or Associates shall, after termination of the Governance Agreement, become the Beneficial Owner of additional Ordinary Shares (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Ordinary Shares or pursuant to a split or subdivision of the outstanding Ordinary Shares), unless, upon becoming the Beneficial Owner of such additional Ordinary Shares, GSK, together with its Affiliates and Associates, is not then the Beneficial Owner of 19% or more of the Ordinary Shares then outstanding.  For all purposes of this Agreement, any calculation of the number of Ordinary Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Ordinary Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date hereof.
 
(b)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof.
 
2

 
(c)           A Person shall be deemed the “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” of and shall be deemed to “beneficially own” any securities:
 
(i)            which such Person or any of such Person’s Affiliates or Associates is deemed to beneficially own, directly or indirectly, within the meaning of Rule l3d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date hereof;
 
(ii)           which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction or occurrence of one or more conditions) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise;  provided ,  however , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (w) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (x) securities which such Person has a right to acquire upon the exercise of Rights at any time prior to the time that any Person becomes an Acquiring Person, (y) securities issuable upon the exercise of Rights from and after the time that any Person becomes an Acquiring Person if such Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (“Original Rights”) or pursuant to Section 11(i) or Section 11(n) with respect to an adjustment to Original Rights or (z) securities which such Person or any of such Person’s Affiliates or Associates may acquire, does or do acquire or may be deemed to have the right to acquire, pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of such Person’s Affiliates or Associates) if such agreement has been approved by the Board of Directors prior to such Person’s becoming an Acquiring Person; or (B) the right or power to vote (directly or indirectly) pursuant to any agreement, arrangement or understanding;  provided ,  further , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security by reason of such agreement, arrangement or understanding if the agreement, arrangement or understanding, whether or not in writing, to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
 
(iii)          which are beneficially owned, directly or indirectly, by any other Person and with respect to which such Person or any of such Person’s Affiliates or Associates has: (A) any agreement, arrangement or understanding, whether or not in writing, (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of such securities of the Company or (B) any agreement, arrangement or understanding, whether or not in writing, to cooperate in obtaining, changing or influencing control of the Company;
 
provided, however, that no Person who is an officer, director or employee of an Exempt Person shall be deemed, solely by reason of such Person’s status or authority as such, to be the
 
3

 
“Beneficial Owner” of, to have “Beneficial Ownership” of or to “beneficially own” any securities that are “beneficially owned” (as defined in this Section l(c)), including, without limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of an Exempt Person; and  provided further , that nothing in this paragraph (c) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty days.
 
(d)           “Book Entry” shall mean entry in the register of members of the Company for the Ordinary Shares or, for Ordinary Shares participating in the direct registration system, by notation in the respective book entry accounts for the Ordinary Shares.
 
(e)           “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York, the State of New Jersey or the city in which the principal office of the Rights Agent is located are authorized or obligated by law or executive order to close.
 
(f)            “Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided ,  however , that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.
 
(g)           “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
(h)           “Distribution Date” shall have the meaning set forth in Section 3 hereof.
 
(i)            “Equivalent Preferred Shares” shall have the meaning set forth in Section 11(b) hereof.
 
(j)            “Exchange Ratio” shall have the meaning set forth in Section 24 hereof.
 
(k)           “Exempt Person” shall mean the Company or any Subsidiary (as such term is hereinafter defined) of the Company, in each case including, without limitation, in its fiduciary capacity, or any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity or trustee holding (or acting in a fiduciary capacity in respect of) Ordinary Shares for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other employee benefits for employees of the Company or of any Subsidiary of the Company.
 
(l)            “Expiration Date” shall have the meaning set forth in Section 7 hereof.
 
(m)          “Final Expiration Date” shall have the meaning set forth in Section 7 hereof.
 
(n)           “Flip-In Event” shall have the meaning set forth in Section 11(a)(ii) hereof.
 
(o)           “NASDAQ” shall mean The NASDAQ Global Market.
 
(p)           “New York Stock Exchange” shall mean the New York Stock Exchange, Inc.
 
4

 
(q)           “Ordinary Shares” when used with reference to the Company shall mean the Ordinary Shares, par value $0.00001 per share, of the Company.  “Ordinary Shares” when used with reference to any Person other than the Company shall mean the Ordinary Shares (or, in the case of any entity other than a corporation, the equivalent equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
 
(r)            “Ordinary Share Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
(s)            “Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust, association, syndicate, other entity, or an unincorporated group of persons, who by formal or informal agreement or arrangement, have embarked on a common purpose or act, and shall include, in each case, any successor (by merger or otherwise) to such Person.
 
(t)            “Preferred Share” shall mean the Series A Junior Participating Preferred Share, par value $0.00001 per share, of the Company having the rights and preferences set forth in the Amended and Restated Memorandum and Articles of Association attached to this Agreement as  Exhibit A  and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Shares authorized to permit the full exercise of the Rights, Equivalent Preferred Shares .
 
(u)           “Principal Party” shall have the meaning set forth in Section 13(b) hereof.
 
(v)           “Purchase Price” shall have the meaning set forth in Section 7(b) hereof.
 
(w)          “Record Date” shall have the meaning set forth in the recitals hereto.
 
(x)           “Redemption Date” shall have the meaning set forth in Section 7 hereof.
 
(y)           “Redemption Price” shall have the meaning set forth in Section 23 hereof.
 
(z)           “Right” shall have the meaning set forth in the recitals hereto.
 
(aa)         “Right Certificate” shall have the meaning set forth in Section 3 hereof.
 
(bb)         “Securities Act” shall mean the Securities Act of 1933, as amended.
 
(cc)         “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
(dd)         “Share Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such, or such earlier date as a majority of the Board of Directors shall become aware of the existence of an Acquiring Person.
 
5

 
(ee)         “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
(ff)          “Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.
 
(gg)         “Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
(hh)         “Summary of Rights” shall have the meaning set forth in Section 3 hereof.
 
(ii)           “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.
 
Section 2.              Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the express terms and conditions hereof (and no implied terms or conditions), and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable.  In the event the Company appoints one or more co-rights agents, the Company shall delivery written notice to the Rights Agent setting forth the respective duties of the Rights Agent and any co-rights agent.  The Rights Agent shall not have a duty to supervise, and no event shall the Rights Agent be liable for, the acts or omissions of any such co-rights agent.
 
Section 3.              Issue of Right Certificates.
 
(a)           Until the Close of Business on the tenth day after the Share Acquisition Date (such date hereinafter referred to as the “Distribution Date”) (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Ordinary Shares registered in the names of the holders thereof, which certificates of Ordinary Shares shall be deemed also to be certificates for Rights (or, with respect to Ordinary Shares not represented by certificates, the Rights related thereto will be evidenced by notation on the records of the Company evidencing ownership of such Ordinary Shares), and, in each case, not by separate Right Certificates, and (y) the Rights will be transferable only in connection with the transfer of the Ordinary Shares evidencing such Rights.  As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested to do so by the Company and provided with all necessary information and documents, in form, format and substance satisfactory to the Rights Agent, send) by such means as the Company shall select (or direct the Rights Agent to use in a written notice), to each record holder of Ordinary Shares as of the close of business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, the transfer agent or the registrar for the Ordinary Shares (and if the Rights Agent is not the transfer agent or registrar for the Ordinary Shares, the Company shall promptly provide such information to the Rights Agent in a form, format and substance satisfactory to the Rights Agent) a Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to adjustment as provided herein) for each Ordinary Share so held.
 
6

 
As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates.  The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if notification is given orally, the Company shall confirm the same in writing on or prior to the Business Day next following. Until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.
 
(b)           On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the “Summary of Rights”), by such means as the Company shall select, to each record holder of Ordinary Shares as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company.  With respect to certificates for Ordinary Shares (or Book Entry Ordinary Shares) outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof (or such Book Entry shares) together with the Summary of Rights.  Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any certificate for Ordinary Shares (or any Book Entry Ordinary Shares) outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Ordinary Shares represented thereby.
 
(c)           Rights shall be issued in respect of all Ordinary Shares issued or disposed of (including, without limitation, upon transfer or exchange or disposition of Ordinary Shares out of treasury or issuance or reissuance of Ordinary Shares out of authorized but unissued share capital) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, or in certain circumstances provided in Section 22 hereof, after the Distribution Date.  Certificates issued for Ordinary Shares (including, without limitation, upon transfer of outstanding Ordinary Shares, disposition of Ordinary Shares out of treasury or issuance or reissuance of Ordinary Shares out of authorized but unissued share capital) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, or in certain circumstances provided in Section 22 hereof, after the Distribution Date shall have impressed on, printed on, written on or otherwise affixed to them a legend in substantially the following form:
 
This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Theravance Biopharma, Inc. (the “Company”) and Computershare Inc., as Rights Agent, dated as of                         , 2014 and as amended, supplemented, restated, extended or renewed from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company.  Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Company will deliver to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.  Under certain circumstances, as set forth in the Rights Agreement, Rights owned by or transferred to any Person who is or becomes an Acquiring Person or Affiliate or Associate thereof (as those terms are defined in the Rights Agreement) and certain transferees thereof will become null and void and will no longer be transferable.
 
7

 
With respect to any Book Entry Ordinary Shares, a legend in substantially the form of the foregoing shall be included in a notice to the record holder of such shares in accordance with applicable law.  With respect to such certificates containing a legend in substantially the form of the foregoing, or any notice delivered to the holders of Book Entry shares in accordance with the preceding sentence, until the Distribution Date the Rights associated with the Ordinary Shares represented by such certificates or Book Entry shares shall be evidenced by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Ordinary Shares represented thereby.  In the event that the Company purchases or otherwise acquires any Ordinary Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Ordinary Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Ordinary Shares which are no longer outstanding.
 
Notwithstanding this paragraph (c), neither the omission of a legend nor the failure to deliver the notice of such legend required hereby shall affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.
 
Section 4.              Form of Right Certificates.  The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) when, as and if issued, shall be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (which do not affect the rights, duties or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or interdealer quotation system on which the Rights may from time to time be listed or quoted, or to conform to usage.  Subject to the provisions of this Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of one one-thousandths of a Preferred Share as shall be set forth therein at the Purchase Price, but the number of such one one-thousandths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.    The Company shall give written notice to the Rights Agent promptly after it becomes aware of the existence of any Acquiring Person, and until such written notice is received by the Rights Agent, the Rights Agent shall not be deemed to have knowledge that any person has become an Acquiring Person, or have any duty or obligation in connection with any person becoming an Acquiring Person.
 
Section 5.              Countersignature and Registration.
 
(a)           The Right Certificates shall be executed on behalf of the Company by the Company’s Chief Executive Officer either manually or by facsimile signature, shall have affixed thereto the Company’s seal or a facsimile thereof and shall be attested by the Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be manually or facsimile countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned.  In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be
 
8

 
countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such Person was not such an officer.
 
(b)           Following the Distribution Date and receipt by the Rights Agent of notice to that effect and all other relevant information and documents referred to in Section 3(a), the Rights Agent will keep or cause to be kept, at an office or agency designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
 
Section 6.              Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates .
 
(a)           Subject to the provisions of this Agreement, at any time after the Close of Business on the Distribution Date and at or prior to the Close of Business on the Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become null and void) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share (or such shares of the Principal Party, if any, as shall be issuable in lieu of such one-hundredths of a Preferred Share pursuant to Section 13(a) hereof) as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer any Right Certificate shall surrender the Right Certificate at the office of the Rights Agent designated for such purpose with the form of assignment on the reverse side thereof duly endorsed (or enclose with such Right Certificate a written instrument of transfer in a form satisfactory to the Company and the Rights Agent, duly executed by the registered holder thereof or the registered holder’s attorney duly authorized in writing), and with all signatures duly guaranteed. Any registered holder desiring to, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office or agency of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate or Right Certificates until the registered holder thereof shall have (i) properly completed and duly signed the certificate contained in the form of assignment set forth on the reverse side of each such Right Certificate and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) as the Company or the Rights Agent shall reasonably request.  Thereupon the Rights Agent shall countersign (by manual or facsimile signature) and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested, registered in such name or names as may be designated by the surrendering registered holder.  The Company may require payment from the holder of a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.  The Rights Agent shall have no
 
9

 
duty or obligation to take any action under any section of this Agreement that requires the payment of taxes and/or charges unless and until the Rights Agent is satisfied that all such taxes and/or charges have been paid.
 
(b)           Subject to the provisions of this Agreement, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make, execute and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.  Without limiting the foregoing, the Company may require the owner of any lost, stolen or destroyed Right Certificate, or his legal representative, to give the Company a bond sufficient to indemnify the Company and the Rights Agent against any claim that may be made against it on account of the alleged loss, theft or destruction of any such Right Certificate or the issuance of any such new Right Certificate.
 
Section 7.              Exercise of Rights, Purchase Price; Expiration Date of Rights.
 
(a)           Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date, and thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights evidenced thereby in whole or in part upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof properly completed and duly executed (with such signature duly guaranteed), to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a Preferred Share (or other securities, cash or other assets, as the case may be) as to which the Rights are exercised, and an amount equal to any tax or charge required to be paid under Section 9(e) hereof, at any time which is both after the Distribution Date and prior to the time (the “Expiration Date”) that is the earliest of (i) the Close of Business on                          (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), (iii) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement of the type described in Sections 1(c)(ii)(A)(z) and 13 of this Agreement at which time the Rights are terminated or (iv) the time at which such Rights are exchanged as provided in Section 24 hereof.
 
(b)           The Purchase Price shall be initially $             for each one one-thousandth of a Preferred Share purchasable upon the exercise of a Right.  The Purchase Price and the number of one one-thousandths of a Preferred Share or other securities or property to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) of this Section 7.
 
(c)           Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase properly completed and duly executed, accompanied by payment of the aggregate Purchase Price for the Preferred Shares
 
10

 
to be purchased and an amount equal to any applicable tax or charge required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof, in cash or by certified check, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from the Company or any transfer agent of the Preferred Shares, or make available if the Rights Agent is the transfer agent for the Preferred Shares, certificates for the number of Preferred Shares to be purchased (or by Book Entry in respect of such shares), and the Company will comply and hereby irrevocably authorizes and directs its transfer agent to comply with all such requests, or (B) if the Company, in its sole discretion, shall have elected to deposit the Preferred Shares into a depositary, requisition from the depositary agent appointed by the Company depositary receipts representing interests in such number of one one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company will direct any such depositary agent to comply with such request, (ii) when necessary to comply with this Agreement, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, as the case may be, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when necessary to comply with this Agreement, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.
 
(d)           Except as otherwise provided herein, in case the registered holder of any Right Certificate shall exercise less than all of the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the exercisable Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof.
 
(e)           Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights or other securities upon the occurrence of any purported transfer or exercise of such Rights or other securities pursuant to Section 6 hereof or this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate contained in the form of assignment or form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof as the Company or the Rights Agent shall reasonably request.
 
Section 8.              Cancellation and Destruction of Right Certificates.  All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the
 
11

 
written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
 
Section 9.              Availability of Preferred Shares.
 
(a)           The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights.
 
(b)           So long as the Preferred Shares issuable upon the exercise of Rights may be listed or admitted to trading on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed or admitted to trading on such exchange, upon official notice of issuance upon such exercise.
 
(c)           From and after such time as the Rights become exercisable, the Company shall use its best efforts, if then necessary to permit the issuance of Preferred Shares upon the exercise of Rights, to register and qualify such Preferred Shares under the Securities Act and any applicable state securities or “Blue Sky” laws (to the extent exemptions therefrom are not available), cause such registration statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of the date as of which the Rights are no longer exercisable for such securities and the Expiration Date.  The Company may temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act and permit it to become effective.  Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  The Company shall notify the Rights Agent in writing whenever it makes a public announcement pursuant to this Section 9(c) and give the Rights Agent a copy of such announcement. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement under the Securities Act shall have been declared effective, unless an exemption therefrom is available.
 
(d)           The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of entry of such Preferred Shares on the register of members of the Company (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
 
(e)           The Company further covenants and agrees that it will pay when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights.  The Company shall not, however, be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of
 
12

 
certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by that holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s and the Rights Agent’s satisfaction that no such tax or charge is due.
 
Section 10.            Preferred Share Record Date.  Each Person in whose name any certificate or Book Entry for Preferred Shares (or other securities as permitted by this Agreement) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or other such securities represented thereby on, and such certificate or Book Entry shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges) was made;  provided ,  however , that if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
 
Section 11.            Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights.  The Purchase Price, the number of Preferred Shares or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
 
(a)
 
(i)            In the event the Company shall at any time after the date of this Agreement (A) declare and pay a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its share capital in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the number and kind of share capital issuable upon exercise of a Right as of the record date for such dividend or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of share capital which, if such Right had been exercised immediately prior to such date and at a time when the register of members of Preferred Shares of the Company were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification.
 
(ii)           Subject to Section 24 of this Agreement, in the event any Person becomes an Acquiring Person (the first occurrence of such event being referred to hereinafter as the “Flip-
 
13

 
In Event”), then (A) the Purchase Price shall be adjusted to be the Purchase Price in effect immediately prior to the Flip-In Event multiplied by the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such Flip-In Event, whether or not such Right was then exercisable, and (B) each holder of a Right, except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon exercise thereof at a price equal to the Purchase Price (as so adjusted), in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Ordinary Shares as shall equal the result obtained by dividing the Purchase Price (as so adjusted) by 50% of the current per share market price of the Ordinary Shares (determined pursuant to Section 11(d) hereof) on the date of such Flip-In Event;  provided ,  however , that the Purchase Price (as so adjusted) and the number of Ordinary Shares so receivable upon exercise of a Right shall, following the Flip-In Event, be subject to further adjustment as appropriate in accordance with Section 11(f) hereof.  Notwithstanding anything in this Agreement to the contrary, however, from and after the Flip-In Event, any Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Flip-In Event or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with the Flip-In Event pursuant to either (I) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding the provisions of this paragraph, and subsequent transferees of such Persons, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Agreement.  The Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder.  From and after the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall, upon receipt of written notice directing it to do so, be canceled by the Rights Agent.  From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and not pursuant to this Section 11(a)(ii).
 
(iii)          The Company may at its option substitute for an Ordinary Share issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Ordinary Share.  In the event that there shall not be sufficient Ordinary Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board of Directors shall, with respect to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, (A) determine the excess (such excess, the “Spread”) of (1) the value of the Ordinary Shares issuable upon the exercise of a Right in accordance with the
 
14

 
foregoing subparagraph (ii) (the “Current Value”) over (2) the Purchase Price (as adjusted in accordance with the foregoing subparagraph (ii)), and (B) with respect to each Right (other than Rights which have become void pursuant to the foregoing subparagraph (ii)), make adequate provision to substitute for the Ordinary Shares issuable in accordance with the foregoing subparagraph (ii) upon exercise of the Right and payment of the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3) Preferred Shares or other equity securities of the Company (including, without limitation, shares or fractions of Preferred Shares which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Ordinary Shares, are deemed in good faith by the Board of Directors to have substantially the same value as the Ordinary Shares (such Preferred Shares and shares or fractions of Preferred Shares are hereinafter referred to as “Ordinary Share Equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having a value which, when added to the value of the Ordinary Shares issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board of Directors upon the advice of a nationally recognized investment banking firm selected in good faith by the Board of Directors;  provided ,  however , that if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the Flip-In Event (the date of the Flip-In Event being the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of such Purchase Price, Ordinary Shares (to the extent available), and then, if necessary, such number or fractions of Preferred Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  If, upon the occurrence of the Flip-In Event, the Board of Directors shall determine in good faith that it is likely that sufficient additional Ordinary Shares could be authorized for issuance upon exercise in full of the Rights, then, if the Board of Directors so elects, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the per share value of the Ordinary Shares shall be the current per share market price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or fractional value of any “Ordinary Share Equivalent” shall be deemed to equal the current per share market price of the Ordinary Shares.  The Board of Directors of the Company may, but shall not be
 
15

 
required to, establish procedures to allocate the right to receive Ordinary Shares upon the exercise of the Rights among the holders of Rights pursuant to this Section 11(a)(iii).
 
(b)           In case the Company shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“Equivalent Preferred Shares”)) or securities convertible into Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share or Equivalent Preferred Shares (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Preferred Shares) less than the then current per share market price of the Preferred Shares (determined pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of Preferred Shares and Equivalent Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible);  provided ,  however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the share capital of the Company issuable upon exercise of one Right.  In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.  Preferred Shares and Equivalent Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
 
(c)           In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares (determined pursuant to Section 11(d) hereof) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share, and the denominator of which shall be such current per share
 
16

 
market price (determined pursuant to Section 11(d) hereof) of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the share capital of the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
 
(d)
 
(i)            Except as otherwise provided herein, for the purpose of any computation hereunder, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to but not including such date;  provided ,  however , that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Security is not listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high and low asked prices in the over-the-counter market, as reported by any system then in use, or, if not quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company.  The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.
 
(ii)           For the purpose of any computation hereunder, if the Preferred Shares are publicly traded, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i).  If the Preferred Shares are not publicly traded but the Ordinary Shares are publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Ordinary Shares as determined pursuant to Section 11(d)(i) multiplied by the then applicable Adjustment Number (as defined in and determined in accordance with the terms of the Preferred Shares).  If neither the Ordinary Shares nor the Preferred Shares are publicly traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board
 
17

 
of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
 
(e)           No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price;  provided ,  however , that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest one hundred-thousandth of a Preferred Share or one-hundredth of an Ordinary Share or other share or security as the case may be.  Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.
 
(f)            If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any share capital of the Company other than the Preferred Shares, thereafter the Purchase Price and the number of such other shares so receivable upon exercise of a Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.
 
(g)           All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
 
(h)           Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one hundred-thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-thousandths of a share purchasable upon the exercise of a Right immediately prior to such adjustment by (y) the Purchase Price in effect immediately prior to such adjustment and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment.
 
(i)            The Company may elect on or after the date of any adjustment of the Purchase Price pursuant to Sections 11(b) or 11(c) hereof to adjust the number of Rights, in substitution for any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-hundredth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement (with prompt written
 
18

 
notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement.  If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Right Certificates so to be distributed shall be issued, executed and delivered by the Company, and countersigned and delivered by the Rights Agent, in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.
 
(j)            Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the exercise of a Right, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.
 
(k)           Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the fraction of Preferred Shares or other share capital issuable upon exercise of a Right, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares or other such shares at such adjusted Purchase Price.
 
(l)            In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent) until the occurrence of such event issuing to the holder of any Right exercised after such record date the Preferred Shares and other share capital or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other share capital or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment;  provided ,  however , that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.
 
(m)          Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such adjustments in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or
 
19

 
exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders.
 
(n)                                Anything in this Agreement to the contrary notwithstanding, in the event that at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare and pay any dividend on the Ordinary Shares payable in Ordinary Shares or (ii) effect a subdivision, combination or consolidation of the Ordinary Shares (by reclassification or otherwise than by payment of a dividend payable in Ordinary Shares) into a greater or lesser number of Ordinary Shares, then, in each such case, the number of Rights associated with each Ordinary Share then outstanding, or issued or delivered thereafter, shall be proportionately adjusted so that the number of Rights thereafter associated with each Ordinary Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Ordinary Share immediately prior to such event by a fraction the numerator of which shall be the total number of Ordinary Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Ordinary Shares outstanding immediately following the occurrence of such event.
 
(o)                                The Company agrees that, after the earlier of the Distribution Date or the Share Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or eliminate the benefits intended to be afforded by the Rights.
 
Section 12.                                   Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made or any event affecting the Rights or their exercisability (including, without limitation, an event which causes Rights to become null and void) occurs as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment or describing such event, and a brief, reasonably detailed statement of the facts, methodology and computations accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Ordinary Shares and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof (if so required under Section 25 hereof).  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of any such adjustment or event unless and until it shall have received such certificate.
 
Section 13.                                   Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
 
(a)                                In the event, directly or indirectly, at any time after the Flip-In Event (i) the Company shall consolidate with or shall merge into any other Person, (ii) any Person shall merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Ordinary Shares shall be changed into or exchanged for shares or other securities of any other Person (or of the Company) or cash or any other property, or (iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or
 
20

 
earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company or one or more wholly-owned Subsidiaries of the Company), then upon the first occurrence of such event, proper provision shall be made so that: (A) each holder of a Right (other than Rights which have become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to receive, upon the exercise thereof at the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof), in accordance with the terms of this Agreement and in lieu of Preferred Shares or Ordinary Shares of the Company, such number of validly authorized and issued, fully paid, non-assessable and freely tradable Ordinary Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by dividing the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the current per share market price of the Ordinary Shares of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer;  provided ,  however , that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) and the number of Ordinary Shares of such Principal Party so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(f) hereof to reflect any events occurring in respect of the Ordinary Shares of such Principal Party after the occurrence of such consolidation, merger, sale or transfer; (B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (C) the term “Company” shall thereafter be deemed to refer to such Principal Party; and (D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Ordinary Shares in accordance with Section 9 hereof) in connection with such consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of its Ordinary Shares thereafter deliverable upon the exercise of the Rights; provided that, upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Ordinary Shares of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.
 
(b)                                “Principal Party” shall mean:
 
(i)                                    in the case of any transaction described in (i) or (ii) of the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of the securities into which the Ordinary Shares are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer the Ordinary Shares of which have the greatest aggregate market value of shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the Ordinary Shares of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that
 
21

 
does survive the merger (including the Company if it survives) or (z) the Person resulting from the consolidation; and
 
(ii)                                 in the case of any transaction described in (iii) of the first sentence of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of Ordinary Shares having the greatest aggregate market value of shares outstanding;  provided ,  however , that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the Ordinary Shares of such Person is not at such time or has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the Ordinary Shares of which is and has been so registered, the term “Principal Party” shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Ordinary Shares of all of which is and has been so registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer of Ordinary Shares having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests.
 
(c)                                 The Company shall not consummate any consolidation, merger, share exchange, sale or transfer referred to in Section 13(a) hereof unless prior thereto the Company and the Principal Party involved therein shall have executed and delivered to the Rights Agent an agreement confirming that the requirements of Sections 13(a) and (b) hereof shall promptly be performed in accordance with their terms and that such consolidation, merger, share exchange, sale or transfer of assets shall not result in a default by the Principal Party under this Agreement as the same shall have been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and providing that, as soon as practicable after executing such agreement pursuant to this Section 13, the Principal Party will:
 
(i)                                    prepare and file a registration statement under the Securities Act, if necessary, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date and similarly comply with applicable state securities laws;
 
(ii)                                 use its best efforts, if the Ordinary Shares of the Principal Party shall be listed or admitted to trading on the New York Stock Exchange, NASDAQ or on another national securities exchange, to list or admit to trading (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on the New York Stock Exchange or such
 
22

 
securities exchange, or, if the Ordinary Shares of the Principal Party shall not be listed or admitted to trading on the New York Stock Exchange, NASDAQ or a national securities exchange, to cause the Rights and the securities receivable upon exercise of the Rights to be authorized for quotation on any other system then in use;
 
(iii)                              deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act; and
 
(iv)                             obtain waivers of any rights of first refusal or preemptive rights in respect of the Ordinary Shares of the Principal Party subject to purchase upon exercise of outstanding Rights.
 
(d)                                In case the Principal Party has a provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, Ordinary Shares or Ordinary Share Equivalents of such Principal Party at less than the then current market price per share thereof (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible into, Ordinary Shares or Ordinary Share Equivalents of such Principal Party at less than such then current market price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the Ordinary Shares of such Principal Party pursuant to the provisions of Section 13, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.
 
(e)                                 The Company covenants and agrees that it shall not, at any time after the Flip-In Event, enter into any transaction of the type described in clauses (i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately after such consolidation, merger, sale, transfer or other transaction there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such consolidation, merger, sale, transfer or other transaction, the shareholders of the Person who constitutes, or would constitute, the Principal Party for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
 
Section 14.                                   Fractional Rights and Fractional Shares.
 
(a)                                The Company shall not be required to issue fractions of Rights (except prior to the Distribution Date in accordance with Section 11(n) hereof) or to distribute Right Certificates
 
23

 
which evidence fractional Rights.  In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.  The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Rights are not listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by any system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company.  If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
 
(b)                                The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) upon the exercise or exchange of Rights.  Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts.  In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of a whole Preferred Share (as determined in accordance with Section 14(a) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.
 
(c)                                 The Company shall not be required to issue fractions of Ordinary Shares or to distribute certificates which evidence fractional Ordinary Shares upon the exercise or exchange of Rights.  In lieu of such fractional Ordinary Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Ordinary Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Ordinary Share.  For purposes of this Section 14(c), the current market value of one Ordinary Share for which a Rights is exercisable shall be deemed to be the closing price of one Ordinary Share (as determined in accordance with Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.
 
24

 
(d)                                The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise or exchange of a Right (except as provided above).
 
(e)                                 Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.
 
Section 15.                                   Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, including but not limited to under Section 18 and 20 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Ordinary Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Ordinary Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Ordinary Shares), on his own behalf and for his own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate (or, prior to the Distribution Date, such Ordinary Shares) in the manner provided therein and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach by the Company of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations by the Company of, the obligations of any Person subject to this Agreement.
 
Section 16.                                   Agreement of Right Holders.  Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
 
(a)                                prior to the Distribution Date, the Rights will not be evidenced by a Rights Certificate and will be transferable only in connection with the transfer of the Ordinary Shares;
 
(b)                                after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or agency of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with appropriate forms and certificates contained therein properly completed and duly executed; and
 
(c)                                 the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the Ordinary Shares certificate (or Book
 
25

 
Entry shares in respect of Ordinary Shares)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the Ordinary Shares certificate (or notices provided to holders of Book Entry Ordinary Shares) made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to Section 7(e) hereof, shall be affected by any notice to the contrary.
 
(d)                                notwithstanding anything in this Agreement to the contrary, to the fullest extent permitted by applicable law, neither the Company nor the Rights Agent, nor any of their directors, officers, employees and agents, shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory, self-regulatory or administrative agency or commission, or by reason of any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation.
 
Section 17.                                   Right Certificate Holder Not Deemed a Shareholder.  No holder of a Right Certificate, as such, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in this Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by such Right Certificate shall have been exercised or exchanged in accordance with the provisions hereof.
 
Section 18.                                   Concerning the Rights Agent.
 
(a)                                The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and expenses and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, demand, judgment, fine, penalty, claim, settlement, cost or expense (including without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (each as determined by a final judgment of a court of competent jurisdiction) for any action taken, suffered or omitted to be taken by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including but not limited to the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly, or enforcing its rights hereunder.
 
(b)                                The Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in connection with, its
 
26

 
acceptance and administration of this Agreement and the exercise and performance of its duties hereunder in reliance upon any Right Certificate or certificate for the Preferred Shares or Ordinary Shares or for any other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, guaranteed, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.  The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, but for which it has not received such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith unless and until it has received such notice in writing.
 
(c)                                 The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the resignation, replacement or removal of the Rights Agent and the exercise, termination and the expiration of the Rights. To the extent successful in whole or in part, the costs and expenses incurred by the Rights Agent in enforcing its right of indemnification shall be paid by the Company. Notwithstanding anything in this Agreement to the contrary, in no event shall the Rights Agent be liable for special, punitive, incidental, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action; and the Company agrees to indemnify the Rights Agent and to hold it harmless to the fullest extent permitted by law against any loss, liability or expense incurred as a result of claims for special, punitive, incidental, indirect or consequential loss or damages of any kind whatsoever provided that such claims are not based on the gross negligence, bad faith or willful misconduct of the Rights Agent (each as determined by a final judgment of a court of competent jurisdiction).  Any liability of the Rights Agent under this Agreement shall be limited to the amount of annual fees paid by the Company to the Rights Agent.
 
Section 19.                                   Merger or Consolidation or Change of Name of Rights Agent.
 
(a)                                Any entity into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any entity succeeding to the share transfer or corporate trust or shareowner services powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such entity would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
 
27

 
(b)                                In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
 
Section 20.                                   Duties of Rights Agent.  The Rights Agent undertakes to perform only the duties and obligations expressly imposed by this Agreement (and no implied duties or obligations) upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
 
(a)                                The Rights Agent may consult with legal counsel (who may be legal counsel for the Rights Agent (including such legal counsel employed by the Rights Agent) or the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct (each as determined by a final judgment of a court of competent jurisdiction) and in accordance with such advice or opinion.
 
(b)                                Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including without limitation the identity of an Acquiring Person and the determination of any current market price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer and the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it, in the absence of bad faith, under the provisions of this Agreement in reliance upon such certificate.
 
(c)                                 The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct (each as determined by a final judgment of a court of competent jurisdiction).
 
(d)                                The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
 
(e)                                 The Rights Agent shall not have any liability for nor be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be liable or responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any
 
28

 
Right Certificate; nor shall it be liable or responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 11(a)(ii) hereof) or any change or adjustment in the terms of the Rights, including an adjustment provided for in Sections 3, 11, 13, 23 and 24, or responsible for the manner, method or amount of any such adjustment, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to Section 12, describing such change or adjustment, upon which the Rights Agent may conclusively rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable.
 
(f)                                  The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
 
(g)                                 The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person reasonably believed by the Rights Agent to be one of the Chief Executive Officer or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such advice or instruction shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken or suffered or omitted to be taken by it by it, in the absence of bad faith, in accordance with advice or instructions of any such officer or for any delay in acting while waiting for those instructions.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective.  The Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received from any such officer, and shall not be liable for any action taken, suffered or omitted to be taken by the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken, suffered or omitted.
 
(h)                                The Rights Agent and any shareholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
 
29

 
(i)                                    The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be liable, answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company, any holder of Rights or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (each as determined by a final judgment of a court of competent jurisdiction) in the selection and continued employment thereof.
 
(j)                                   If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
 
(k)                                No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder (other than internal costs incurred by the Rights Agent in providing services to the Company in the ordinary course of its business as Rights Agent) or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
 
Section 21.                                   Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Ordinary Shares or Preferred Shares by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Ordinary Shares or Preferred Shares by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the incumbent Rights Agent or registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or the laws of any state of the United States or the District of Columbia, in good standing, which is authorized under such laws to exercise corporate trust or share transfer or shareowner services powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million, or (b) an Affiliate of such a Person.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights
 
30

 
Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver, if applicable, any further assurance, conveyance, act or deed necessary for that purpose.  Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Ordinary Shares or Preferred Shares, and, following the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates.  Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
 
Section 22.                                   Issuance of New Right Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such forms as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of Ordinary Shares following the Distribution Date and prior to the Expiration Date, the Company may with respect to Ordinary Shares so issued or sold (i) pursuant to the exercise of share options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company or (iv) pursuant to a contractual obligation of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale.
 
Section 23.                                   Redemption.
 
(a)                                The Board of Directors of the Company may, at any time prior to the Flip-In Event, redeem all but not less than all of the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any share split, share dividend or similar transaction occurring in respect of the Ordinary Shares after the date hereof (the redemption price being hereinafter referred to as the “Redemption Price”).  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish.  The Redemption Price shall be payable, at the option of the Company, in cash, Ordinary Shares, or such other form of consideration as the Board of Directors shall determine.
 
(b)                                Immediately upon the action of the Board of Directors ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the Board of Directors may establish for the effectiveness of such redemption) (evidence of which shall have been filed with the Rights Agent), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held.  The Company shall promptly give public notice of any such redemption (with prompt written notice thereof to the Rights Agent);  provided ,  however , that the failure to give, or any defect in, any such notice shall not affect the legality or validity of such redemption.  Within 10 days after such action of the Board of Directors ordering the redemption of the Rights (or such later time as the Board of Directors
 
31

 
may establish for the effectiveness of such redemption), the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Company or the Rights Agent or, prior to the Distribution Date, on the registry books of the Company or the transfer agent for the Ordinary Shares.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made, unless such notice is mailed together with such payment.
 
Section 24.                                   Exchange.
 
(a)                                The Board of Directors of the Company may, at its option, at any time after the Flip-In Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) for Ordinary Shares at an exchange ratio of one Ordinary Share per Right, appropriately adjusted to reflect any share split, share dividend or similar transaction occurring in respect of the Ordinary Shares after the date hereof (such amount per Right being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after an Acquiring Person shall have become the Beneficial Owner of Ordinary Shares aggregating 50% or more of the Ordinary Shares then outstanding.  From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section 24(a).  The exchange of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish.
 
(b)                                Immediately upon the effectiveness of the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Ordinary Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice of any such exchange (with prompt written notice thereof to the Rights Agent); provided ,  however , that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of exchange will state the method by which the exchange of the Ordinary Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
 
(c)                                 Following the action of the Board ordering the exchange of any Rights pursuant to Section 24(a) hereof, the Company may implement such procedures in its sole discretion as it deems appropriate for the purpose of ensuring that the Ordinary Shares or other consideration issuable upon an exchange pursuant to this Section 24 not be received by holders of Rights that
 
32

 
have become void pursuant to the second paragraph of Section 11(a)(ii) hereof.  In furtherance thereof, if so directed by the Company, Ordinary Shares or other consideration potentially issuable to holders of Rights upon an exchange pursuant to this Section 24, who have not verified to the satisfaction of the Company, in its sole discretion, that they are not Acquiring Persons, may be deposited in a trust established by the Company pending receipt of appropriate verification.
 
(d)                                The Company may at its option substitute, and, in the event that there shall not be sufficient Ordinary Shares authorized that have not been issued, subscribed for or otherwise reserved for issuance or committed to be issued, to permit an exchange of Rights for Ordinary Shares as contemplated in accordance with this Section 24, the Company shall substitute to the extent of such insufficiency, for each Ordinary Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof (or Equivalent Preferred Shares, as such term is defined in Section 11(b)) such that the current per share market price (determined pursuant to Section 11(d) hereof) of one Preferred Share (or Equivalent Preferred Share) multiplied by such number or fraction is equal to the current per share market price of one Ordinary Share (determined pursuant to Section 11(d) hereof) as of the date of such exchange.
 
(e)                                 The Company shall not be required to issue fractions of Ordinary Shares or to distribute certificates that evidence fractional Ordinary Shares.  In lieu of such fractional Ordinary Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Ordinary Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Ordinary Share.  For the purposes of this Section 24(e), the current market value of a whole Ordinary Share shall be the closing price of an Ordinary Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately after the date of the first public announcement by the Company that an exchange is to be effected pursuant to this Section 24.
 
Section 25.                                   Notice of Certain Events.
 
(a)                                In case the Company shall at any time after the earlier of the Distribution Date or the Share Acquisition Date propose (i) to pay any dividend payable in shares of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision or combination of outstanding Preferred Shares), (iv) to effect the liquidation, dissolution or winding up of the Company, or (v) to pay any dividend on the Ordinary Shares payable in Ordinary Shares or to effect a subdivision, combination or consolidation of the Ordinary Shares (by reclassification or otherwise than by payment of dividends in Ordinary Shares), then, in each such case, the Company shall give to the Rights Agent and to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such dividend or distribution or offering of rights or warrants, or the date on which such liquidation, dissolution, winding up, reclassification, subdivision, combination or consolidation is to take place and the date of participation therein by the holders of the Ordinary Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given
 
33

 
in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Ordinary Shares and/or Preferred Shares, whichever shall be the earlier.
 
(b)                                In case any event described in Section 11(a)(ii) or Section 13 shall occur then the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Right Certificate (or if occurring prior to the Distribution Date, the holders of the Ordinary Shares) in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) and Section 13 hereof.
 
Section 26.                                   Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by national or international courier or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
 
Theravance Biopharma, Inc.
Ugland House, South Church Street
George Town, Grand Cayman Islands KY1-1104
Attention: [Chief Executive Officer]
 
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by national or international courier or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
 
Computershare Inc.
Newport Office Center VII
480 Washington Boulevard
Jersey City, New Jersey 07310
Attention:  Relationship Manager
 
With a copy to:
 
Computershare Inc.
Newport Office Center VII
480 Washington Boulevard
Jersey City, New Jersey 07310
Attention:  Legal Department
 
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by national or international courier or first-class mail, postage prepaid, addressed to such holder at
 
34

 
the address of such holder as shown on the registry books of the Company or the Rights Agent or the transfer agent.
 
Section 27.                                   Supplements and Amendments.  Except as provided in the penultimate sentence of this Section 27, for so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of the Rights.  At any time when the Rights are no longer redeemable, except as provided in the penultimate sentence of this Section 27, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights, provided that no such supplement or amendment may (a) adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), (b) cause this Agreement again to become amendable other than in accordance with this sentence or (c) cause the Rights again to become redeemable.  Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price.  Upon the delivery of a certificate from an appropriate officer of the Company, which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment, provided, that notwithstanding anything to the contrary contained herein, the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or immunities under this Rights Agreement.  Any  supplement or amendment that does not affect the Rights Agent’s rights, duties, obligations or immunities under this Rights Agreement shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.
 
Section 28.                                   Successors; Assignment.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.  This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns;  provided , however , that this Agreement shall not be assignable by either party without prior written consent of the other party; and provided further, that (a) the foregoing proviso shall not apply to assignments by the Rights Agent to an affiliate or subsidiary of the Rights Agent and (b) any reorganization, merger, consolidation, sale of assets or other form of business combination by the Rights Agent shall not be deemed to constitute an assignment of this Agreement.
 
Section 29.                                   Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Ordinary Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Ordinary Shares).
 
Section 30.                                   Determinations and Actions by the Board of Directors.  The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise the rights and powers specifically granted to the Board of Directors
 
35

 
of the Company or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend or not amend this Agreement).  All such actions, calculations, interpretations and determinations that are done or made by the Board of Directors of the Company in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties.  The Rights Agent is entitled always to assume that the Board of Directors of the Company (or any committee thereof) acted in good faith and shall be fully protected and incur no liability in reliance thereon.
 
Section 31.                                   Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, that if any such excluded terms, provisions, covenants or restrictions shall affect the rights, immunities, liabilities, duties, responsibilities or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately.
 
Section 32.                                   Governing Law; Waiver of Jury Trial.  This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided ,  however , that all provisions regarding the Rights Agent’s rights, immunities, liabilities, duties, responsibilities or obligations hereunder (“Rights Agent Matters”) shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.  The parties agree that actions or proceedings arising out of this Agreement and pertaining to Rights Agents Matters shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, the parties shall submit to the jurisdiction of, and venue in, such court.  All other actions or proceedings arising out of this Agreement shall be brought in the Court of Chancery of the State of Delaware.  Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement.
 
Section 33.                                   Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
 
Section 34.                                   Descriptive Headings.  Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
 
36

 
Section 35.                                   Force Majeure.  Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunctions of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest.
 
37

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.
 
 	THERAVANCE BIOPHARMA, INC.	
 	 	
 	By:	 	
 	Name:	 	
 	Title:	 	

 	COMPUTERSHARE INC.,	
 	as Rights Agent	
 	 	
 	By:	 	
 	Name:	 	
 	Title:	 	
 
Signature Page to Rights Agreement
 
38

 
Exhibit A
 
Amended and Restated Memorandum and Articles of Association
 
A-1

 
Exhibit B
 
Form of Right Certificate
 
Certificate No. R-
 
NOT EXERCISABLE AFTER                      OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS THOSE TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
 
RIGHT CERTIFICATE
 
THERAVANCE BIOPHARMA, INC.
 
This certifies that                                   or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of                         , 2014, as the same may be amended, restated, renewed or extended from time to time (the “Rights Agreement”), between Theravance Biopharma, Inc., a Cayman Islands corporation (the “Company”), and Computershare Inc., as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on                          at the office or agency of the Rights Agent designated for such purpose, or of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Share, par value $0.00001 per share (the “Preferred Share”), of the Company at a purchase price of $             per one one-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed.  The number of Rights evidenced by this Rights Certificate (and the number of one one-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of                     , 20   , based on the Preferred Shares as constituted at such date.  As provided in the Rights Agreement, the Purchase Price, the number of one one-thousandths of a Preferred Share (or other securities or property) which may be purchased upon the exercise of the Rights and the number of Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.
 
B-1

 
This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at the principal executive offices of the Company and the office of the Rights Agent designated for such purpose.  The Company will mail to the holder of this Right Certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.
 
This Right Certificate, with or without other Right Certificates, upon surrender at the office or agency of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase.  If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.
 
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of [$.01] per Right or (ii) may be exchanged in whole or in part for shares of the Company’s Ordinary Shares, par value $0.01 per share, or Preferred Shares.
 
No fractional Preferred Shares or Ordinary Shares will be issued upon the exercise or exchange of any Right or Rights evidenced hereby (other than fractions of a Preferred Share which are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depository receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.
 
No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Share or of any other securities of the Company which may at any time be issuable on the exercise or exchange hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement) or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised or exchanged as provided in the Rights Agreement.
 
This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
 
B-2

 
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.  Dated as of                           , 20    .
 
 	THERAVANCE BIOPHARMA, INC.	

 	By:	 	
 	Name:	
 	Title:	

ATTEST:	 	

 	 	
Name:,	 	
Title:	 	
 	 	
Countersigned:	 	
 	 	
Computershare Inc.,	 	
as Rights Agent	 	

By:	 	 	

B-3

 
Form of Reverse Side of Right Certificate
 
FORM OF ASSIGNMENT
 
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
 
FOR VALUE RECEIVED                                                                                             hereby sells, assigns and transfers unto

(Please print name and address of transferee)
 
Rights represented by this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                          Attorney, to transfer said Rights on the books of the within-named Company, with full power of substitution.
 
Dated:	 	 	 	

 	Signature	
 
Signature Guaranteed:
 
Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program at a guarantee level satisfactory to the Rights Agent.  A notary public is not sufficient.
 
(To be completed)
 
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being assigned to an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

 	 	
 	Signature	
 
B-4

 
FORM OF ELECTION TO PURCHASE
 
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
 
To THERAVANCE BIOPHARMA, INC.:
 
The undersigned hereby irrevocably elects to exercise               Rights represented by this Right Certificate to purchase the Preferred Shares (or other securities or property) issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares (or such other securities) be issued in the name of:
 
(Please print name and address)
 
If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
 
Please insert social security
or other identifying number
 
(Please print name and address)

Dated:	 	 	 	

 	Signature	
 
Signature Guaranteed:
 
Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program at a guarantee level satisfactory to the Rights Agent.  A notary public is not sufficient.
 
B-5

 
(To be completed)
 
The undersigned certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, and were not acquired by the undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

 	Signature	
 
NOTICE
 
The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
 
In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
 
B-6

 
Exhibit C
 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS THOSE TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
 
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES OF
THERAVANCE BIOPHARMA, INC.
 
On                         , the Board of Directors of Theravance Biopharma, Inc. (the “Company”) declared a dividend of one preferred share purchase right (a “Right”) for each outstanding Ordinary Share, par value $0.00001 per share, of the Company (the “Ordinary Shares”).  The dividend is payable on                          (the “Record Date”) to the shareholders of record on that date.  Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Share, par value $0.00001 per share, of the Company (the “Preferred Share”) at a price of $             per one one-thousandth of a Preferred Share (the “Purchase Price”), subject to adjustment.  The description and terms of the Rights are set forth in a Rights Agreement dated as of                          2014, as the same may be amended from time to time (the “Rights Agreement”), between the Company and Computershare Inc., as Rights Agent (the “Rights Agent”).
 
Until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (with certain exceptions, an “Acquiring Person”) has acquired beneficial ownership of 19% or more of the outstanding Ordinary Shares or (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 19% or more of the outstanding Ordinary Shares (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced, with respect to any of the Ordinary Shares certificates outstanding as of the Record Date, by such Ordinary Shares certificate together with this Summary of Rights.
 
The Rights Agreement provides that, until the Distribution Date (or earlier expiration of the Rights), the Rights will be transferred with and only with the Ordinary Shares.  Until the Distribution Date (or earlier expiration of the Rights), new Ordinary Shares certificates issued after the Record Date upon transfer or new issuances of Ordinary Shares will contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier expiration of the Rights), the surrender for transfer of any certificates for Ordinary Shares outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights, will also constitute the transfer of the Rights associated with the Ordinary Shares
 
C-1

 
represented by such certificate.  As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Ordinary Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.
 
The Rights are not exercisable until the Distribution Date.  The Rights will expire on                          (the “Final Expiration Date”), unless the Final Expiration Date is advanced or extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as described below.
 
The Purchase Price payable, and the number of Preferred Shares or other securities or property issuable, upon exercise of the Rights is subject to adjustment from time to time to prevent dilution (i) in the event of a share dividend on, or a subdivision, combination or reclassification of, the Preferred Share, (ii) upon the grant to holders of the Preferred Shares of certain rights or warrants to subscribe for or purchase Preferred Shares at a price, or securities convertible into Preferred Shares with a conversion price, less than the then-current market price of the Preferred Shares or (iii) upon the distribution to holders of the Preferred Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Shares) or of subscription rights or warrants (other than those referred to above).
 
The number of outstanding Rights is subject to adjustment in the event of a share dividend on the Ordinary Shares payable in Ordinary Shares or subdivisions, consolidations or combinations of the Ordinary Shares occurring, in any such case, prior to the Distribution Date.
 
Preferred Shares purchasable upon exercise of the Rights will not be redeemable.  Each Preferred Share will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $1.00 per share, and (b) an amount equal to 1,000 times the dividend declared per Ordinary Share.  In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares will be entitled to a minimum preferential payment of the greater of (a) $10.00 per share (plus any accrued but unpaid dividends), and (b) an amount equal to 1,000 times the payment made per Ordinary Share.  Each Preferred Share will have 1,000 votes, voting together with the Ordinary Shares.  Finally, in the event of any merger, consolidation or other transaction in which outstanding Ordinary Shares are converted or exchanged, each Preferred Share will be entitled to receive 1,000 times the amount received per Ordinary Share.  These rights are protected by customary anti-dilution provisions.
 
Because of the nature of the Preferred Share’s dividend, liquidation and voting rights, the value of the one one-thousandth interest in a Preferred Share purchasable upon exercise of each Right should approximate the value of one Ordinary Share.
 
In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right that number of Ordinary Shares having a market value of two times the exercise price of the Right.
 
C-2

 
In the event that, after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provisions will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person which will have become void) will thereafter have the right to receive upon the exercise of a Right that number of Ordinary Shares of the person with whom the Company has engaged in the foregoing transaction (or its parent) that at the time of such transaction have a market value of two times the exercise price of the Right.
 
At any time after any person or group becomes an Acquiring Person and prior to the earlier of one of the events described in the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding Ordinary Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person which will have become void), in whole or in part, for Ordinary Shares or Preferred Shares (or a series of the Company’s preferred shares having equivalent rights, preferences and privileges), at an exchange ratio of one Ordinary Share, or a fractional Preferred Share (or other preferred shares) equivalent in value thereto, per Right.
 
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.  No fractional Preferred Shares or Ordinary Shares will be issued (other than fractions of Preferred Shares which are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the current market price of the Preferred Shares or the Ordinary Shares.
 
At any time prior to the time an Acquiring Person becomes such, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the “Redemption Price”) payable, at the option of the Company, in cash, Ordinary Shares or such other form of consideration as the Board of Directors of the Company shall determine.  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
 
For so long as the Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner.  After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner that does not adversely affect the interests of holders of the Rights.
 
Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.
 
A copy of the Rights Agreement will be filed with the Securities and Exchange Commission as an Exhibit to the                          on Form         dated                         .  A copy of
 
C-3

 
the Rights Agreement is available free of charge from the Company.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, as the same may be amended from time to time, which is hereby incorporated herein by reference.
 
C-4

Exhibit 10.1
 
TRANSITION SERVICES AGREEMENT
 
by and between
 
THERAVANCE, INC.
 
and
 
THERAVANCE BIOPHARMA, INC.
 
Dated as of [·], 2014

 
TRANSITION SERVICES AGREEMENT
 
This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of [                    ], 2014, by and between Theravance, Inc., a Delaware corporation (“ ParentCo ”), and Theravance Biopharma, Inc., a Cayman Islands corporation (“ 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 as of [                    ], 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.
 
2

 
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.
 
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 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
 
3

 
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 Service Provider cannot provide such Service due to a Force Majeure event;  provided ,  however
 
4

 
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 [ · ], and the initial SpinCo Project Manager designated by SpinCo shall be [ · ].
 
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 originally due, at an interest rate per annum equal to the prime rate as published by  The Wall
 
5

 
Street Journal (or any successor) 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 $[•] 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.
 
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)
 
6

 
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 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
 
7

 
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 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,
 
8

 
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 “Agreement” in such Article V as incorporated herein shall be deemed to be references to this Agreement.
 
9

 
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 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
 
10

 
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]
 
11

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

 	THERAVANCE, INC.	

 	By:	 	
 	 	Name:	
 	 	Title:	

 	THERAVANCE BIOPHARMA, INC.	

 	By:	 	
 	 	Name:	
 	 	Title:	

[Signature Page to Transition Services Agreement]

Exhibit 10.5
 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
 
NOTICE OF OPTION GRANT
 
You have been granted the following option to purchase Common Shares of Theravance Biopharma, Inc. (the “Company”):
 
Name of Optionee:	 	«First» «Last»	
 	 	 	
ID Number:	 	«ID»	
 	 	 	
Total Number of Shares:	 	«Shares»	
 	 	 	
Type of Option:	 	Nonstatutory Option	
 	 	 	
Grant Number:	 	«Number»	
 	 	 	
Exercise Price Per Share:	 	«Price»	
 	 	 	
Date of Grant:	 	«Grant_Date»	
 	 	 	
Vesting Schedule:	 	This option shall vest and become exercisable with respect to the first 25% of the Common Shares subject to this option when you complete 12 months of continuous service as an Employee or Consultant (“Service”) following the Date of Grant. This option shall vest and become exercisable with respect to an additional 1/48 th  of the Common Shares subject to this option when you complete each month of continuous Service thereafter.  The option shall be fully vested and exercisable on the 4-year anniversary of the Date of Grant provided you have remained in continuous Service through such date.	
 	 	 	
Expiration Date:	 	«Expiration_Date». This option expires earlier if your Service terminates earlier, as described in the Option Agreement, and may be terminated sooner in connection with certain corporate transactions as provided in Article XI of the Plan.	
 
You and the Company agree that this option is granted under and governed by the terms and conditions of the Option Agreement, which is attached to and made a part of this document, and the 2013 Equity Incentive Plan (the “Plan”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
 
You further agree that the Company may deliver by email all documents relating to the Plan or this option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you by email.

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
 
OPTION AGREEMENT
 
Grant of Option	 	Subject to all of the terms and conditions set forth in the Notice of Option Grant, this Option Agreement (the “ Agreement ”) and the Plan, the Company has granted you an option to purchase up to the total number of shares specified in the Notice of Option Grant at the exercise price indicated in the Notice of Option Grant.	
 	 	 	
Tax Treatment	 	This option is intended to be a nonstatutory option, as provided in the Notice of Option Grant.	
 	 	 	
Vesting	 	This option vests and becomes exercisable as shown in the Notice of Option Grant.	
 	 	 	
 	 	This option shall vest and become exercisable in full if the Company is subject to a “Change in Control ” (as defined in the Plan) before your Service terminates and this option is not assumed or replaced with a new award as set forth in Section 10.1 of the Plan.  In addition, this option shall vest and become exercisable in full if the Company is subject to a Change in Control before your Service terminates, and you are subject to an Involuntary Termination (as defined below) within 24 months after the Change in Control.	
 	 	 	
 	 	For purposes of this Agreement, “Cause” shall mean (i) the unauthorized use or disclosure of the confidential information or trade secrets of the Company, a Parent, a Subsidiary or an Affiliate, which use causes material harm to the Company, a Parent, a Subsidiary or an Affiliate, (ii) conviction of a felony under the laws of the United States or any state thereof, (iii) gross negligence or (iv) repeated failure to perform lawful assigned duties for thirty days after receiving written notification from the Board of Directors.	
 	 	 	
 	 	For purposes of this Agreement, “Involuntary Termination” means the termination of your Service by reason of:	
 	 	 	
 	 	(a)         an involuntary dismissal or discharge by the Company (or Parent, Subsidiary or Affiliate employing you) for reasons other than for Cause; or	
 	 	 	
 	 	(b)         your voluntary resignation following one of the following that is effected by the Company (or the Parent, Subsidiary or Affiliate employing you) without your consent (i) a change in your position with the Company (or Parent, Subsidiary or Affiliate employing you) which materially reduces your level of responsibility, (ii) a material reduction in your base	

 
 	 	compensation or (iii) a relocation of your workplace by more than fifty miles from your workplace immediately prior to the Change in Control that also materially increases your one-way commute. In order for your resignation under clause (b) to constitute an “Involuntary Termination,” all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to resign and assert an Involuntary Termination pursuant to clause (b) within 90 days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii), (2) the Company (or the Parent, Subsidiary or Affiliate employing you) will have 30 days from the date of such notice to remedy the condition and, if it does so, you may withdraw your resignation or resign without any vesting acceleration, and (3) any termination of Service under clause (b) must occur within two years of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii).  Should the Company (or the Parent, Subsidiary or Affiliate employing you) remedy the condition as set forth above and then one or more of the conditions arises again within two years following the occurrence of a Change in Control, you may assert clause (b) again subject to all of the conditions set forth herein.	
 	 	 	
 	 	For purposes of this Agreement, “Service” means your service as an Employee or Consultant.	
 	 	 	
 	 	Notwithstanding the foregoing, if you are or become eligible to participate in the Company’s Change in Control Severance Plan (the “ Severance Plan ”), the vesting acceleration provisions in the Severance Plan shall apply instead of those contained herein.	
 	 	 	
 	 	No additional shares will vest or become exercisable after your Service has terminated for any reason, except as set forth in the Severance Plan to the extent you are eligible for benefits thereunder.	
 	 	 	
Term	 	This option expires in any event at the close of business at Company headquarters on the day before the 10 th  anniversary of the Date of Grant, as shown in the Notice of Option Grant.  (This option will expire earlier if your Service terminates, as described below, and this option may be terminated sooner as provided in Article XI of the Plan.)	
 	 	 	
 	 	You may exercise this option, to the extent vested and exercisable, at any time before its expiration or termination pursuant to this Agreement or the Plan.	
 	 	 	
Termination of Service	 	If your Service terminates for any reason, this option will expire to the extent it is unvested as of your termination date and does not vest as a result of your termination of Service.  The Company determines when your Service terminates for all purposes of this option.	
 
3

 
Regular Termination	 	If your Service terminates for any reason except death or total and permanent disability, then this option, to the extent vested as of your termination date, will expire at the close of business at Company headquarters on the date three months after your termination date.	
 	 	 	
Death/Disability	 	If your Service terminates because of your death or due to your total and permanent disability, then this option, to the extent vested as of your termination date, will expire at the close of business at Company headquarters on the date 12 months after your termination date.	
 	 	 	
 	 	For all purposes under this Agreement, “total and permanent disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.	
 	 	 	
Leaves of Absence and Part-Time Work	 	For purposes of this option, your Service does not terminate when you go on a military leave, a sick leave or another  bona fide  leave of absence, if the leave was approved by the Company (or Parent, Subsidiary or Affiliate employing you) in writing.  But your Service terminates when the approved leave ends, unless you immediately return to active work.	
 	 	 	
 	 	If you go on a leave of absence, then the vesting schedule specified in the Notice of Option Grant may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave.  If you and the Company (or Parent, Subsidiary or Affiliate employing you) agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which this option vests, so that the rate of vesting is commensurate with your reduced work schedule.	
 	 	 	
 	 	The Company shall not be required to adjust any vesting schedule pursuant to this subsection.	
 	 	 	
Restrictions on Exercise	 	The Company will not permit you to exercise this option if the issuance of shares at that time would violate any law or regulation.	
 	 	 	
Notice of Exercise	 	When you wish to exercise this option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on the form.  Your notice must specify how many shares you wish to purchase.  Your notice must also specify how your shares should be registered.  The notice will be effective when the Company receives it.	
 	 	 	
 	 	However, if you wish to exercise this option by executing a same-day sale (as described below), you must follow the instructions of the Company and the broker who will execute the sale.	
 	 	 	
 	 	If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.	
 
4

 
 	 	In no event may this option be exercised for any fractional shares.	
 	 	 	
Form of Payment	 	When you submit your notice of exercise, you must include payment of the option exercise price for the shares that you are purchasing.  To the extent permitted by applicable law, payment may be made in one (or a combination of two or more) of the following forms:	
 	 	 	
 	 	·                      Your personal check, a cashier’s check, a money order or by wire transfer.	
 	 	 	
 	 	·                      Irrevocable directions to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds an amount sufficient to pay the option exercise price and any withholding taxes.  (The balance of the sale proceeds, if any, will be delivered to you.)  The directions must be given in accordance with the instructions of the Company and the broker.  This exercise method is sometimes called a “same-day sale.”	
 	 	 	
 	 	·                      With the Company’s consent (which may be granted by the Compensation Committee of the Board of Directors or, if applicable, by the Equity Award Committee of the Board of Directors), irrevocable directions to a securities broker or lender approved by the Company to pledge option shares as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the option exercise price and any withholding taxes.  The directions must be given in accordance with the instructions of the Company and the broker or lender.	
 	 	 	
 	 	·                      With the Company’s consent (which may be granted by the Compensation Committee of the Board of Directors or, if applicable, by the Equity Award Committee of the Board of Directors), Common Shares that you own, along with any forms needed to effect a transfer of those shares to the Company.  The value of the shares, determined as of the effective date of the option exercise, will be applied to the option exercise price.  Instead of surrendering Common Shares, you may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the option shares issued to you.	
 	 	 	
 	 	·                      With the Company’s consent (which may be granted by the Compensation Committee of the Board of Directors or, if applicable, by the Equity Award Committee of the Board of Directors), by having the Company withhold Common Shares that would otherwise be issued on exercise of the option.  The value of the withheld shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. This exercise method is sometimes referred to as a “net exercise.” 	
 	 	 	
Withholding	 	You will not be allowed to exercise this option unless you make	
 
5

 
Taxes and Share Withholding	 	arrangements acceptable to the Company (and/or the Parent, Subsidiary or Affiliate employing you) to pay any withholding taxes that may be due as a result of the option exercise (“Tax Withholding Obligations”).  These arrangements include payment in cash or via the same-day sale method described above.  With the Company’s consent (which may be granted by the Compensation Committee of the Board of Directors or, if applicable, by the Equity Award Committee of the Board of Directors), these arrangements may also include withholding shares that otherwise would be issued to you when you exercise this option.  The value of these shares, determined as of the effective date of the option exercise, will be applied to the Tax Withholding Obligations.	
 	 	 	
Automatic Exercise at End of Option Term	 	This option, to the extent then outstanding, will be automatically exercised as to all then-vested Shares at 9:00 am Pacific Time on the fourth trading day preceding the expiration date set forth in the Notice of Option Grant if the per share exercise price of the option is at least 1% below the Fair Market Value of a Common Share at such time.	
 	 	 	
 	 	In the event of an automatic exercise, you authorize the Company to instruct the broker whom it has selected for this purpose to sell a number of Common Shares to be issued upon exercise of the option necessary to generate cash proceeds to cover the exercise price for the exercised shares and the Tax Withholding Obligations in connection with such exercise (the “Exercise Costs”).  Such sales shall be effected at a market price following the date that the option is exercised.	
 	 	 	
 	 	You acknowledge that the proceeds of any such sale may not be sufficient to satisfy the Exercise Costs.  To the extent the proceeds from such sale are insufficient to cover the Exercise Costs, the Company (or Parent, Subsidiary or Affiliate employing you) may in its discretion (a) withhold the balance of the Exercise Costs from your wages or other cash compensation paid to you by the Company (or Parent, Subsidiary or Affiliate employing you) and/or (b) satisfy the Exercise Costs by means of a net-exercise arrangement, provided that in the case of the Tax Withholding Obligations the Company only withholds an amount of shares not in excess of the amount necessary to satisfy the minimum withholding amount.  The fair market value of the withheld shares, determined as of the date of exercise, will be applied against the Exercise Costs.  If the Company satisfies the Exercise Costs by means of a net-exercise arrangement as described above, you are deemed to have been issued the full number of shares subject to the option so exercised.	
 	 	 	
 	 	You acknowledge that the instruction to the broker to sell in the foregoing section is intended to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Securities Exchange Act of 1934 (the “Exchange Act”), and to be interpreted to comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act (a “10b5-1 Plan”).  This 10b5-1 Plan is adopted to be effective as of the first day of the Company’s first open	
 
6

 
 	 	trading window following the date on which shares subject to this option first become vested.  This 10b5-1 Plan is being adopted to permit you to sell a number of shares issued upon exercise of the option sufficient to pay the Exercise Costs.  You hereby appoint the Company as your agent and attorney-in-fact to instruct the broker with respect to the number of shares to be sold under this 10b5-1 Plan.	
 	 	 	
 	 	You hereby authorize the broker to sell the number of Common Shares determined as set forth above and acknowledge that the broker is under no obligation to arrange for such sale at any particular price.  You acknowledge that the broker may aggregate your sales with sales occurring on the same day that are effected on behalf of other Company employees pursuant to sales of shares vesting under Company options or restricted share unit awards and your proceeds will be based on a blended price for all such sales.  You acknowledge that you will be responsible for all brokerage fees and other costs of sale, and you agree to indemnify and hold the Company harmless from any losses, costs, damages or expenses relating to any such sale.  You acknowledge that it may not be possible to sell Common Shares during the term of this 10b5-1 Plan due to (a) a legal or contractual restriction applicable to you or to the broker, (b) a market disruption, (c) rules governing order execution priority on the Nasdaq Global Market, (d) a sale effected pursuant to this 10b5-1 Plan that fails to comply (or in the reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144 under the Securities Act of 1933, if applicable, or (e) if the Company determines that sales may not be effected under this 10b5-1 Plan.  You acknowledge that this 10b5-1 Plan is subject to the terms of any policy adopted now or hereafter by the Company governing the adoption of 10b5-1 plans. 	
 	 	 	
Restrictions on Resale	 	You agree not to sell any option shares at a time when applicable laws, Company policies (including the Company’s Insider Trading Policy, a copy of which can be found on the Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale.  This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.	
 	 	 	
Transfer of Option	 	Prior to your death, only you may exercise this option.  You cannot transfer or assign this option.  For instance, you may not sell this option or use it as security for a loan.  If you attempt to do any of these things, this option will immediately become invalid.  You may, however, dispose of this option in your will or a beneficiary designation.  A beneficiary designation must be filed with the Company on the proper form.	
 	 	 	
 	 	Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your option in any other way.	
 
7

 
No Retention Rights	 	Your option or this Agreement does not give you the right to be retained by the Company, a Parent, Subsidiary or Affiliate in any capacity.  The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause.	
 	 	 	
Shareholder Rights	 	You, or your estate or heirs, have no rights as a shareholder of the Company until this option has been exercised by giving the required notice to the Company, paying the exercise price, satisfying any Tax Withholding Obligations and being registered on the register of members of the Company.  No adjustments are made for dividends or other rights if the applicable record date occurs before exercise of this option, except as described in the Plan.	
 	 	 	
Recoupment Policy	 	This option, and the shares acquired upon exercise of this option, shall be subject to any Company recoupment policy in effect from time to time.	
 	 	 	
Adjustments	 	In the event of a share split, a share dividend or a similar change in the Common Shares, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan.	
 	 	 	
Effect of Significant Corporate Transactions	 	If the Company is a party to a merger, consolidation or certain change in control transactions, then this option will be subject to the applicable provisions of Article XI of the Plan.	
 	 	 	
Applicable Law	 	This Agreement will be interpreted and enforced under the laws of the Cayman Islands (without regard to its choice-of-law provisions).	
 	 	 	
The Plan and Other Agreements	 	The text of the Plan is incorporated in this Agreement by reference.  A copy of the Plan is available on the Company’s intranet or by request to the Finance Department.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.	
 	 	 	
 	 	This Agreement, the Notice of Option Grant, and the Plan constitute the entire understanding between you and the Company regarding this option.  Any prior agreements, commitments or negotiations concerning this option are superseded.  This Agreement may be amended only by another written agreement between the parties.	
 
BY ACCEPTING THIS OPTION GRANT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
 
8

 
[Director Initial and Annual Grants]
 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
 
NOTICE OF OPTION GRANT
 
You have been granted the following option to purchase Common Shares of Theravance Biopharma, Inc. (the “Company”):
 
Name of Optionee:	 	«First» «Last»	
 	 	 	
ID Number:	 	«ID»	
 	 	 	
Total Number of Shares:	 	«Shares»	
 	 	 	
Type of Option:	 	Nonstatutory Option	
 	 	 	
Grant Number:	 	«Number»	
 	 	 	
Exercise Price Per Share:	 	«Price»	
 	 	 	
Date of Grant:	 	«Grant_Date»	
 	 	 	
Vesting Schedule:	 	[Initial Grant: This optionshall vest and become exercisable as to 1/24th of the Common Shares subject to this option when you complete each month of continuous service as an Outside Director (“Service”) following the Date of Grant.] [Annual Grant: This option shall vest and become exercisable as to 1/12 th  of the Common Shares subject to this option when you complete each month of continuous service as an Outside Director (“Service”) following the Date of Grant. In addition, this option shall vest and become exercisable in full on the date of the Company’s 20     Annual Meeting of Shareholders, provided you remain in continuous Service through such date.]	
 	 	 	
Expiration Date:	 	«Expiration_Date». This option expires earlier if your Service terminates earlier, as described in the Option Agreement, and may be terminated sooner in connection with certain corporate transactions as provided in Article XI of the Plan.	
 
You and the Company agree that this option is granted under and governed by the terms and conditions of the Option Agreement, which is attached to and made a part of this document, and the 2013 Equity Incentive Plan (the “Plan”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
 
You further agree that the Company may deliver by email all documents relating to the Plan or this option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you by email.

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
 
OPTION AGREEMENT
 
Grant of Option	 	Subject to all of the terms and conditions set forth in the Notice of Option Grant, this Option Agreement (the “ Agreement ”) and the Plan, the Company has granted you an option to purchase up to the total number of shares specified in the Notice of Option Grant at the exercise price indicated in the Notice of Option Grant.	
 	 	 	
Tax Treatment	 	This option is intended to be a nonstatutory option, as provided in the Notice of Option Grant.	
 	 	 	
Vesting	 	This option vests and becomes exercisable as shown in the Notice of Option Grant.
 
This option shall vest and become exercisable in full if the Company is subject to a “ Change in Control ” (as defined in the Plan) before your Service terminates or upon your death.
 
For purposes of this Agreement, “Service” means your service as an Outside Director.	
 	 	 	
 	 	This option will in no event become exercisable for additional shares after your Service has terminated for any reason except as set forth above.	
 	 	 	
Term	 	This option expires in any event at the close of business at Company headquarters on the day before the 10 th  anniversary of the Date of Grant, as shown in the Notice of Option Grant. (This option will expire earlier if your Service terminates, as described below, and this option may be terminated sooner as provided in Article XI of the Plan.)
 
You may exercise this option, to the extent vested and exercisable, at any time before its expiration or termination pursuant to this Agreement or the Plan.	
 	 	 	
Termination of Service	 	If your Service terminates for any reason, this option will expire immediately to the extent it is unvested as of your termination date and does not vest as a result of your termination of Service. The Company determines when your Service terminates for all purposes of this option.
 
If your Service terminates for any reason except a termination for Cause, then this option, to the extent vested as of your termination date, will expire at the close of business at Company headquarters on the date 36 months after your termination date. If your Service terminates for Cause, then this option will expire on your termination date.	

 
 	 	For purposes of this Agreement, “Cause” shall mean (i) the unauthorized use or disclosure of the confidential information or trade secrets of the Company, a Parent, a Subsidiary or an Affiliate, which use causes material harm to the Company, a Parent, a Subsidiary or an Affiliate, (ii) conviction of a felony under the laws of the United States or any state thereof, (iii) gross negligence or (iv) repeated failure to perform lawful assigned duties for thirty days after receiving written notification from the Board of Directors.	
 	 	 	
Restrictions on Exercise	 	The Company will not permit you to exercise this option if the issuance of shares at that time would violate any law or regulation.	
 	 	 	
Notice of Exercise	 	When you wish to exercise this option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many shares you wish to purchase. Your notice must also specify how your shares should be registered. The notice will be effective when the Company receives it.
 
However, if you wish to exercise this option by executing a same-day sale (as described below), you must follow the instructions of the Company and the broker who will execute the sale.
 
If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.
 
In no event may this option be exercised for any fractional shares.	
 	 	 	
Form of Payment	 	When you submit your notice of exercise, you must include payment of the option exercise price for the shares that you are purchasing. To the extent permitted by applicable law, payment may be made in one (or a combination of two or more) of the following forms:
 
·     Your personal check, a cashier’s check, a money order or by wire transfer.
 
·      Irrevocable directions to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds an amount sufficient to pay the option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, will be delivered to you.) The directions must be given in accordance with the instructions of the Company and the broker. This exercise method is sometimes called a “same-day sale.”
 
·     With the Company’s consent (which may be granted by the Board of Directors or the Compensation Committee of the Board of Directors), Common Shares that you own, along with any forms needed to effect a transfer of those shares to the Company. The value of the shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. Instead of surrendering	
 
3

 
 	 	Common Shares, you may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the option shares issued to you.
 
·      With the Company’s consent (which may be granted by the Board of Directors or the Compensation Committee of the Board of Directors), by having the Company withhold Common Shares that would otherwise be issued on exercise of the option. The value of the withheld shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. This exercise method is sometimes referred to as a “net exercise.”	
 	 	 	
Withholding Taxes and Share Withholding	 	You will not be allowed to exercise this option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the option exercise (“Tax Withholding Obligations”). These arrangements include payment in cash or via the same-day sale method described above. With the Company’s consent (which may be granted by the Board of Directors or the Compensation Committee of the Board of Directors), these arrangements may also include withholding shares that otherwise would be issued to you when you exercise this option. The value of these shares, determined as of the effective date of the option exercise, will be applied to the Tax Withholding Obligations.	
 	 	 	
Automatic Exercise at End of Option Term	 	This option, to the extent then outstanding, will be automatically exercised as to all then-vested Shares at 9:00 a.m. San Francisco, CA Time on the fourth trading day preceding the expiration date set forth in the Notice of Option Grant if the per share exercise price of the option is at least 1% below the Fair Market Value of a Common Share at such time.
 
In the event of an automatic exercise, you authorize the Company to instruct the broker whom it has selected for this purpose to sell a number of Common Shares to be issued upon exercise of the option necessary to generate cash proceeds to cover the exercise price for the exercised shares and the Tax Withholding Obligations, if any, in connection with such exercise (the “Exercise Costs”). Such sales shall be effected at a market price following the date that the option is exercised.
 
You acknowledge that the proceeds of any such sale may not be sufficient to satisfy the Exercise Costs. To the extent the proceeds from such sale are insufficient to cover the Exercise Costs, the Company may in its discretion (a) withhold the balance of the Exercise Costs from the cash compensation paid to you by the Company and/or (b) satisfy the Exercise Costs by means of a net-exercise arrangement, provided that in the case of the Tax Withholding Obligations the Company only withholds an amount of shares not in excess of the amount necessary to satisfy the minimum withholding amount. The fair market value of the withheld shares, determined as of the date of exercise, will be applied against the Exercise	
 
4

 
 	 	Costs. If the Company satisfies the Exercise Costs by means of a net-exercise arrangement as described above, you are deemed to have been issued the full number of shares subject to the option so exercised.
 
You acknowledge that the instruction to the broker to sell in the foregoing section is intended to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Securities Exchange Act of 1934 (the “Exchange Act”), and to be interpreted to comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act (a “10b5-1 Plan”). This 10b5-1 Plan is adopted to be effective as of the first day of the Company’s first open trading window following the date on which shares subject to this option first become vested. This 10b5-1 Plan is being adopted to permit you to sell a number of shares issued upon exercise of the option sufficient to pay the Exercise Costs. You hereby appoint the Company as your agent and attorney-in-fact to instruct the broker with respect to the number of shares to be sold under this 10b5-1 Plan.
 
You hereby authorize the broker to sell the number of Common Shares determined as set forth above and acknowledge that the broker is under no obligation to arrange for such sale at any particular price. You acknowledge that the broker may aggregate your sales with sales occurring on the same day that are effected on behalf of other individuals providing service to the Company pursuant to sales of shares vesting under Company options or restricted share unit awards and your proceeds will be based on a blended price for all such sales. You acknowledge that you will be responsible for all brokerage fees and other costs of sale, and you agree to indemnify and hold the Company harmless from any losses, costs, damages or expenses relating to any such sale. You acknowledge that it may not be possible to sell Common Shares during the term of this 10b5-1 Plan due to (a) a legal or contractual restriction applicable to you or to the broker, (b) a market disruption, (c) rules governing order execution priority on the Nasdaq Global Market, (d) a sale effected pursuant to this 10b5-1 Plan that fails to comply (or in the reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144 under the Securities Act of 1933, if applicable, or (e) if the Company determines that sales may not be effected under this 10b5-1 Plan. You acknowledge that this 10b5-1 Plan is subject to the terms of any policy adopted now or hereafter by the Company governing the adoption of 10b5-1 plans.	
 	 	 	
Restrictions on Resale	 	You agree not to sell any option shares at a time when applicable laws, Company policies (including the Company’s Insider Trading Policy, a copy of which can be found on the Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.	
 	 	 	
Transfer of	 	Prior to your death, only you may exercise this option. You cannot transfer or assign this option. For instance, you may not sell this option or	
 
5

 
Option	 	use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will or a beneficiary designation. A beneficiary designation must be filed with the Company on the proper form.
 
Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your option in any other way.	
 	 	 	
No Retention Rights	 	Your option or this Agreement does not give you the right to be retained by the Company, a Parent, Subsidiary or Affiliate in any capacity. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause. Nor shall this Agreement in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Company or its shareholders to remove you from the Board of Directors at any time in accordance with the provisions of applicable law.	
 	 	 	
Shareholder Rights	 	You, or your estate or heirs, have no rights as a shareholder of the Company until this option has been exercised by giving the required notice to the Company, paying the exercise price, satisfying any Tax Withholding Obligations and being registered on the register of members of the Company. No adjustments are made for dividends or other rights if the applicable record date occurs before exercise of this option, except as described in the Plan.	
 	 	 	
Recoupment Policy	 	This option, and the shares acquired upon exercise of this option, shall be subject to any Company recoupment policy in effect from time to time.	
 	 	 	
Adjustments	 	In the event of a share split, a share dividend or a similar change in the Common Shares, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan.	
 	 	 	
Effect of Significant Corporate Transactions	 	If the Company is a party to a merger, consolidation or certain change in control transactions, then this option will be subject to the applicable provisions of Article XI of the Plan.	
 	 	 	
Applicable Law	 	This Agreement will be interpreted and enforced under the laws of the Cayman Islands (without regard to its choice-of-law provisions).	
 	 	 	
The Plan and Other Agreements	 	The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Finance Department. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
 
This Agreement, the Notice of Option Grant, and the Plan constitute the	
 
6

 
 	 	entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement between the parties.	
 
BY ACCEPTING THIS OPTION GRANT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
 
7

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
 
NOTICE OF RESTRICTED SHARE UNIT AWARD
 
You have been granted the number of restricted share units indicated below by Theravance Biopharma, Inc. (the “ Company ”) on the following terms:
 
Name:                                                                                                          «Name»
 
Restricted Share Unit Award Details:
 
Date of Grant:	 	«DateGrant»	
Restricted Share Units:	 	«TotalShares»	
 
Each restricted share unit (the “restricted share unit”) represents the right to receive one Common Share of the Company subject to the terms and conditions contained in the Restricted Share Unit Agreement (the “ Agreement ”).
 
Vesting Schedule:
 
Vesting is dependent upon continuous service as an Employee or Consultant (“Service”) throughout the vesting period.  The restricted share units will vest as follows:  25% on <<InitialVestDate>>; 6.25% on <<SecondVestDate>>; and an additional 6.25% on the final day of each 3-month period thereafter, provided that you remain in continuous Service through each such date.
 
You and the Company agree that your right to receive the restricted share units is granted under and governed by the terms and conditions of the Theravance Biopharma, Inc. 2013 Equity Incentive Plan (the “ Plan ”) and of the Agreement that is attached to and made a part of this document.  Capitalized terms not defined herein have the meaning ascribed to such terms in the Plan.
 
You agree that the Company may deliver by email all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you by email.
 
You agree to cover the applicable withholding taxes as set forth more fully herein.  In connection with your receipt of the restricted share units, you are simultaneously entering into a trading arrangement that complies with the requirements of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934 (a “ 10b5-1 Plan ”).  As of the date of the Agreement, you are not aware of any material nonpublic information concerning the Company or its securities, or, as of the date any sales are effected pursuant to the 10b5-1 Plan, you will not effect such sales on the basis of material nonpublic information about the securities or the Company of which you were aware at the time you entered into the Agreement.

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN:
RESTRICTED SHARE UNIT AGREEMENT
 
Grant of Units	 	Subject to all of the terms and conditions set forth in the Notice of Restricted Share Unit Award, this Restricted Share Unit Agreement (the “ Agreement ”) and the Plan, the Company has granted to you the number of restricted share units set forth in the Notice of Restricted Share Unit Award.	
 	 	 	
Payment for Units	 	No payment is required for the restricted share units you are receiving.	
 	 	 	
Nature of Units	 	Your restricted share units are bookkeeping entries.  They represent only the Company’s unfunded and unsecured promise to issue Common Shares on a future date.  As a holder of restricted share units, you have no rights other than the rights of a general creditor of the Company.	
 	 	 	
Settlement of Units	 	Each of your restricted share units will be settled when it vests (unless you and the Company have agreed to a later settlement date pursuant to procedures that the Company may prescribe at its discretion).	
 	 	 	
 	 	At the time of settlement, you will receive one Common Share for each vested restricted share unit.	
 	 	 	
Vesting	 	The restricted share units that you are receiving will vest as shown in the Notice of Restricted Share Unit Award.	
 	 	 	
 	 	In addition, the restricted share units will vest in full if the Company is subject to a “ Change in Control ” (as defined in the Plan) before your Service terminates and the restricted share units are not assumed or replaced with a new award as set forth in Section 10.1 of the Plan.  In addition, the restricted share units shall vest in full if the Company is subject to a Change in Control before your Service terminates, and you are subject to an Involuntary Termination (as defined below) within 24 months after the Change in Control.	
 	 	 	
 	 	For purposes of this Agreement, “Cause” means (i) the unauthorized use or disclosure of the confidential information or trade secrets of the Company, a Parent, a Subsidiary or an Affiliate, which use causes material harm to the Company, a Parent, a Subsidiary or an Affiliate, (ii) conviction of a felony under the laws of the United States or any state thereof, (iii) gross negligence or (iv) repeated failure to perform lawful assigned duties for thirty days after receiving written notification from the Board of Directors.	
 	 	 	
 	 	For purposes of this Agreement, “Involuntary Termination” means a	

 
 	 	termination of your Service by reason of:	
 	 	 	
 	 	(a)          an involuntary dismissal or discharge by the Company (or Parent, Subsidiary or Affiliate employing you) for reasons other than for Cause; or	
 	 	 	
 	 	(b)          your voluntary resignation following one of the following that is effected by the Company (or the Parent, Subsidiary or Affiliate employing you) without your consent (i) a change in your position with the Company (or the Parent, Subsidiary or Affiliate employing you) which materially reduces your level of responsibility, (ii) a material reduction in your base compensation or (iii) a relocation of your workplace by more than fifty miles from your workplace immediately prior to the Change in Control that also materially increases your one-way commute, provided that in either case a “separation from service” (as defined in the regulations under Code Section 409A) occurs.  In order for your resignation under clause (b) to constitute an “Involuntary Termination,” all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to resign and assert an Involuntary Termination pursuant to clause (b) within 90 days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii), (2) the Company (or the Parent, Subsidiary or Affiliate employing you) will have 30 days from the date of such notice to remedy the condition and, if it does so, you may withdraw your resignation or resign without any vesting acceleration, and (3) any termination of Service under clause (b) must occur within two years of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii).  Should the Company (or the Parent, Subsidiary or Affiliate employing you) remedy the condition as set forth above and then one or more of the conditions arises again within two years following the occurrence of a Change in Control, you may assert clause (b) again subject to all of the conditions set forth herein.	
 	 	 	
 	 	For purposes of this Agreement, “Service” means your continuous service as an Employee or Consultant.	
 	 	 	
 	 	Notwithstanding the foregoing, if you are or become eligible to participate in the Company’s Change in Control Severance Plan (the “ Severance Plan ”), the vesting acceleration provisions in the Severance Plan shall apply instead of those contained herein.	
 	 	 	
 	 	No additional restricted share units vest after your Service has terminated for any reason, except as set forth in the Severance Plan to the extent you are eligible for benefits thereunder.  It is intended that vesting in the restricted share units is commensurate with a full-time work schedule.  For possible adjustments that may be made by the Company, see the Section below entitled “Leaves of Absence and	
 
2

 
 	 	Part-Time Work.”	
 	 	 	
Forfeiture	 	If your Service terminates for any reason, then your restricted share units that have not vested before the termination date and do not vest as a result of the termination pursuant to this Agreement or as set forth on the Notice of Restricted Share Unit Award will be forfeited.  This means that the restricted share units will revert to the Company.  You receive no payment for restricted share units that are forfeited.  The Company determines when your Service terminates for all purposes of your restricted share units.	
 	 	 	
Leaves of Absence and Part-Time Work	 	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another  bona fide  leave of absence, if the leave was approved by the Company (or the Parent, Subsidiary or Affiliate employing you) in writing.  If your leave of absence (other than a military leave) lasts for more than 6 months, then vesting will be suspended on the day that is 6 months and 1 day after the leave of absence began.  Vesting will resume effective as of the second vesting date after you return from leave of absence provided you have worked at least one day during that vesting period.	
 	 	 	
 	 	In the case of all leaves, your Service terminates when the approved leave ends, unless you immediately return to active work.	
 	 	 	
 	 	If you and the Company (or the Parent, Subsidiary or Affiliate employing you) agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which the restricted share units vest, so that the rate of vesting is commensurate with your reduced work schedule.	
 	 	 	
 	 	The Company shall not be required to adjust any vesting schedule pursuant to this subsection.	
 	 	 	
Share Certificates	 	No Common Shares shall be issued to you prior to the date on which the restricted share units vest.  After any restricted share units vest pursuant to this Agreement, the Company shall promptly cause to be issued in book-entry form, registered in your name or in the name of your legal representatives, beneficiaries or heirs, as the case may be, in the register of members of the Company, the number of Common Shares representing your vested restricted share units.  No fractional shares shall be issued.	
 	 	 	
Section 409A	 	Unless you and the Company have agreed to a deferred settlement date (pursuant to procedures that the Company may prescribe at its discretion), settlement of these restricted share units is intended to be exempt from the application of Code Section 409A pursuant to the “short-term deferral exemption” in Treasury Regulation 1.409A-1(b)(4) and shall be administrated and interpreted in a manner that complies with such exemption.	
 
3

 
 	 	Notwithstanding the foregoing, to the extent it is determined that settlement of these restricted share units is not exempt from Code Section 409A as a short-term deferral or otherwise and the Company determines that you are a “specified employee,” as defined in the regulations under Code Section 409A, at the time of your “separation from service,” as defined in those regulations, then any restricted share units that otherwise would have been settled during the first six months following your separation from service will instead be settled on the first business day following the earlier of the six-month anniversary of your separation from service or your death, unless the event triggering vesting is an event other than your separation from service.	
 	 	 	
No Shareholder Rights	 	The restricted share units do not entitle you to any of the rights of a shareholder of Common Shares.  Upon settlement of the restricted share units into Common Shares, you will obtain full voting and other rights as a shareholder of the Company.	
 	 	 	
Units Restricted	 	You may not sell, transfer, pledge or otherwise dispose of any restricted share units or rights under this Agreement other than by will or by the laws of descent and distribution.  Notwithstanding the foregoing, you may designate a beneficiary or beneficiaries to receive any property distributable with respect to the restricted share units upon your death. A beneficiary designation must be filed with the Company on the proper form.	
 	 	 	
Withholding Taxes	 	No shares will be distributed to you unless you have made arrangements acceptable to the Company (and/or the Parent, Subsidiary or Affiliate employing you) to pay any withholding taxes that may be due as a result of the vesting and/or settlement of this award (“ Tax Withholding Obligations ”).  Prior to the relevant taxable event, you shall pay or make adequate arrangements satisfactory to the Company (and/or the Parent, Subsidiary or Affiliate employing you) to satisfy the Tax Withholding Obligations.	
 	 	 	
 	 	You authorize the Company to instruct the broker whom it has selected for this purpose to sell a number of Common Shares to be issued upon the vesting of your restricted share units or a lesser number necessary to meet the Tax Withholding Obligations.  Such sales shall be effected at a market price following the date that the restricted share units vest (unless you and the Company have agreed to a later settlement date pursuant to procedures that the Company may prescribe at its discretion).	
 	 	 	
 	 	You acknowledge that the proceeds of any such sale may not be sufficient to satisfy the Tax Withholding Obligations.  To the extent the proceeds from such sale are insufficient to cover the Tax Withholding Obligations, the Company (or the Parent, Subsidiary or Affiliate employing you) may in its discretion (a) withhold the balance of the	
 
4

 
 	 	Tax Withholding Obligations from your wages or other cash compensation paid to you by the Company (or the Parent, Subsidiary or Affiliate employing you) and/or (b) withhold in Common Shares, provided that the Company only withholds an amount of shares not in excess of the amount necessary to satisfy the minimum withholding amount.  The fair market value of withheld shares, determined as of the date taxes otherwise would have been withheld in cash, will be applied against the Tax Withholding Obligations.  If the Company satisfies the Tax Withholding Obligations by withholding a number of Common Shares as described above, you are deemed to have been issued the full number of shares subject to the award of restricted share units.	
 	 	 	
Rule 10b5-1 Plan	 	You acknowledge that the instruction to the broker to sell in the foregoing section is intended to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Securities Exchange Act of 1934 (the “ Exchange Act ”), and to be interpreted to comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act (a “ 10b5-1 Plan ”).  This 10b5-1 Plan is adopted to be effective as of the first date on which the restricted share units vest.  This 10b5-1 Plan is being adopted to permit you to sell a number of shares awarded upon the vesting of restricted share units sufficient to pay the Tax Withholding Obligations that become due as a result of this award or the vesting of the restricted share units or, if you elect within thirty days following notification via the broker whom the Company has selected for this purpose of your restricted share unit award, to permit you to sell all of the vested restricted share units.  You hereby appoint the Company as your agent and attorney-in-fact to instruct the broker with respect to the number of shares to be sold under this 10b5-1 Plan.	
 	 	 	
 	 	You hereby authorize the broker to sell the number of Common Shares determined as set forth above and acknowledge that the broker is under no obligation to arrange for such sale at any particular price. You acknowledge that the broker may aggregate your sales with sales occurring on the same day that are effected on behalf of other Company employees pursuant to sales of shares vesting under Company options, restricted share awards or restricted share unit awards and your proceeds will be based on a blended price for all such sales. You acknowledge that you will be responsible for all brokerage fees and other costs of sale, and you agree to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale.  You acknowledge that it may not be possible to sell Common Shares during the term of this 10b5-1 Plan due to (a) a legal or contractual restriction applicable to you or to the broker, (b) a market disruption, (c) rules governing order execution priority on the Nasdaq Global Market, (d) a sale effected pursuant to this 10b5-1 Plan that fails to comply (or in the reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144 under the Securities Act of 1933, if	
 
5

 
 	 	applicable, or (e) if the Company determines that sales may not be effected under this 10b5-1 Plan.  You acknowledge that this 10b5-1 Plan is subject to the terms of any policy adopted now or hereafter by the Company governing the adoption of 10b5-1 plans.	
 	 	 	
Restrictions on Issuance	 	The Company will not issue shares to you if the issuance of shares at that time would violate any law or regulation.	
 	 	 	
Restrictions on Resale	 	You agree not to sell any Common Shares you receive under this Agreement at a time when applicable laws, regulations, Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale.  This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.	
 	 	 	
No Retention Rights	 	Your award or this Agreement does not give you the right to be employed or retained by the Company (or a Parent, Subsidiary or Affiliate) in any capacity.  The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause.	
 	 	 	
Recoupment Policy	 	This award, and the shares acquired upon settlement of this award, shall be subject to any Company recoupment policy in effect from time to time.	
 	 	 	
Adjustments	 	In the event of a share split, a share dividend or a similar change in the Common Shares, the number of restricted share units may be adjusted pursuant to the Plan.	
 	 	 	
Effect of Significant Corporate Transactions	 	If the Company is a party to a merger, consolidation or certain change in control transactions, then this award will be subject to the applicable provisions of Article XI of the Plan, provided that any action taken must either (a) preserve the exemption of your restricted share units from Section 409A of the Code or (b) comply with Section 409A of the Code.	
 	 	 	
Applicable Law	 	This Agreement will be interpreted and enforced with respect to issues of contract law under the laws of the Cayman Islands (without regard to its choice-of-law provisions).	
 	 	 	
The Plan and Other Agreements	 	The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Finance Department. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.	
 	 	 	
 	 	This Agreement, the Notice of Restricted Share Unit Award, and the Plan constitute the entire understanding between you and the Company	
 
6

 
 	 	regarding this award.  Any prior agreements, commitments or negotiations concerning this award are superseded.  This Agreement may be amended only by another written agreement between the parties.	
 
BY ACCEPTING THIS RESTRICTED SHARE UNIT AWARD, YOU AGREE TO
ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
 
7

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED SHARE AWARD
 
You have been granted restricted shares of the Common Shares of Theravance Biopharma, Inc. (the “ Company ”) on the following terms:
 
Name of Recipient:                                                                                                                                    «Name»
 
Total Number of Shares Granted:                                                         «TotalShares»
 
Date of Grant:                                                                                                                                                               «DateGrant»
 
Vesting Schedule:
 
Vesting of the shares is dependent upon continuous service as an Employee or Consultant (“Service”) throughout the vesting period.  The shares will vest as follows:  25% on <<InitialVestDate>>; 6.25% on <<SecondVestDate>>; and an additional 6.25% on the final day of each 3-month period thereafter, provided that you remain in continuous Service through such date.
 
You and the Company agree that these shares are granted under and governed by the terms and conditions of the Theravance Biopharma, Inc. 2013 Equity Incentive Plan (the “ Plan ”) and of the Restricted Share Agreement (the “ Agreement ”) that is attached to and made a part of this document.  Capitalized terms not defined herein have the meaning ascribed to such terms in the Plan.
 
You further agree that the Company may deliver by email all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you by email.
 
You agree to cover the applicable withholding taxes as set forth more fully herein.  In connection with your receipt of these shares, you are simultaneously entering into a trading arrangement that complies with the requirements of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934 (a “ 10b5-1 Plan ”).  As of the date of the Agreement, you are not aware of any material nonpublic information concerning the Company or its securities, or, as of the date any sales are effected pursuant to the 10b5-1 Plan, you will not effect such sales on the basis of material nonpublic information about the securities or the Company of which you were aware at the time you entered into the Agreement.

 
THERAVANCE BIOPHARMA, INC. 2013 EQUITY INCENTIVE PLAN:
RESTRICTED SHARE AGREEMENT
 
Payment for Shares	 	The shares have been awarded to you in consideration of your past service to the Company and no payment is required for the shares that you are receiving, except for satisfying any withholding taxes that may be due as a result of the grant of this award or the vesting or transfer of the shares.	
 	 	 	
Transfer	 	On the terms and conditions set forth in the Notice of Restricted Share Award, this Restricted Share Agreement (the “ Agreement ”) and the Plan, the Company agrees to issue to you the number of shares of its Common Shares set forth in the Notice of Restricted Share Award. 	
 	 	 	
Vesting	 	The shares will vest as shown in the Notice of Restricted Share Award.	
 	 	 	
 	 	In addition, the shares will vest in full if the Company is subject to a “Change in Control ” (as defined in the Plan) before your Service terminates and the shares are not assumed or replaced with a new award as set forth in Section 10.1 of the Plan.  In addition, the shares shall vest in full if the Company is subject to a Change in Control before your Service terminates, and you are subject to an Involuntary Termination (as defined below) within 24 months after the Change in Control.	
 	 	 	
 	 	For purposes of this Agreement, “Cause” means (i) the unauthorized use or disclosure of the confidential information or trade secrets of the Company, a Parent, a Subsidiary or an Affiliate, which use causes material harm to the Company, a Parent, a Subsidiary or an Affiliate, (ii) conviction of a felony under the laws of the United States or any state thereof, (iii) gross negligence or (iv) repeated failure to perform lawful assigned duties for thirty days after receiving written notification from the Board of Directors.	
 	 	 	
 	 	For purposes of this Agreement, “Involuntary Termination” means a termination of your Service by reason of:	
 	 	 	
 	 	(a)               an involuntary dismissal or discharge by the Company (or Parent, Subsidiary or Affiliate employing you) for reasons other than for Cause; or	
 	 	 	
 	 	(b)               your voluntary resignation following one of the following that is effected by the Company (or the Parent, Subsidiary or Affiliate employing you) without your consent (i) a change in your position with the Company (or the Parent, Subsidiary or Affiliate employing you) which materially reduces your level of responsibility, (ii) a material reduction in your base	

 
 	 	compensation or (iii) a relocation of your workplace by more than fifty miles from your workplace immediately prior to the Change in Control that also materially increases your one-way commute.  In order for your resignation under clause (b) to constitute an “Involuntary Termination,” all of the following requirements must be satisfied: (1) you must provide notice to the Company of your intent to resign and assert an Involuntary Termination pursuant to clause (b) within 90 days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii), (2) the Company (or the Parent, Subsidiary or Affiliate employing you) will have 30 days from the date of such notice to remedy the condition and, if it does so, you may withdraw your resignation or resign without any vesting acceleration, and (3) any termination of Service under clause (b) must occur within two years of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii).  Should the Company (or the Parent, Subsidiary or Affiliate employing you) remedy the condition as set forth above and then one or more of the conditions arises again within two years following the occurrence of a Change in Control, you may assert clause (b) again subject to all of the conditions set forth herein.	
 	 	 	
 	 	For purposes of this Agreement, “Service” means your continuous service as an Employee or Consultant.	
 	 	 	
 	 	Notwithstanding the foregoing, if you are or become eligible to participate in the Company’s Change in Control Severance Plan (the “ Severance Plan ”), the vesting acceleration provisions in the Severance Plan shall apply instead of those contained herein.	
 	 	 	
 	 	No additional shares vest after your Service has terminated for any reason, except as set forth in the Notice of Restricted Share Award, in this Agreement or, to the extent you are eligible for benefits thereunder, the Severance Plan.	
 	 	 	
 	 	It is intended that vesting in the shares is commensurate with a full-time work schedule.  For possible adjustments that may be made by the Company, see the Section below entitled “Leaves of Absence and Part-Time Work.”	
 	 	 	
Shares Restricted	 	Unvested shares will be considered “Restricted Shares.”	
 	 	 	
 	 	You may not sell, transfer, pledge or otherwise dispose of any Restricted Shares without the written consent of the Company, except as provided in the next sentence.  You may transfer Restricted Shares to your spouse, children or grandchildren or to a trust established by you for the benefit of yourself or your spouse, children or	
 
2

 
 	 	grandchildren.  However, a transferee of Restricted Shares must agree in writing on a form prescribed by the Company to be bound by all provisions of this Agreement.	
 	 	 	
Forfeiture	 	If your Service terminates for any reason, then your shares will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination.  This means that the Restricted Shares will revert to the Company.  You receive no payment for Restricted Shares that are forfeited. As a matter of Cayman Islands law, the “forfeiture” described in this Agreement shall take effect as a surrender of Restricted Shares by you and by accepting this award of Restricted Shares, you hereby agree that such Restricted Shares shall be surrendered by you for no consideration.  The Company determines when your Service terminates for all purposes of this award.	
 	 	 	
Leaves of Absence and Part-Time Work	 	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another  bona fide  leave of absence, if the leave was approved by the Company (or the Parent, Subsidiary or Affiliate employing you) in writing.  If your leave of absence (other than a military leave) lasts for more than 6 months, then vesting will be suspended on the day that is 6 months and 1 day after the leave of absence began.  Vesting will resume effective as of the second vesting date after you return from leave of absence provided you have worked at least one day during that vesting period.	
 	 	 	
 	 	In the case of all leaves, your Service terminates when the approved leave ends, unless you immediately return to active work.	
 	 	 	
 	 	If you and the Company (or the Parent, Subsidiary or Affiliate employing you) agree to a reduction in your scheduled work hours, then the Company reserves the right to modify the rate at which the shares vest, so that the rate of vesting is commensurate with your reduced work schedule.	
 	 	 	
 	 	The Company shall not be required to adjust any vesting schedule pursuant to this subsection.	
 	 	 	
Share Certificates	 	The Restricted Shares are issued in book-entry form, registered in your name in the register of members of the Company, and held in escrow at the Company’s designated brokerage pending the date on which shares vest.  After shares vest, the Company will release from escrow the number of Common Shares representing your vested shares, registered in your name or in the name of your legal representatives, beneficiaries or heirs, as the case may be. 	
 	 	 	
Voting Rights	 	You may vote your shares even before they vest.	
 
3

 
Dividend Rights	 	Any cash dividends distributed with respect to Restricted Shares shall be subject to the same terms and conditions as apply to the Restricted Shares to which they relate and shall be paid to you (less all applicable withholding taxes) promptly upon vesting.	
 	 	 	
Withholding Taxes	 	No shares will be released to you unless you have made arrangements acceptable to the Company (and/or the Parent, Subsidiary or Affiliate employing you) to pay any withholding taxes that may be due as a result of this award or the vesting of the shares (“ Tax Withholding Obligations ”).  Prior to the relevant taxable event, you shall pay or make adequate arrangements satisfactory to the Company (and/or the Parent, Subsidiary or Affiliate employing you) to satisfy the Tax Withholding Obligations.	
 	 	 	
 	 	You authorize the Company to instruct the broker whom it has selected for this purpose to sell a number of Common Shares to be released to you upon the vesting of your Restricted Shares or a lesser number necessary to meet the Tax Withholding Obligations.  Such sales shall be effected at a market price following the date that the Restricted Shares vest.	
 	 	 	
 	 	You acknowledge that the proceeds of any such sale may not be sufficient to satisfy the Tax Withholding Obligations.  To the extent the proceeds from such sale are insufficient to cover the Tax Withholding Obligations, the Company (or the Parent, Subsidiary or Affiliate employing you) may in its discretion (a) withhold the balance of the Tax Withholding Obligations from your wages or other cash compensation paid to you by the Company (or the Parent, Subsidiary or Affiliate employing you) and/or (b) withhold in Common Shares, provided that the Company only withholds an amount of shares not in excess of the amount necessary to satisfy the minimum withholding amount.  The fair market value of withheld shares, determined as of the date taxes otherwise would have been withheld in cash, will be applied against the Tax Withholding Obligations.  If the Company satisfies the Tax Withholding Obligations by withholding a number of Common Shares as described above, you will be deemed to have received the full number of shares released from restrictions.	
 
4

 
Rule 10b5-1 Plan	 	You acknowledge that the instruction to the broker to sell in the foregoing section is intended to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Securities Exchange Act of 1934 (the “ Exchange Act ”), and to be interpreted to comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act (a “ 10b5-1 Plan ”).  This 10b5-1 Plan is adopted to be effective as of the first date on which Restricted Shares vest.  This 10b5-1 Plan is being adopted to permit you to sell a number of shares to be released to you upon the vesting of Restricted Shares sufficient to pay the Tax Withholding Obligations that become due as a result of this award or the vesting of the Restricted Shares or, if you elect within thirty days following notification via the broker whom the Company has selected for this purpose of your restricted share award, to permit you to sell all of the vested Restricted Shares.  You hereby appoint the Company as your agent and attorney-in-fact to instruct the broker with respect to the number of shares to be sold under this 10b5-1 Plan.	
 	 	 	
 	 	You hereby authorize the broker to sell the number of Common Shares determined as set forth above and acknowledge that the broker is under no obligation to arrange for such sale at any particular price. You acknowledge that the broker may aggregate your sales with sales occurring on the same day that are effected on behalf of other Company employees pursuant to sales of shares vesting under Company options, restricted share awards or restricted share unit awards and your proceeds will be based on a blended price for all such sales. You acknowledge that you will be responsible for all brokerage fees and other costs of sale, and you agree to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale.  You acknowledge that it may not be possible to sell Common Shares during the term of this 10b5-1 Plan due to (a) a legal or contractual restriction applicable to you or to the broker, (b) a market disruption, (c) rules governing order execution priority on the Nasdaq Global Market, (d) a sale effected pursuant to this 10b5-1 Plan that fails to comply (or in the reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144 under the Securities Act of 1933, if applicable, or (e) if the Company determines that sales may not be effected under this 10b5-1 Plan.  You acknowledge that this 10b5-1 Plan is subject to the terms of any policy adopted now or hereafter by the Company governing the adoption or administration of 10b5-1 plans.	
 
5

 
Restrictions on Resale	 	You agree not to sell any shares at a time when applicable laws, regulations, Company trading policies (including the Company’s Insider Trading Policy, a copy of which can be found on the Company’s intranet) or an agreement between the Company and its underwriters prohibit a sale.  This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.	
 	 	 	
No Retention Rights	 	Your award or this Agreement does not give you the right to be employed or retained by the Company, a Parent, a Subsidiary or an Affiliate in any capacity.  The Company and its Parent, Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause.	
 	 	 	
Additional or Exchanged Securities and Property	 	In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a share split, the declaration of a share dividend, the declaration of an extraordinary dividend payable in a form other than shares, a spin-off, a recapitalization or a similar transaction affecting the Company’s outstanding Common Shares, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares, shall be subject to the same terms and conditions (including, without limitation, vesting and forfeiture) as are applicable to the Restricted Shares under this Agreement and the Plan.  Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. 	
 	 	 	
Recoupment Policy	 	The shares issued pursuant to this award shall be subject to any Company recoupment policy in effect from time to time.	
 	 	 	
Effect of Significant Corporate Transactions	 	If the Company is a party to a merger, consolidation or certain change in control transactions, then the Restricted Shares will be subject to the applicable provisions of Article XI of the Plan.	
 	 	 	
Applicable Law	 	This Agreement will be interpreted and enforced under the laws of the Cayman Islands (without regard to their choice-of-law provisions).	
 	 	 	
The Plan and Other Agreements	 	The text of the Plan is incorporated in this Agreement by reference.  A copy of the Plan is available on the Company’s intranet or by request to the Finance Department.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.	
 	 	 	
 	 	This Agreement, the Notice of Restricted Share Award and the Plan constitute the entire understanding between you and the Company regarding this award.  Any prior agreements, commitments or	
 
6

 
 	 	negotiations concerning this award are superseded.  This Agreement may be amended only by another written agreement between the parties.	
 
BY ACCEPTING THIS RESTRICTED SHARE AWARD, YOU AGREE TO ALL OF THE
TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
 
7

Exhibit 10.7
 
THERAVANCE BIOPHARMA, INC.
CHANGE IN CONTROL SEVERANCE PLAN
AND SUMMARY PLAN DESCRIPTION
 
(Effective                    , 20    )
 
The Theravance Biopharma, Inc. Change in Control Severance Plan (the “Plan”) is primarily designed to provide separation pay and other benefits to Theravance Biopharma, Inc. (the “Company”) executives who meet the eligibility requirements as set forth below (an “Eligible Executive”) and whose employment is involuntarily terminated in connection with a change in control occurring after the effective date of the Plan.
 
This Plan is designed to be an “employee welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  This Plan is governed by ERISA and, to the extent applicable, the laws of the State of California.  This document constitutes both the official plan document and the required summary plan description under ERISA.
 
I.                                       ELIGIBILITY
 
You will be an Eligible Executive for severance benefits under the Plan if:
 
·                 you are an employee of the Company, or a parent or subsidiary of the Company that has been designated to participate in the Plan(1), and you are an officer (which means you have a title of “vice president” or higher);
 
·                 your active employment is Involuntarily Terminated other than for Misconduct within the designated period before or following a Change in Control;
 
·                 you execute (and do not revoke) a waiver and general release of all claims in a form provided by and acceptable to the Company as provided for in the section entitled “Release and Waiver of Claims,” within the prescribed number of days following your Involuntary Termination, as set forth in such release; and
 
·                 you are not in one of the excluded categories listed below.
 
You will not be an Eligible Executive for severance benefits under this Plan if:
 
·                 you are an independent contractor, a temporary employee, part-time employee working fewer than 32 hours per week, probationary employee or student employee;
 
·                 you are employed with a successor employer following a Change in Control.  However, you would be eligible for severance benefits pursuant to the terms of the Plan upon a subsequent Involuntary Termination other than for Misconduct within the designated period following a Change in Control; or
 
·                 you are dismissed for Misconduct.

(1)  As of the effective date, Theravance Biopharma (US), Inc. has been selected to participate in the Plan.

 
The Company’s Board of Directors (the “Board”) or its Compensation Committee may waive any of the foregoing exclusions with respect to one or more individuals otherwise ineligible to participate in the Plan.  Any such waiver must be in writing.
 
II.                                  HOW THE PLAN WORKS
 
1.                                     Severance Guidelines
 
If you are an Eligible Executive and your employment is Involuntarily Terminated within three (3) months before or twenty-four (24) months after a Change in Control, you will be paid a Severance Payment calculated as follows:
 
If you were a vice president immediately before the Change in Control:
 
·                 100% of your combined Annual Base Pay and Target Bonus, plus
 
·                 A pro-rata portion of your current target bonus based on the number of full months of employment completed in the applicable period on the date of termination in such year of termination.
 
If you were a senior vice president or held a title greater than senior vice president (other than the title of chief executive officer of the Company) immediately before the Change in Control:
 
·                 150% of your combined Annual Base Pay and Target Bonus, plus
 
·                 A pro-rata portion of your current target bonus based on the number of full months of employment completed in the applicable period on the date of termination in such year of termination.
 
If you were the chief executive officer of the Company immediately before the Change in Control:
 
·                 200% of your combined Annual Base Pay and Target Bonus, plus
 
·                 A pro-rata portion of your current target bonus based on the number of full months of employment completed in the applicable period on the date of termination in such year of termination.
 
Payments made under this Plan shall not be treated as “compensation” for purposes of any 401(k) plan of the Company or a parent or subsidiary of the Company.  An Eligible Executive will also receive his or her unpaid salary through his or her termination date and a lump sum payment for all accrued and unused vacation (through the termination date) in a final paycheck provided on his or her last day of work.
 
The full amount of any balance and accrued interest remaining on any outstanding loans owed by the Eligible Executive to the Company as of the date of the Involuntary Termination shall be forgiven in full immediately upon the Eligible Executive’s Involuntary Termination.
 
2

 
The Severance Payment under this subsection 1 shall be paid in one lump sum from the general assets of the Company within 60 days after the Eligible Executive’s Involuntary Termination or, if later, on the date of the Change in Control.  Notwithstanding the foregoing, if the 60-day period described in the previous sentence spans two calendar years, then the Severance Payment will in any event be made in the second calendar year.
 
2.                                     Group Health Insurance Coverage
 
If (i) an Eligible Executive becomes entitled to a Severance Payment under this Plan, (ii) the Eligible Executive was a participant in the Company’s fully insured group health insurance plans (major medical, dental and vision) on the date of the Eligible Executive’s Separation and (iii) the Eligible Executive timely elects to continue his or her health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following his or her Separation, then the Company shall pay the monthly premium under COBRA for the Eligible Executive and, if applicable, the Eligible Executive’s dependents who were covered under the Company’s fully insured group health insurance plans as of the date of the Eligible Executive’s Separation, for the following periods:
 
·                 12 months if you were a vice president immediately before the Change in Control
 
·                 18 months in the case of any other Eligible Executive
 
In no event shall the Company’s obligation to pay the monthly premium under COBRA for an Eligible Executive (and the Eligible Executive’s dependents, if applicable) exceed the COBRA continuation period applicable to the Eligible Executive.  Further, the Company’s obligation to pay the monthly premium under COBRA shall cease when the Eligible Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment.  To the extent necessary to avoid the imposition of penalties on either the Eligible Executive or the Company by the Internal Revenue Service, the Company’s payment of the monthly premium under COBRA will be paid to the Eligible Executive as a lump sum taxable benefit, subject to applicable tax withholdings, at the same time as the Severance Payment described in Section 1 above.
 
3.                                     Equity
 
If an Eligible Executive becomes entitled to a Severance Payment under this Plan, then the Company shall fully vest the Eligible Executive in all of his or her unvested equity awards that were granted by the Company, and such equity awards shall become fully exercisable, as of the date of the Eligible Executive’s Involuntary Termination.  For avoidance of doubt, vesting of equity awards granted by Theravance, Inc. shall be governed by the terms of those awards or the applicable Theravance, Inc. Change in Control Severance Plan, as applicable, and not by this Plan.
 
3

 
4.                                     Definitions
 
Annual Base Pay shall mean the Eligible Executive’s base salary at the highest rate in effect at any regularly scheduled payroll period preceding the occurrence of the Change in Control (“Base Salary”) and does  not  include, for example, bonuses, overtime compensation, incentive pay, sales commissions or expense allowances.
 
Target Bonus shall mean the normal bonus amount payable to the Eligible Executive based on the percentage of his or her Base Salary correlating with the Eligible Executive’s grade level, assuming that the Company’s cash bonus pool is set at 100%.
 
Involuntary Termination shall mean a Separation as a result of the termination of the service of the Eligible Executive which occurs by reason of:
 
A.                                   such individual’s involuntary dismissal or discharge by the Company (or the parent or subsidiary employing the Eligible Executive) for reasons other than Misconduct, or
 
B.                                   such individual’s voluntary resignation following (i) a material diminution in the Eligible Executive’s authority, duties or responsibilities, (ii) a material reduction in his or her base compensation, (iii) a material change in the geographic location at which he or she must perform services for the Company or (iv) any other action or inaction that constitutes a material breach by the Company (or parent or subsidiary employing an Eligible Executive) of the agreement under which the Eligible Executive provides services.  For the Eligible Executive to receive the benefits under this Plan as a result of a voluntary resignation under this clause B, all of the following requirements must be satisfied:  (1) the Eligible Executive must provide notice to the Company of his or her intent to assert this clause B within 90 days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iv); (2) the Company (or parent or subsidiary employing the Eligible Executive) will have 30 days from the date of such notice to remedy the condition and, if it does so, the Eligible Executive may withdraw his or her resignation or may resign with no Plan benefits; and (3) any termination of employment under this clause B must occur within two years of the initial existence of one or more of the conditions set forth in subclauses (i) through (iv).  Should the Company (or parent or subsidiary employing the Eligible Executive) remedy the condition as set forth above and then one or more of the conditions arises again within two years following the occurrence of a Change in Control, the Eligible Executive may assert this clause B again subject to all of the conditions set forth herein.
 
Misconduct shall mean the commission of any material act of fraud, embezzlement or dishonesty by an individual, any material unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or any parent or subsidiary), or any other intentional material misconduct by such person adversely affecting the business or affairs of the Company (or any parent or subsidiary).
 
Change in Control shall mean:
 
A.                                   The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not shareholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting
 
4

 
power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity;
 
B.                                   The sale, transfer or other disposition of all or substantially all of the Company’s assets;
 
C.                                   A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either:
 
(i)                                    had been directors of the Company on the date 12 months prior to the date of such change in the composition of the Board (the “Original Directors”) or
 
(ii)                                 were appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a majority of the aggregate of (A) the Original Directors who were in office at the time of their appointment or nomination and (B) the directors whose appointment or nomination was previously approved in a manner consistent with this clause (ii); or
 
D.                                   Any transaction as a result of which any person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities.  For purposes of this Paragraph (D), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company.
 
A transaction shall not constitute a Change in Control if its sole purpose is to change the country or state, as applicable, of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.  In addition, a transaction shall not constitute a Change in Control unless it also constitutes a “change in control event” under Treasury Regulation 1.409A-3(a)(5).
 
Separation shall mean a “separation from service” as defined in the regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
 
5.                                     Golden Parachute Tax Limitation
 
The Internal Revenue Code imposes an excise tax on certain payments and other benefits received by certain officers and shareholders in connection with a change of control involving the Company.  Such payments can include severance pay, loan forgiveness and acceleration of vesting.
 
5

 
Basic Rule.
 
In the event that it is determined that any payment or distribution of any type (cash, equity or otherwise) to or for the benefit of the Eligible Executive made by the Company, by any of its affiliates, by any person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of section 280G of the Code and the regulations thereunder) or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or under any other agreement including an Eligible Executive’s equity award agreements and including loan forgiveness (the “Total Payments”), would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “Excise Tax”), then:
 
·                 Rule for grandfathered Eligible Executives: If, immediately prior to the Effective Date, the Eligible Executive was eligible to participate in the Theravance, Inc. Amended and Restated Change in Control Severance Plan (i.e., the Eligible Executive was an officer of Theravance, Inc. as of December 16, 2009), the Company shall pay Eligible Executive an additional amount (a “Gross-Up Payment”) equal to the amount that shall fund the payment by the Eligible Executive of any Excise Tax on the Total Payments as well as all income taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and any interest or penalties imposed with respect to taxes on the Gross-Up Payment or any Excise Tax, or
 
·                 Rule for all other Eligible Executives: In the case of any other Eligible Executive, the Total Payments shall be made to the Eligible Executive either (i) in full or (ii) as to such lesser amount as would result in no portion of the Total Payments being subject to Excise Tax (a “Reduced Payment”), whichever of the foregoing results in the receipt by the Eligible Executive on an after-tax basis, of benefits of the greatest value, notwithstanding that all or some portion of the Total Payments may be subject to the Excise Tax.
 
For avoidance of doubt, the Total Payments shall include acceleration of vesting of equity awards granted by Theravance, Inc. that vest based on service to the Company and that accelerate in connection with a change in control of the Company, but only to the extent such acceleration of vesting is deemed a parachute payment with respect to a change in control of the Company.
 
Rules Applicable to Gross-Up Payment.
 
Determination by Accountant.
 
All mathematical determinations and all determinations of whether any of the Total Payments are “parachute payments” (within the meaning of section 280G of the Code), including all determinations of whether a Gross-Up Payment is required and of the amount of such Gross-Up Payment, shall be made by an independent accounting firm selected by the Company (the “Accounting Firm”), which shall provide its determination (the “Determination”), together with detailed supporting calculations regarding the amount of any Gross-Up Payment, both to the Company and to the Eligible Executive within seven business days of the Eligible Executive’s
 
6

 
Separation, if applicable, or such earlier time as is requested by the Company or by the Eligible Executive (if the Eligible Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax).  If the Accounting Firm determines that no Excise Tax is payable by the Eligible Executive, it shall furnish the Eligible Executive with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including the reasons therefor) and that the Eligible Executive has substantial authority not to report any Excise Tax on the Eligible Executive’s federal income tax return.  If a Gross-Up Payment is determined to be payable, it shall be paid to the Eligible Executive within five business days after the Determination is delivered to the Company or the Eligible Executive and in no event later than the close of the calendar year following the calendar year in which the Eligible Executive pays the Excise Tax.  Notwithstanding the foregoing, to the extent the Gross-Up Payment is subject to Section 457A of the Code, it will be paid no later than 12 months after the end of the Company’s taxable year in which the Eligible Executive’s Involuntary Termination occurs.  Any determination by the Accounting Firm shall be binding upon the Company and the Eligible Executive, absent manifest error.
 
Underpayments and Overpayments.
 
As a result of uncertainty in the application of Sections 4999 and 280G of the Code at the time of the initial Determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made (“Gross-Up Underpayments”) or that Gross-Up Payments will have been made by the Company which should not have been made (“Gross-Up Overpayments”).  In either event, the Accounting Firm shall determine the amount of the Gross-Up Underpayment or Gross-Up Overpayment that has occurred.  In the case of a Gross-Up Underpayment, the amount of such Gross-Up Underpayment shall promptly be paid by the Company to or for the benefit of the Eligible Executive.  In the case of a Gross-Up Overpayment, the Eligible Executive shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Company and otherwise reasonably cooperate with the Company to correct such Gross-Up Overpayment;  provided, however,  that (i) the Eligible Executive shall in no event be obligated to return to the Company an amount greater than the net after-tax portion of the Gross-Up Overpayment that the Eligible Executive has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent with the intent of this section, which is to make the Eligible Executive whole, on an after-tax basis, for the application of the Excise Tax, it being understood that the correction of a Gross-Up Overpayment may result in the Eligible Executive’s repaying to the Company an amount which is less than the Gross-Up Overpayment.
 
Rules Applicable to Reduced Payments.
 
Determination by Accountant.
 
The Determination as to whether any of the Total Payments are “parachute payments” (within the meaning of section 280G of the Code) and whether to make a Reduced Payment shall be made by the Accounting Firm, which shall provide such Determination, together with detailed supporting calculations both to the Company and to the Eligible Executive within seven business days of the Eligible Executive’s Separation, if applicable, or such earlier time as is requested by the Company or by the Eligible Executive (if the Eligible Executive reasonably believes that any
 
7

 
of the Total Payments may be subject to the Excise Tax).  In any event, as promptly as practicable following the Accounting Firm’s Determination, the Company shall pay or transfer to or for the benefit of the Eligible Executive such amounts as are then due to him or her and shall promptly pay or transfer to or for the benefit of the Eligible Executive in the future such amounts as become due to him or her.  Any determination by the Accounting Firm shall be binding upon the Company and the Eligible Executive, absent manifest error.
 
Reduction of Payments.
 
For purposes of determining whether to make a Reduced Payment, if applicable, the Company shall cause to be taken into account all federal, state and local income and employment taxes and excise taxes applicable to the Eligible Executive (including the Excise Tax).  If a Reduced Payment is made, the Company shall reduce or eliminate the Total Payments in the following order: (1) cancellation of accelerated vesting of options with no intrinsic value, (2) reduction of cash payments, (3) cancellation of accelerated vesting of equity awards other than options, (4) cancellation of accelerated vesting of options with intrinsic value and (5) reduction of other benefits paid to the Eligible Executive.  In the event that acceleration of vesting is reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Eligible Executive’s equity awards.  In the event that cash payments or other benefits are reduced, such reduction shall occur in reverse order beginning with payments or benefits which are to be paid farthest in time from the date of the Determination.  For avoidance of doubt, an option will be considered to have no intrinsic value if the exercise price of the shares subject to the option exceeds the fair market value of such shares.
 
Underpayments and Overpayments.
 
As a result of uncertainty in the application of Sections 4999 and 280G of the Code at the time of the initial Determination by the Accounting Firm hereunder, it is possible that payments will have been made by the Company which should not have been made (an “Overpayment”) or that additional payments which will not have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of whether and to what extent a Reduced Payment shall be made hereunder.  In either event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred.  In the event that the Accounting Firm determines that an Overpayment has occurred, such Overpayment shall be treated for all purposes as a loan to the Eligible Executive that he or she shall repay to the Company, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Eligible Executive to the Company if and to the extent that such payment would not reduce the amount that is subject to taxation under Section 4999 of the Code.  In the event that the Accounting Firm determines that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the benefit of the Eligible Executive, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code.
 
If this Section 5 is applicable with respect to an Eligible Executive’s receipt of a Reduced Payment, it shall supersede any contrary provision of any plan, arrangement or agreement governing the Eligible Executive’s rights to the Total Payments.
 
8

 
6.             Sections 409A and 457A.
 
Severance payments and benefits under the Plan are intended to be exempt from the application of Section 409A of the Code and any state law of similar effect, and the Plan will be construed to the greatest extent possible consistent with such intent.  In particular, severance payments are intended to be exempt from the application of Section 409A of the Code pursuant to Treasury Regulation 1.409A-1(b)(4) (as a short-term deferral) and alternatively pursuant to Treasury Regulation 1.409A-1(b)(9)(iii) (to the extent of the dollar limitation set forth therein).    To the extent not so exempt, the Plan will be construed to comply with the requirements of Section 409A of the Code so that none of the payments or benefits hereunder will be subject to additional tax imposed under Section 409A of the Code.  For purposes of Section 409A of the Code, an Eligible Executive’s right to receive a series of installment payments under the Plan will be treated as a right to receive a series of separate payments.  Severance payments and benefits under the Plan are also intended to be exempt from the application of Section 457A of the Code and will be construed to the greatest extent possible consistent with such intent.
 
This paragraph shall only apply if the Company determines that the Eligible Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code and the regulations thereunder when his or her Separation occurs.  If this paragraph applies, it shall supersede any contrary provision of the Plan.  To the extent that any payments or benefits to which an Eligible Executive becomes entitled under the Plan in connection with a Separation constitute “deferred compensation” subject to Section 409A of the Code, such payments shall not be paid, or, in the case of installments, shall not commence until expiration of the six-month period measured from the Eligible Executive’s Separation or the date of the Eligible Executive’s death, but only to the extent necessary to avoid the additional tax imposed by Section 409A of the Code.  The severance payments or benefits that otherwise would have been made during such deferral period shall be paid in a lump sum on the first day following expiration of the deferral period.
 
III.                             OTHER IMPORTANT INFORMATION
 
1.                                     Release and Waiver of Claims.  Any other provision of this Plan notwithstanding, an Eligible Executive shall not be entitled to receive any Severance Payment, other payment, or benefit under this Plan unless such Eligible Executive has executed a waiver of claims and a general release of all claims in favor of the Company and its affiliates.  Such release shall be executed on a form provided by and acceptable to the Company.  The Company shall complete the form of release and deliver it to the Eligible Executive within 30 days after his or her Separation occurs.  The form of the release will specify how much time such Eligible Executive has to sign it and whether there is a revocation period; provided, however, that the deadline for execution of the release will in no event be later than 50 days after the Eligible Executive’s Separation and the release must become effective by the 60 th  day after the Eligible Executive’s Separation.  If the release has not been signed by the Eligible Executive and become effective by the 60 th  day after the Eligible Executive’s Separation, then the Eligible Executive will cease to be eligible for benefits under this Plan.
 
2.                                     Plan Administration.  As the Plan Administrator, the Company has full discretionary authority to administer and interpret the Plan, including discretionary authority to determine eligibility for benefits under the Plan and the amount of benefits (if any)
 
9

 
payable per participant. Any determination by the Plan Administrator will be final and conclusive upon all persons.  The Plan Administrator hereby delegates to the Chief Financial Officer all of its administrative duties.  Accordingly, the Chief Financial Officer, on behalf of the Plan Administrator, has full discretionary authority to carry out its delegated duties.  Any determination by the Chief Financial Officer will be final and conclusive upon all persons.  The Company, as the Plan Administrator, will indemnify and hold harmless the Chief Financial Officer for carrying out the responsibilities of the Plan Administrator;  provided, however,  such person does not act with gross negligence or willful misconduct.
 
3.                                     Benefits. The Company is not required to establish a trust to fund the Plan.  The benefits provided under this Plan are not assignable and may be conditioned upon your compliance with the waiver and release of claims signed by you and any confidentiality agreement and/or proprietary information and invention assignment agreement you have entered into with the Company.
 
4.                                     Claims Procedure.  If you believe you are incorrectly denied a benefit or are entitled to a greater benefit than the benefit you receive under the Plan, you may submit a signed, written application to the Plan Administrator.  This notice must be filed within ninety (90) days of your Separation or, if your claim involves a Gross-Up Payment or a Reduced Payment, within ninety (90) days of the date on which a Determination is made regarding such Gross-Up Payment or Reduced Payment.
 
·                                         Initial Claims Procedure.  The Plan Administrator shall, within ninety (90) days after receipt of a claim, either allow or deny the claim in writing.  The ninety (90)-day period may be extended for another ninety (90) days if the Plan Administrator determines that special circumstances warrant an extension.  If an extension is required, you will be notified in advance of the circumstances underlying the extension and the date by which the Plan Administrator expects to render a decision.  A denial of a claim should include:
 
a)            The specific reason or reasons for the denial;
 
b)            Specific reference to pertinent Plan provisions on which the denial is based;
 
c)             A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
 
d)            An explanation of the Plan’s claim review procedure, including the right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
 
·                                         Appeals Procedure.  If your claim is denied, you (or your duly authorized representative) may, within sixty (60) days after receipt of denial of your claim, submit a written request to the Plan Administrator for a full and fair review of the denied claim.  As part of the appeal, you may submit written issues and comments, documents, records and other information relating to the claim.  Upon request and free of charge, you will be provided reasonable access to, and copies
 
10

 
of, all documents, records and other information relevant to the claim for benefits.  The review will take into account all comments, documents, records and any other information submitted by you relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
 
The Plan Administrator shall notify you of the final decision on review within sixty (60) days after receipt of a request for review.  The sixty (60)-day period may be extended for another sixty (60) days if the Plan Administrator determines that special circumstances warrant an extension.  If an extension is required, you will be notified in advance of the circumstances underlying the extension and the date by which the Plan Administrator expects to render a decision.  The final decision will be provided in writing and, if adverse, will include:
 
a)            The specific reason or reasons for the adverse determination;
 
b)            A reference to specific Plan provisions on which the adverse determination was made;
 
c)             A statement that you are entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to your claim for benefits; and
 
d)            A statement describing any voluntary appeal procedures offered by the Plan and your right to obtain the information about such procedures and a statement of your right to bring an action under ERISA Section 502(a).
 
In reviewing the adverse benefit determination of a benefit claim, the Plan Administrator will have full authority to interpret and apply in its discretion the provisions of the Plan.  The decision of the Plan Administrator will be final and binding on all parties.  You must follow and fully exhaust these claims procedures before you may commence a civil action in court for any claim.  Additionally, any legal action must be commenced within two (2) years following the date on which administrative remedies have been exhausted hereunder.
 
5.                                     Plan Terms.  This Plan supersedes any and all prior separation, severance and salary continuation arrangements, programs and plans which were previously offered by the Company relating to a Change in Control event, for which you are eligible, but excluding terms of the Company’s equity plans and individual letter agreements which address the vesting of equity awards.  In no event shall an Eligible Executive receive cash severance benefits under this Plan following a Change in Control event and under any other Plan, program or arrangement.
 
6.                                     Plan Amendment or Termination.  The Company, acting through its Board or its Compensation Committee, reserves the right to terminate or amend the Plan at any time and in any manner.  Any termination or amendment of the Plan may be made effective immediately with respect to any benefits not yet paid, whether or not prior notice of such amendment or termination has been given to affected employees.  However, no
 
11

 
amendment or termination may be approved following the execution of a definitive agreement to effect any Change in Control involving the Company without the consent of 75% of the then participating Eligible Executives.
 
7.                                     Taxes.  Except as set forth herein, the Company will withhold taxes and other payroll deductions from any severance payment.
 
8.                                     No Right to Employment.  This Plan does not provide you with any right to continue employment with the Company (or any parent or subsidiary) or affect the Company’s right (or the right of any parent or subsidiary employing an Eligible Executive), which right is hereby expressly reserved, to terminate the employment of any individual at any time for any reason with or without cause.
 
IV.                              STATEMENT OF ERISA RIGHTS
 
As a participant in the Plan, you are entitled to certain rights and protections under ERISA.  ERISA provides that all Plan participants shall be entitled to:
 
Receive Information About Your Plan and Benefits
 
1.                                     Examine, without charge, at the Plan Administrator’s office, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if applicable, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.
 
2.                                     Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series), if applicable, and an updated (as necessary) summary plan description.  The Plan Administrator may make a reasonable charge for the copies.
 
3.                                     Receive a summary of the Plan’s annual financial report, if applicable.  The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.
 
Prudent Actions by Plan Fiduciaries
 
In addition to creating rights for Plan participants, ERISA imposes obligations upon the people who are responsible for the operation of the Plan.  The people who operate the Plan (called “fiduciaries”) have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries.
 
No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit to which you are entitled under the Plan or from exercising your rights under ERISA.
 
12

 
Enforce Your Rights
 
If your claim for a severance benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
 
Under ERISA, there are steps you can take to enforce the above rights.  For instance, if you request a copy of Plan documents or the latest annual report from the Plan, if applicable, and do not receive them within 30 days, you may file suit in a Federal court.  In such a case, the court may require the Plan Administrator to provide the materials and to pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.  If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.  If it should happen that Plan fiduciaries are misusing the Plan’s assets (if any) or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or file suit in a Federal court.  The court will decide who should pay court costs and legal fees.  If you are successful the court may order the person you have sued to pay these costs and fees.  If you lose, the court may order you to pay these costs and fees, for example, if it finds that your claim is frivolous.
 
Assistance with Your Questions
 
If you have any questions about the Plan, you should contact the Plan Administrator.  If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.
 
13

 
ADDITIONAL PLAN INFORMATION
 
Name of Plan:	 	Theravance Biopharma, Inc. Change in Control Severance Plan	
 	 	 	
Company Sponsoring Plan:	 	Theravance Biopharma, Inc.
Ugland House, South Church Street
George Town, Grand Cayman, Cayman Islands
(650) 808-6000	
 	 	 	
Employer Identification Number:	 	N/A; provided, however, the Employer Identification Number for Theravance Biopharma (US), Inc., which is a participating employer in the Plan is:	
 	 	 	
Plan Number:	 	 	
 	 	 	
Plan Year:	 	The calendar year; the first plan year shall end December 31, 2014	
 	 	 	
Plan Administrator:	 	Theravance Biopharma (US), Inc.
901 Gateway Blvd.
South San Francisco, CA 94080
(650) 808-6000	
 	 	 	
Agent for Service of Legal Process:	 	Plan Administrator	
 	 	 	
Type of Plan:	 	Severance Plan/Employee Welfare Benefit Plan	
 	 	 	
Plan Costs:	 	The cost of the Plan is paid by Theravance Biopharma, Inc.	
 
14

Exhibit 10.15
 
THERAVANCE RESPIRATORY COMPANY, LLC
 
LIMITED LIABILITY COMPANY AGREEMENT
 
                             , 2014

 
TABLE OF CONTENTS
 
 	 	Page	
 	 	
ARTICLE I DEFINITIONS	2	
1.1	Definitions	2	
 	 	
ARTICLE II FORMATION OF LIMITED LIABILITY COMPANY	16	
2.1	Formation	16	
2.2	Name and Principal Place of Business	16	
2.3	Agreement	16	
2.4	Business	17	
2.5	Definitions	17	
2.6	Term	17	
 	 	 	
ARTICLE III MEMBERS AND INTERESTS	17	
3.1	Units Generally	17	
3.2	Classes of Units	17	
3.3	Members	18	
3.4	Representations and Warranties	18	
3.5	Resignation or Withdrawal of a Member	19	
3.6	Limited Liability of Members	19	
3.7	General Voting Rights	19	
3.8	Fiduciary Duties of Theravance Biopharma	20	
3.9	Related Party Transactions	21	
3.10	Relationship of Members	21	
3.11	Cancellation of Units	21	
3.12	Compliance with GSK Agreements by Theravance and the LLC	21	
3.13	Performance of Obligations by Manager	22	
3.14	Theravance Triggering Event	22	
 	 	
ARTICLE IV CONTRIBUTIONS TO CAPITAL; WITHDRAWALS; ADVANCES	22	
4.1	Initial Capital Contribution by Theravance	22	
4.2	Additional Capital Contributions	25	
4.3	Interest	25	
4.4	No Right of Withdrawal	26	
4.5	Advances	26	
 	 	
ARTICLE V MANAGEMENT, EXPENSES AND RESTRICTIONS	26	
5.1	Management by Manager; Manager	26	
5.2	Fiduciary Duties of Theravance and the Manager	27	
5.3	Duties of the Manager	27	
5.4	Limitation of Authority of Manager	29	
5.5	Management Fee	30	
 	 	 	
ARTICLE VI NOTICES	30	
6.1	Notices	30	
 
i

 
6.2	Waiver of Notice	30	
 	 	
ARTICLE VII OFFICERS	30	
7.1	Officers	30	
7.2	Reliance by Third Parties	31	
7.3	Actions and Determinations of the LLC	31	
 	 	
ARTICLE VIII ACCOUNTING AND RECORDS	31	
8.1	Financial and Tax Reporting	31	
8.2	Members Access to Certain Information	32	
8.3	Books and Records	32	
8.4	Tax Returns	32	
8.5	Tax Matters Partner	32	
8.6	Confidentiality	32	
 	 	 	
ARTICLE IX CAPITAL ACCOUNTS AND ALLOCATIONS OF NET INCOME AND NET LOSS	33	
9.1	Capital Accounts	33	
9.2	Allocations of Net Income and Net Loss	34	
9.3	Special Allocation Provisions	34	
9.4	Curative Allocations	36	
9.5	Tax Allocations	36	
9.6	Compliance with Section 704(b) of the Code	36	
9.7	Section 754 Election	36	
 	 	
ARTICLE X EXPENSES	37	
10.1	Expenses	37	
 	 	
ARTICLE XI DISTRIBUTIONS	37	
11.1	Distributions	37	
11.2	Tax Distributions	37	
11.3	No Other Withdrawals	38	
11.4	Distribution Limitations	38	
 	 	 	
ARTICLE XII TRANSFER OF MEMBERSHIP; OTHER MATTERS	38	
12.1	Transfer	38	
12.2	Transfer Void	39	
12.3	Effect of Assignment	39	
12.4	Legends	39	
12.5	Publicly Traded Partnership Limitations	40	
12.6	Effective Date	40	
12.7	Redemption	40	
12.8	Assignment of Reverted Drug Programs	40	
12.9	Admission of Permitted Assignee as a Member	40	
12.10	Transfer to Theravance Biopharma at Effective Time; Admission of Theravance Biopharma at Effective Time	40	
 
ii

 
ARTICLE XIII INDEMNIFICATION AND LIMITATION OF LIABILITY	41	
13.1	Indemnification	41	
13.2	Exculpation	42	
13.3	Limitation of Liability	43	
 	 	 	
ARTICLE XIV DISSOLUTION AND TERMINATION	43	
14.1	Dissolution	43	
14.2	Authority to Wind Up	43	
14.3	Winding Up and Certificate of Cancellation	43	
14.4	Distribution of Assets	44	
14.5	Contingent Distribution	44	
 	 	 	
ARTICLE XV MISCELLANEOUS	45	
15.1	Amendment	45	
15.2	Power of Attorney	46	
15.3	Withholding	47	
15.4	Apportionment of Amounts Withheld at the Source or Paid by the LLC	47	
15.5	Notice to and Consent of Members	48	
15.6	Further Assurances	48	
15.7	Binding Effect	48	
15.8	Governing Law	48	
15.9	Title to LLC Property	48	
15.10	Dispute Resolution	48	
15.11	Entire Agreement	51	
15.12	Counterparts	52	
15.13	No State-law Partnership	52	
15.14	Tax Classification	52	
15.15	Severability	52	
15.16	No Third Party Beneficiary	53	
15.17	Interpretation	53	
15.18	Aggregation of Units	53	
 
EXHIBIT A	Members; Units	
EXHIBIT B	Manager; Officers; Tax Matters Member	
EXHIBIT C	Assigned Rights and Benefits and Assumed Liabilities	
 	 	
ATTACHMENT A	Assigned Assets — Patents	
ATTACHMENT B	Assigned Assets — Trademarks	
ATTACHMENT C	Assigned Assets — Domain Names	
ATTACHMENT D	Assigned Assets — Registrations	
ATTACHMENT E	Assumed Liabilities	
ATTACHMENT F	FF Chemical Structure	
ATTACHMENT G	UMEC Chemical Structure	
ATTACHMENT H	VI Chemical Structure	
 
iii

 
THERAVANCE RESPIRATORY COMPANY, LLC
 
 LIMITED LIABILITY COMPANY AGREEMENT
 
This Limited Liability Company Agreement (the “Agreement”) of Theravance Respiratory Company, LLC (the “ LLC ”) is entered into pursuant to the Delaware Limited Liability Company Act, Delaware Code Ann. Title 6, §§18-101, et seq., as amended from time to time (the “ Act ”), effective as of         , 2014, by and among (i) each Member (as hereinafter defined) set forth on  Exhibit A  hereto, each having duly executed this Agreement or a counterpart to this Agreement intending to be legally bound by the following terms and conditions, (ii) Theravance, Inc., a Delaware corporation, as Manager, having duly executed this Agreement or a counterpart to this Agreement intending to be legally bound by the following terms and conditions, and (iii) such other Persons who may hereafter be admitted from time to time as Members (as hereinafter defined) in accordance with the provisions hereof.
 
RECITALS
 
WHEREAS, Theravance has announced its plan to spin off its drug discovery and development business into Theravance Biopharma, which will be a separate publicly traded company;
 
WHEREAS, at the Contribution Time, Theravance will assign to the LLC its Strategic Alliance Agreement with GSK and all of its rights and obligations under its Collaboration Agreement with GSK, other than with respect to the Retained Products, and certain other related assets and liabilities;
 
WHEREAS, immediately after the Contribution Time, Theravance’s Class A Units, Class B Units and Class C Units of the LLC will entitle it to 100% of the economic interest in all future payments made by GSK to the LLC under the GSK Agreements relating to the Assigned Products;
 
WHEREAS, at the Effective Time, Theravance shall transfer all of its Class B Units in the LLC and six thousand three hundred seventy-five (6,375) of its Class C Units in the LLC to Theravance Biopharma and Theravance Biopharma shall be admitted as a Member; and
 
WHEREAS, the LLC shall be controlled by Theravance who shall, among other things, appoint the Manager which shall manage the business and affairs of the LLC:
 
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members hereby agree as follows:

 
ARTICLE I
 
DEFINITIONS
 
1.1                              Definitions.  The following terms shall have the meanings set forth for purposes of this Agreement:
 
“Accounting Period” shall mean for each Fiscal Year the period beginning on the 1st of January and ending on the 31st of December;  provided, however , that the first Accounting Period commenced on the date of formation of the LLC and shall end on December 31 of the year of formation of the LLC; and  provided ,  further , that, at the election of the Manager, a new Accounting Period shall commence on any date on which an additional Member is admitted to the LLC or a Member ceases to be a Member for any reason.
 
“Act” shall have the meaning ascribed to it in the Preamble.
 
“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.
 
“Affiliates” shall mean, with respect to any specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, the Person specified.  For the avoidance of doubt, as of the Effective Time, GSK is not an Affiliate of Theravance or Theravance Biopharma.
 
“Agreement” shall mean this Limited Liability Company Agreement of the LLC as the same shall be amended from time to time.
 
“Alliance Product” shall mean that term as defined in the Strategic Alliance Agreement.
 
“ANORO™” shall mean the Collaboration Product consisting of (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 and formulations, 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).
 
“Assigned Assets” shall mean:
 
(a)                                All of Theravance’s rights, title and interest in and to the patents and patent applications listed in Attachment A, 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
 
2

 
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.
 
(b)                                All of Theravance’s rights, title and interest in and to the Trademarks listed on Attachment B, together with (i) all common law rights to such Trademarks, (ii) the goodwill of the LLC Business symbolized by such Trademarks, (iii) all Actions for, or arising 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.
 
(c)                                 All of Theravance’s rights, title and interest in and to the domain names listed in Attachment C and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing.
 
(d)                                All U.S. and foreign copyrights and copyrightable subject matter related to the LLC Business (and not to the Theravance 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 LLC Business and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing (“ LLC Copyrights ”).
 
(e)                                 All of Theravance’s rights, title and interest in and to any Intellectual Property, including trade secrets, not heretofore described in the definition of Assigned Assets that is reasonably likely to be used in the LLC Business  (and not in the Theravance Business) and that Theravance in its sole discretion determines to assign to the LLC.
 
(f)                                  With respect to the Assigned Products, all (i) regulatory filings and approvals, registrations and governmental authorizations, (ii) each NDA, (iii) each IND or equivalent, (iv) all compliance notices, licenses and permits, (v) all applications to the FDA or the comparable foreign law or bodies in effect or pending at the Effective Time, and (vi) all materials and information relating to the FDA and other Governmental Approvals for the LLC Business, all as set forth on Attachment D, and all information contained therein (collectively, the “ Registrations ”).
 
(g)                                 All Books and Records.
 
(h)                                All pre-clinical and clinical data related to the LLC Business (and not to the Theravance Business) and which is contained in Theravance’s databases or otherwise in Theravance’s possession or control.
 
(i)                                    All of Theravance’s rights, title and interest in and to the Clinical Trial Materials to the extent not related to the Theravance Business.
 
(j)                                   All of Theravance’s rights, title and interest in and to the Clinical Trial Study Reports to the extent not related to the Theravance Business.
 
(k)                                All of Theravance’s rights, title and interest in and to any and all other assets that primarily relate to the Assigned Drug Programs or Assigned Products (and not to the
 
3

 
Theravance Business) or that otherwise are expressly contemplated by this Agreement (or the Attachments and Schedules hereto) to be transferred by Theravance to the LLC.
 
“Assigned Collaboration Product” shall mean each Collaboration Product and any other compound that has been, is currently or may in the future be developed or commercialized under the Collaboration Agreement other than Retained Products.
 
“Assigned Drug Programs” shall mean (i) the rights and obligations of Theravance under the GSK Agreements relating to the Assigned Products, (ii) the Liabilities of Theravance under the GSK Agreements relating to the Assigned Products and (iii) the Assigned Assets and Assumed Liabilities.
 
“Assigned Products” shall mean, individually and collectively, each Assigned Collaboration Product and each Assigned Strategic Alliance Product.
 
“Assigned Strategic Alliance Product” shall mean each Alliance Product and any other compound that has been, is currently or may in the future be developed or commercialized under the Strategic Alliance Agreement.
 
“Assignment” shall mean that term as defined in Section 4.1(a).
 
“Assumed Liabilities” shall mean:
 
(a)                                All Liabilities under the Registrations arising after the Effective Time.
 
(b)                                All other Liabilities primarily arising out of the Assigned Drug Programs or Assigned Products or otherwise arising out of the conduct of Theravance’s business solely to the extent relating to of the conduct of the LLC Business or the Assigned Assets.
 
(c)                                 Any and all Liabilities expressly set forth on Attachment E.
 
(d)                                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 the LLC.
 
“Assumption” shall mean that term as defined in Section 4.1(c).
 
“Books and Records” shall mean books and records of the business, operations and accounts of an Assigned Product or the LLC to the extent not related to the Theravance Business.
 
“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 or formulations, in each case, with respect only to such
 
4

 
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).
 
“Business Day” shall mean any day on which banks located in New York, New York are not required or authorized by law to remain closed.
 
“Capital Account” shall mean, with respect to any Member, the account maintained for such Member in accordance with the provisions of Section 9.1(a) hereof.
 
“Capital Contribution” shall mean, with respect to any Member, any contribution to the LLC by such Member of cash or other property.  Any reference in this Agreement to the Capital Contribution of a Member shall include the Capital Contribution made by any predecessor holder of the Interest of that Member.
 
“Carrying Value” shall mean:
 
(a)                                with respect to any LLC asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:
 
(i)                                    the Carrying Value of any asset contributed or deemed contributed by a Member to the LLC shall be the fair market value of such asset at the time of contribution as determined by agreement of the Members;
 
(ii)                                 the Carrying Value of any asset distributed or deemed distributed by the LLC to any Member shall be adjusted immediately prior to such distribution to equal its fair market value at such time;
 
(iii)                              the Carrying Values of all LLC assets shall be adjusted to equal their respective fair market values as of the following times:
 
(1)                                immediately prior to the date of the acquisition of any additional Interest by any new or existing Member, other than in exchange for a  de minimis  Capital Contribution;
 
(2)                                immediately prior to the date of the distribution of more than a de minimis amount of LLC property to a Member;
 
(3)                                the liquidation of the LLC within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); and
 
(4)                                in connection with the grant of an Interest (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the LLC or a subsidiary of the LLC by an existing Member acting in a partner capacity, or by a new Member acting in a partner capacity in anticipation of becoming a Member;  provided  that an adjustment described in subclauses (1), (2) and (4) of this clause (iii) shall be made only if the Manager reasonably determines that such adjustment is necessary to reflect the collective economic interests of the Members in the LLC.
 
5

 
In the case of any asset that has a Carrying Value determined pursuant to subclause (1), (2) or (4) above, depreciation or deductions shall be computed based on the asset’s Carrying Value as so determined, and not on the asset’s adjusted tax basis, as more fully described under the definition of Net Income and Net Loss below.
 
(b)                                with respect to any liability, at a given time, the amount of such liability to the extent:
 
(i)                                    reflected in the basis of any asset;
 
(ii)                                 previously or currently deductible in computing Net Income or Net Loss or otherwise for Capital Account maintenance purposes; or
 
(iii)                              otherwise previously taken into account for Capital Account maintenance purposes.
 
“Certificate” shall have the meaning ascribed to it in Section 2.1.
 
“Class” shall mean the group of Members owning all of the outstanding Units of a particular class of Units as set forth in Section 3.2(a) hereof.
 
“Class A Members” shall mean Members holding Class A Units, their permitted successors and assigns who may be admitted to the LLC as Class A Members, in accordance with the terms hereof and any other Person who may be admitted to the LLC as a Class A Member in accordance with the terms of this Agreement.
 
“Class A Units” shall have the meaning ascribed to it in Section 3.2(a).
 
“Class B Members” shall mean Members holding Class B Units, their permitted successors and assigns who may be admitted to the LLC as Class B Members, in accordance with the terms hereof and any other Person who may be admitted to the LLC as a Class B Member in accordance with the terms of this Agreement.
 
“Class B Units” shall have the meaning ascribed to it in Section 3.2(a).
 
“Class C Members” shall mean Members holding Class C Units, their permitted successors and assigns who may be admitted to the LLC as Class C Members, in accordance with the terms hereof and any other Person who may be admitted to the LLC as a Class C Member in accordance with the terms of this Agreement.
 
“Class C Units” shall have the meaning ascribed to it in Section 3.2(a).
 
“Clinical Trial” shall mean a pre-clinical or clinical trial related to the Assigned Products.
 
“Clinical Trial Materials” shall mean the Assigned Products and the placebo for each of these products for use in Clinical Trials, whether in bulk, formulated or finished form and whether in existence at the Effective Time.
 
6

 
“Clinical Trial Study Reports” shall mean all reports or summaries of all data, records and documents resulting from the Clinical Trials.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended.
 
“Collaboration Agreement” means that certain Collaboration Agreement, dated as of November 14, 2002, by and between Theravance and GSK, including all amendments and supplements thereto (including the Theravance Collaboration Agreement Amendment dated March 3, 2014 (the “ Collaboration Amendment Agreement ”)).
 
“Collaboration Product” shall mean that term as defined in the Collaboration Agreement.
 
“Consents” shall mean any and all consents, waivers or approvals from, or notification requirements to, any Third Parties.
 
“Contingent Distribution” shall have the meaning ascribed to it in Section 14.5.
 
“Contribution Time” shall mean 11:59 p.m. Eastern Standard Time on the day which is two days before the Distribution Date (subject to the Distribution (as defined in the Separation and Distribution Agreement) being effective on the Distribution Date).
 
“Costs” shall mean LLC Costs and Management Costs.
 
“Defined Covenants” shall mean any covenant:
 
(a)                                requiring Theravance Biopharma and its permitted transferees, successors and permitted assigns (as applicable) to fully perform and comply with the Master Agreement and this Agreement and prohibiting any of them from taking any action, or failing to take any action, that breaches, violates or could reasonably be expected to breach or violate the Master Agreement or this Agreement;
 
(b)                                (A) requiring Theravance Biopharma and its permitted transferees, successors and permitted assigns (as applicable) to enforce the Master Agreement and this Agreement and their rights thereunder and hereunder, in each case to the extent that the failure to do so under this clause (A) would be reasonably expected to have a direct or indirect material and adverse effect on Theravance Biopharma’s or its permitted transferees’, successors’ and permitted assigns’ (as applicable) rights or obligations under the Master Agreement or this Agreement, and (B) prohibiting Theravance Biopharma and its permitted transferees, successors and permitted assigns (as applicable) from amending, modifying, supplementing, waiving, canceling, terminating or granting any consent thereunder or hereunder, or taking any other action or failing to take any action having the effect of the foregoing, or agreeing to do any of the foregoing directly or indirectly, in whole or in part, to the Master Agreement or this Agreement or any rights thereunder or hereunder, in each case to the extent that such action or inaction referred to in clause (B) would be reasonably expected to have a direct or indirect material and adverse effect on Theravance Biopharma’s or its permitted transferees’, successors’ and permitted assigns’ (as applicable) rights or obligations under the Master Agreement or this Agreement;
 
7

 
(c)                                 prohibiting Theravance Biopharma and its permitted transferees, successors and permitted assigns (as applicable) from taking any action to, directly or indirectly, adversely impact, delay, forgive, release or compromise any amount owed to or becoming owing to them under this Agreement; and
 
(d)                                requiring a holder to maintain its separate existence from any other entity and to operate in a manner so as to establish or maintain a bankruptcy remote status, including by restricting incurrence of debt, grant of liens, employment of employees and consultants, ownership or lease of real or personal property, guarantees, incurrence of liabilities, issuance of securities, lines of business, and initiation of bankruptcy or insolvency proceedings and other similar customary covenants regarding bankruptcy remote status.
 
“DGCL” shall mean the General Corporation Law of the State of Delaware, 8 Del. Code § 101 et seq., as amended from time to time.
 
“Designated Jurisdiction” shall mean California.
 
“Distribution Date” shall mean that term as defined in the Separation and Distribution Agreement.
 
“Effective Time” shall mean 11:59 p.m. Eastern Time on the day immediately preceding the Distribution Date.
 
“Electronic Signature” shall have the meaning ascribed to it in Section 15.12.
 
“Estimated Tax Period” shall mean, for each Fiscal Year, the periods of January 1 through March 31, April 1 through May 31, June 1 through August 31, and September 1 through December 31 (each a “ Fiscal Quarter ”).
 
“FF” shall mean the inhaled corticosteroid known as Fluticasone Furorate (with the chemical structure as set forth in  Attachment F ) or an ester, salt or other noncovalent derivative thereof.
 
“Financial Plan” shall have the meaning ascribed to it in Section 5.3(e).
 
“Fiscal Year” shall mean the taxable year of the LLC, which shall be the period from January 1 to December 31 of each year, except as otherwise required by the Code.
 
“GAAP” shall mean United States generally accepted accounting principles.
 
“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.
 
“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.
 
8

 
“GSK” shall mean Glaxo Group Limited, a private company limited by shares registered under the laws of England and Wales.
 
“GSK Agreements” shall mean the Collaboration Agreement and the Strategic Alliance Agreement, individually or collectively.
 
“IND” shall mean an investigational new drug application, including any amendments and supplements thereto, and all reports, correspondence and other submissions related thereto.
 
“Indebtedness” shall mean as to any Person: (a) all obligations, whether or not contingent, of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured); (b) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments; (c) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases; (d) all liabilities and obligations secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person; and (e) all Indebtedness of any other Person referred to in clauses (a) through (e) above, guaranteed, directly or indirectly, by that Person; but excluding all obligations of such Person for deferred rent.
 
“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 (and rights to bring such Actions).
 
“Interest” shall mean the interest of a Member (or a permitted assignee of a Member) in the LLC, which is represented by the Units held by such Member (or permitted assignee), and includes all of the respective rights and responsibilities appurtenant thereto hereunder, including (i) with respect to a Member (but not an assignee), the right, if any, to vote, (ii) the right to have a Capital Account maintained for such Member (or assignee), (iii) the right to receive allocations of Net Income and Net Losses pursuant to Article IX, (iv) the right to receive distributions of cash or property of the LLC, (v) the right to appoint the Manager, if applicable and (vi) the right to approve the actions prohibited by Section 5.4, if applicable.
 
“Interim Period” shall mean, upon the Transfer of a Member’s Interest (other than the Theravance Biopharma Transfer), a change in the LLC Percentage of any Member, the resignation of a Member from the LLC or the admission of a new Member to the LLC (other
 
9

 
than the admission of Theravance Biopharma as a Member pursuant to Section 12.10), in each case, other than on the first day of any Fiscal Year, or [the election of the Manager], the period beginning on the date of such event or election and ending on the last day of the Fiscal Year in which such Interim Period began or on the day immediately preceding the beginning of a new Interim Period, whichever is earlier.
 
“Law” shall mean any constitutional provision, law, statute, rule, regulation (including any stock exchange rule or regulation), ordinance, treaty, order, decree, license, permit, policy, guideline, consent, approval, certificate, judgment or decision of any governmental authority or any judgment, decree, injunction, writ, order or like action of any court or other judicial or quasi-judicial tribunal.
 
“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.
 
“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or other security interest of any kind or nature whatsoever, including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention contract, the interest of a lessor under a lease which in accordance with GAAP should be recorded as a capital lease, or any financing lease having substantially the same economic effect as any of the foregoing.
 
“LLC” shall have the meaning ascribed to it in the Preamble.
 
“LLC Business” shall mean exercising all of the rights and benefits and performing and discharging all of the liabilities and obligations under (i) the Strategic Alliance Agreement and (ii) the Collaboration Agreement relating to the Assigned Collaboration Products.
 
“LLC Costs” shall mean all costs and expenses incurred by or on behalf of the LLC relating to the operation of the LLC, whether recurring or non-recurring, including, without limitation, (i) occupancy costs, (ii) personnel costs of the LLC, (iii) general administrative costs of the LLC, including service costs (if any) from Theravance for services provided to the LLC, and (iv) costs of indemnifying the Manager.
 
“LLC Percentage” shall mean, as of any date, the LLC Percentage for each Member (or assignee of such Member), which shall be determined by dividing the number of Units of such Member (or assignee) in the LLC as of such date by the sum of total issued and outstanding Units in the LLC as of such date (including, for the avoidance of doubt, all Class A Units, all Class B Units and all Class C Units).  The sum of the Members’ (and assignees of Members’) LLC Percentages shall be one hundred percent (100%).
 
10

 
“Majority in Interest of the Class A Members” shall mean, as of any date, unless otherwise expressly set forth herein, the Member(s) holding at least a majority of the outstanding Class A Units as of such date.
 
“Majority in Interest of the Class B Members” shall mean, as of any date, unless otherwise expressly set forth herein, the Member(s) holding at least a majority of the outstanding Class B Units as of such date.
 
“Majority in Interest of the Class C Members” shall mean, as of any date, unless otherwise expressly set forth herein, the Member(s) holding at least a majority of the outstanding Class C Units as of such date.
 
“Management Fee” shall mean the management fee payable to the Manager on a quarterly basis pursuant to Section 5.5.
 
“Manager” means the Person appointed pursuant to Section 5.1 to manage the business and affairs of the LLC or, if no Person is appointed as Manager pursuant to Section 5.1, a Majority in Interest of the Class A Members.
 
“Master Agreement” means that certain Master Agreement, dated March 3, 2014, by and among GSK, Theravance and Theravance Biopharma, as amended from time to time.
 
“Members” and “Member” means the Persons listed as members on Exhibit A (as may be amended from time to time) and any other Person that both acquires an Interest and is admitted to the LLC as a Member in accordance with the terms of this Agreement, in such Person’s capacity as a member of the LLC.
 
“NDA” shall mean a new drug application, including any amendments or supplements thereto, and all reports, correspondence and other submissions related thereto.
 
“Net Cash” shall mean an amount of cash at the end of each Fiscal Quarter (and Interim Period, if applicable) equal to (i) the amount of cash and cash equivalents held by the LLC as of the end of such Fiscal Quarter (or Interim Period, if applicable) minus (ii) the cash, if any, expected to be used in the LLC over the next four Fiscal Quarters.
 
“Net Income” and “Net Loss” shall mean, for each Accounting Period, an amount equal to the LLC’s net taxable income or loss, as applicable, for such Accounting Period, determined in accordance with Code Section 703(a) (it being understood that for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in such taxable income or loss) and determined in accordance with the accounting method used by the LLC for U.S. Federal income tax purposes with the following adjustments (without duplication):
 
(a)                                all items of income, gain, loss or deduction specifically allocated pursuant to Section 9.3 shall not be taken into account in computing such taxable income or loss;
 
11

 
(b)                                any income of the LLC that is exempt from U.S. Federal income taxation and not otherwise taken into account in computing Net Income and Net Loss shall be added to such taxable income or loss;
 
(c)                                 if the Carrying Value of any asset differs from its adjusted tax basis for U.S. Federal income tax purposes, any gain or loss resulting from a disposition of such asset shall be calculated with reference to such Carrying Value;
 
(d)                                upon an adjustment to the Carrying Value of any asset pursuant to clauses (ii) or (iii) of subsection (a) of the definition of Carrying Value (other than an adjustment in respect of depreciation), the amount of the adjustment shall be included as gain or loss in computing such taxable income or loss;
 
(e)                                 if the Carrying Value of any asset differs from its adjusted tax basis for U.S. Federal income tax purposes the amount of depreciation, amortization or cost recovery deductions with respect to such asset for purposes of determining Net Income and Net Loss shall be an amount which bears the same ratio to such Carrying Value as the U.S. Federal income tax depreciation, amortization or other cost recovery deductions bears to such adjusted tax basis ( provided  that if the U.S. Federal income tax depreciation, amortization or other cost recovery deduction is zero, the Manager may use any reasonable method for purposes of determining depreciation, amortization or other cost recovery deductions in calculating Net Income and Net Loss; and
 
(f)                                  except for items set forth in clauses (a) through (e) above, any expenditures of the LLC not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income and Net Loss pursuant to this definition shall be treated as deductible items.
 
For the avoidance of doubt, costs and expenses of the LLC shall not include Management Costs that are borne by the Manager.
 
“Non-Contributing Member” shall have the meaning ascribed to it in Section 4.2.
 
“Nonrecourse Deductions” shall be as defined in Treasury Regulations Section 1.704-2(b).  The amount of Partner Nonrecourse Deductions for a Fiscal Year equals the net increase, if any, in the amount of Partnership Minimum Gain during that Fiscal Year, determined according to the provisions of Treasury Regulations Section 1.704-2(c).
 
“Officer” shall have the meaning ascribed to it in Section 7.1.
 
“Partner Nonrecourse Debt Minimum Gain” shall mean an amount with respect to each partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b)(4)) equal to the Partnership Minimum Gain that would result if such partner nonrecourse debt were treated as a nonrecourse liability (as defined in Treasury Regulations Section 1.752-1(a)(2)) determined in accordance with Treasury Regulations Section 1.704-2(i)(3).
 
12

 
“Partner Nonrecourse Deductions” shall be as defined in U.S. Treasury Regulations Section 1.704-2(i)(2).
 
“Partnership Minimum Gain” shall be as defined in Treasury Regulations Section 1.704-2(b)(2) and 1.704-2(d).
 
“Permitted Consultants” shall have the meaning ascribed to it in the Master Agreement.
 
“Person” shall mean a natural person, partnership (whether general or limited and whether domestic or foreign), limited liability company, foreign limited liability company, trust, estate, association, corporation, government entity, custodian, nominee or any other individual or entity in its own or representative capacity.
 
“Projected Capital Contribution” for the LLC shall mean an amount calculated each Fiscal Quarter equal to the forecast negative net cash flow of the LLC for that Fiscal Quarter, as set forth in the Operating Plan then in effect for such Fiscal Quarter.
 
“Proprietary Information” shall have the meaning ascribed to it in Section 8.6.
 
“Restricted Party” means any of Almirall, AstraZeneca, Boehringer Ingelheim, Chiesi, Forest Laboratories, Merck, Mylan, Novartis, Sandoz, Teva, Theravance Biopharma and any other pharmaceutical or biotechnology company with a product either being developed or commercialized for the treatment of respiratory disease, and their respective Restricted Party Affiliates.
 
“Restricted Party Affiliate” with respect to any person means any other person, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with such person for so long as such control exists, where “control” means the decision-making authority as to such other person and, further, where such control shall be presumed to exist where such other person owns more than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity.
 
“Retained Product” means each of ANORO™, BREO®/RELVAR® and VI Monotherapy.
 
“SEC” shall mean the U.S. Securities and Exchange Commission.
 
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder.
 
“Securities Exchange Act” shall mean the United States Securities Exchange Act of 1934, as then in effect and as thereafter amended from time to time, or any successor statute, including the rules and regulations promulgated thereunder.
 
13

 
“Separation and Distribution Agreement” shall mean the Separation and Distribution Agreement between Theravance and Theravance Biopharma dated as of                    , 2014.
 
“Strategic Alliance Agreement” shall mean that certain Strategic Alliance Agreement, dated as of March 30, 2004, by and between Theravance and GSK, including all amendments and supplements thereto (including the Theravance Strategic Alliance Agreement Amendment dated March 3, 2014 (the “ Strategic Alliance Amendment Agreement ”).
 
“Tax Matters Partner” shall have the meaning ascribed to it in Section 8.5.
 
“Theravance” shall mean Theravance, Inc., a Delaware corporation, its successors and/or permitted assigns.
 
“Theravance Affiliate” shall mean an “Affiliate” (as such term is defined in the GSK Agreements) of Theravance.
 
“Theravance Biopharma” shall mean Theravance Biopharma, Inc., a Cayman Islands exempted company, its successors and/or permitted assigns.
 
“Theravance Biopharma Transfer” shall mean the Transfer of all Class B Units and six thousand three hundred seventy-five (6,375) Class C Units to Theravance Biopharma pursuant to Section 12.10.
 
“Theravance Biopharma Triggering Event” shall mean the Transfer to GSK and/or its Affiliates, in one or more transactions, of a Majority in Interest of the Class B Units, which, for the avoidance of doubt, shall include (a) any transaction or series of related transactions (including mergers, consolidations and other forms of business consolidations) following which GSK and/or its Affiliates own at least 50% of the outstanding equity securities of Theravance Biopharma, the entity surviving such transaction or any direct or indirect parent entity of such continuing or surviving entity at a time when Theravance Biopharma or such entity surviving such transaction or any such direct or indirect parent entity of such continuing or surviving entity or any of its subsidiaries holds a Majority in Interest of the Class B Units; or (b) the sale, lease, license, transfer or disposal of all or substantially all of the business or assets  of Theravance Biopharma to GSK and/or its Affiliates provided that following such transaction GSK and/or its Affiliates hold a Majority in Interest of the Class B Units.
 
“Theravance Business” shall mean any business within (i) the “ParentCo Business” as defined in the Separation and Distribution Agreement (other than the portion thereof that is specific to the Assigned Products) or (ii) the “SpinCo Business” as defined in the Separation and Distribution Agreement.
 
“Theravance Triggering Event” shall mean: (a) any transaction or series of related transactions (including mergers, consolidations and other forms of business consolidations) following which GSK and/or its Affiliates own at least 50% of the outstanding equity securities of Theravance, the entity surviving such transaction or any direct or indirect parent entity of such continuing or surviving entity; (b) the sale, lease, license, transfer or other disposal of all or substantially all of the business or assets of Theravance to GSK and/or its
 
14

 
Affiliates; (c) the assignment by Theravance or its Affiliate to GSK or its Affiliate of all or substantially all of its rights and obligations under the Collaboration Agreement or the Strategic Alliance Agreement; (d) the Transfer to GSK and/or its Affiliates of a Majority in Interest of the Class A Units; or (e) the occurrence of (1) the breach or violation by Theravance of the GSK Agreements or the taking of other action by Theravance, in each case, that gives GSK the right to terminate or invalidate the GSK Agreements or the terms thereof relating to the Assigned Drug Programs and (2) the termination or invalidation of the GSK Agreements or the terms thereof relating to the Assigned Drug Programs by GSK.
 
“Theravance Triggering Event Date Agreements” shall have the meaning ascribed to it in Section 3.14.
 
“Third Party” shall mean any Person other than Theravance, any Theravance Affiliate, the LLC and any LLC Affiliate.
 
“Transfer” shall mean transfer, sell, mortgage, pledge, assign or otherwise dispose of, either directly or indirectly, by operation of law or otherwise.  For the avoidance of doubt, (i) the grant of Defined Covenants by Theravance Biopharma and its permitted transferees, successors and permitted assigns (as applicable) with respect to the Master Agreement, this Agreement or the Class B Units or Class C Units in connection with any monetization of any Interest in its Class B Units or Class C Units, and the grant of “Pre-Agreed Covenants” (as defined in the Master Agreement) in compliance with the Master Agreement shall not constitute a Transfer under this Agreement; and (ii) the parties expressly agree that no inference shall be drawn as to whether any other grant of any covenants constitutes an assignment under any GSK Agreement or a Transfer under this Agreement from the fact of the agreements with respect to Defined Covenants and Pre-Agreed Covenants.  Notwithstanding the foregoing, Theravance Biopharma (on behalf of itself and its permitted transferees, successors and permitted assigns) agrees that, as a condition to the granting of any Defined Covenants:  (i)  Theravance Biopharma and/or its permitted transferees, successors or permitted assigns (as applicable) shall obtain a certification from the original third party recipient of such Defined Covenants, as applicable, that it is not a Restricted Party (as defined above); and (ii) any notes, securities or other instruments subject to such covenants shall provide that (a) they may not be held by a Restricted Party and if, notwithstanding such prohibition, such notes, securities or other instruments come to be held by a Restricted Party, such Restricted Party shall not be entitled to enforce or vote to enforce such Defined Covenants, (b) any holder of such notes, securities or other instruments seeking to enforce or to vote to enforce such Defined Covenants must provide a certificate for the benefit of the issuer that such holder is not a Restricted Party, and (c) the restriction set forth in the preceding sections (a) and (b) and this section (c) may not be waived or amended.  Any notes, securities or other instruments subject to such Defined Covenants issued in physical form shall bear a legend referencing the provisions set forth in (a), (b) and (c) of the foregoing sentence.
 
“Treasury Regulations” shall mean regulations issued pursuant to the Code.
 
“UMEC” shall mean the long-acting muscarinic antagonist umeclidinium bromide (with the chemical structure as set forth in  Attachment G ) or an ester, salt or other non-covalent derivative thereof.
 
15

 
“Units” shall mean the Class A Units, the Class B Units and the Class C Units.
 
“VI” shall mean the long-acting beta2 agonist vilanterol (with the chemical structure as set forth in Attachment H ) or an ester, salt or other noncovalent derivative thereof.
 
“VI Monotherapy” shall mean (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)).
 
ARTICLE II
 
FORMATION OF LIMITED LIABILITY COMPANY
 
2.1                              Formation.  The LLC has been formed as a Delaware limited liability company by the execution and filing with the Secretary of State of the State of Delaware of a Certificate of Formation (as the same may be amended from time to time, the “ Certificate ”) by                             , as an authorized person of the LLC within the meaning of the Act.  Upon such filing, the powers of such authorized person ceased.  The rights, powers, duties, obligations and liabilities of the Members (in their respective capacities as such) shall be determined pursuant to the Act and this Agreement.  To the extent that the rights, powers, duties, obligations and liabilities of any Member (in its capacity as such) are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.  The Members hereby ratify the actions of the authorized person of the LLC in executing and filing the Certificate with the Secretary of State of the State of Delaware.  Other than actions relative to its formation, the LLC has not engaged in any business or conducted any other activities prior to the date of this Agreement.
 
2.2                              Name and Principal Place of Business.  Unless and until amended in accordance with this Agreement and the Act, the name of the LLC will be “Theravance Respiratory Company, LLC.”  The principal place of business of the LLC shall initially be located at 901 Gateway Blvd., South San Francisco, CA 94080, or such other location as the Manager may, from time to time, designate.  The address of the LLC’s registered office in the State of Delaware, and the name of the registered agent for service of process, shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, or such other place or person in the State of Delaware as the Manager shall designate.
 
2.3                              Agreement.  For and in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Members executing this Agreement hereby agree to the terms and conditions of this Agreement, as it may from time to time be amended in accordance with this Agreement.  It is the express intention of the parties hereto that this Agreement shall be the sole statement of agreement among them, and, except to the extent a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Treasury Regulations or is expressly prohibited or ineffective under the Act, this Agreement shall govern even when inconsistent with or different from the provisions of the Act or any other law or rule.
 
16

 
To the extent any provision of this Agreement is prohibited or ineffective under the Act or other applicable law, this Agreement shall be considered amended to the smallest degree possible in order to make this Agreement effective under the Act or such other applicable law.  In the event the Act is subsequently amended or interpreted in such a way to make valid any provision of this Agreement that was formerly invalid, such provision shall be considered to be a part of this Agreement from and after the date of such interpretation or amendment.
 
2.4                              Business.  The purpose of the LLC is to (i) engage in the LLC Business, (ii) enter into, make, and perform all contracts and other undertakings relating thereto or arising therefrom, (iii) carry on any other business or activity relating thereto or arising therefrom and (iv) carry on anything incidental, convenient or necessary to the foregoing.  Notwithstanding the foregoing, the LLC may engage in any lawful business permitted under the Act or the laws of any jurisdiction in which the LLC may do business.
 
2.5                              Definitions.  Terms not otherwise defined in this Agreement shall have the meanings set forth in Article I.
 
2.6                              Term.  The term of the LLC commenced on the date the Certificate was filed with the Secretary of State of the State of Delaware in accordance with the Act and shall continue until the LLC is dissolved pursuant to Article XIV of this Agreement.
 
ARTICLE III
 
MEMBERS AND INTERESTS
 
3.1                              Units Generally.
 
(a)                                Generally.  The Interest of each of the Members in the LLC shall consist of a number of “ Units .”  Except as otherwise provided in this Agreement or the Act, the holders of each class of Units shall be entitled to the rights, subject to the obligations set forth herein, ascribed to such class of Units.  The Units shall be uncertificated unless the Manager determines that the Units shall be represented by certificates in such form as shall be determined by the Manager from time to time.  If applicable, the LLC may issue a new certificate in place of any certificate therefore issued by it, alleged to have been lost, stolen or destroyed, and the LLC may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative to give the LLC a bond sufficient to indemnify it against any claim that may be made against it on account of that alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
 
3.2                              Classes of Units(a).  There are three classes of Units designated “Class A Units” (the “ Class A Units ”), “Class B Units” (the “ Class B Units ”) and “Class C Units” (the “ Class C Units ”).  Subject to the terms and conditions of Articles III and IV hereof, the LLC is authorized to issue up to ten thousand (10,000) Units in the aggregate, divided as follows:  (i) seven hundred fifty (750) Units shall be Class A Units, of which seven hundred fifty (750) Class A Units shall be issued and outstanding and owned by the Class A Members as of the Contribution Time, (ii) two thousand one hundred twenty-five (2,125) Units shall be Class B Units, of which two thousand one hundred twenty-five (2,125) Class B Units shall be issued and outstanding and
 
17

 
owned by the Class B Members as of the Contribution Time, and (iii) seven thousand one hundred twenty-five (7,125) Units shall be Class C Units, of which seven thousand one hundred twenty-five (7,125) Class C Units shall be issued and outstanding and owned by the Class C Members as of the Contribution Time.  The parties hereto agree that, notwithstanding anything to the contrary in this Agreement, the LLC is not and shall not be authorized to issue additional classes of Units or additional Class A, Class B or Class C Units, other than those authorized and issued pursuant to the preceding sentence.  Each Class A Member shall hold an Interest in the LLC represented by the Class A Units set forth opposite the Member’s name on  Exhibit A , as amended from time to time pursuant to Section 15.1(c), each Class B Member shall hold an Interest in the LLC represented by the Class B Units set forth opposite the Member’s name on  Exhibit A  (after giving effect to the Theravance Biopharma Transfer pursuant to Section 12.10), as amended from time to time pursuant to Section 15.1(c), and each Class C Member shall hold an Interest in the LLC represented by the Class C Units set forth opposite the Member’s name on Exhibit A (after giving effect to the Theravance Biopharma Transfer pursuant to Section 12.10), as amended from time to time pursuant to Section 15.1(c).  For the avoidance of doubt each Member may hold more than one class of Units.  Each Member holding Units shall have (a) the right to share in the Net Income and Net Loss of the LLC as provided in this Agreement, (b) a right to the Capital Account maintained for such Member according to Article IX hereof, (c) the right to receive distributions from the LLC as provided in this Agreement, and (d) such other relative rights, powers and duties as are set forth in this Agreement.
 
3.3                              Members.  The Members of the LLC are set forth on Exhibit A attached hereto, each of whom is (or, in the case of Theravance Biopharma, will be as of the Effective Time) admitted to the LLC as a Member as of the Contribution Time, in the case of Theravance, and as of the Effective Time, in the case of Theravance Biopharma.  The name and place of residence of each Member is as set forth on  Exhibit A  attached hereto (after giving effect to the Theravance Biopharma Transfer pursuant to Section 12.10), as amended from time to time pursuant to Section 15(c).  Each Member shall be entitled to review  Exhibit A .
 
3.4                              Representations and Warranties.  Each Member hereby represents and warrants to the LLC and each other Member as follows:
 
(a)                                Good Standing; Due Organization.  If such Member is a Person who is not an individual, such Member is duly organized, validly existing, and in good standing under the law of its state of organization and has full organizational power to execute and deliver this Agreement and to perform its obligations hereunder.
 
(b)                                Accredited Investor.  (i) Such Member is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the Securities Act, or (ii) such Member is acquiring the respective Interest in compliance with Federal, state, local or foreign laws.
 
(c)                                 Purchase Entirely for Own Account.  The Member is acquiring its Interest for the Member’s own account for investment purposes only and not with a view to or for the resale, distribution, subdivision or fractionalization thereof, and has no contract, understanding, undertaking, agreement or arrangement of any kind with any Person to Transfer to any Person its Interest or any part thereof, nor does such Member have any plans to enter into any such agreement.
 
18

 
(d)                                Investment Experience.  By reason of the Member’s business or financial experience, the Member has the knowledge, experience and capacity to evaluate and protect its own interests in connection with the transactions contemplated hereunder, is able to bear the economic and financial risks of an investment in the LLC for an indefinite period of time, and at the present time could afford a complete loss of such investment.
 
(e)                                 Disclosure of Information.  The Member is aware of the LLC’s business affairs and financial condition and has acquired sufficient information about the LLC to reach an informed and knowledgeable decision to acquire an Interest.
 
(f)                                  Federal and State Securities Laws.  Assuming federal and state securities laws apply to the interests described herein, the Member acknowledges that the Units have not been registered under the Securities Act or any state securities laws, inasmuch as they are being acquired in a transaction not involving a public offering, and, under such laws, may not be resold or transferred by the Member without appropriate registration or the availability of an exemption from such requirements.  In this connection, the Member represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
 
(g)                                 DISCLAIMER. THE ASSIGNED ASSETS AND ANY LICENSES ARE PROVIDED “AS IS” WITH NO WARRANTY EXPRESS OR IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, NONINFRINGEMENT, TITLE, VALIDITY OR OTHERWISE.
 
3.5                              Resignation or Withdrawal of a Member.  Except as specifically provided herein, and subject to the provisions for Transfers contained in Article XII, no Member shall have the right to resign or withdraw from membership in the LLC or withdraw its Interest.
 
3.6                              Limited Liability of Members.
 
(a)                                General.  Except as expressly provided in the Act, (i) no Member or any of its Affiliates shall have any liability for the debts, obligations or liabilities of the LLC, any other Member or their respective Affiliates solely by reason of being a Member or an Affiliate of a Member, (ii) the debts, obligations and liabilities of the LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the LLC, and (iii) no Member or former Member shall be obligated personally for any such debt, obligation or liability of the LLC solely by reason of being a Member or former Member.
 
(b)                                Deficit Capital Accounts.  Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or rule of law to the contrary, to the extent that there exists a deficit in the Capital Account of any Member, upon dissolution of the LLC such deficit shall not be an asset of the LLC and such Members shall not be obligated to contribute such amount to the LLC to bring the balance of such Member’s Capital Account to zero.
 
3.7                              General Voting Rights.  The Class A Members shall, and the Class B Members and the Class C Members shall not, be entitled to vote, approve, consent or authorize on all
 
19

 
matters for which the vote, approval, consent or authorization of the Members is required or permitted under this Agreement or the Act.  Each Class A Member shall have one (1) vote for each Class A Unit held by it. For the avoidance of doubt, Class B Members and Class C Members shall not be entitled to vote, approve, consent or authorize any matter whatsoever (including with respect to the merger, consolidation or conversion of the LLC and any other matters that may otherwise require consent of members or any class of members under the Act) except as set forth in the next sentence.  Notwithstanding the forgoing, the affirmative consent of (i) the Class B Members shall be required to the extent specifically set forth in Sections 3.11, 5.4, 14.1 and 15.1, (ii) the Class C Members shall be required to the extent specifically set forth in Sections 3.11, 14.1 and 15.1(d) and (iii) the Non-Contributing Member shall be required to the extent required pursuant to Section 4.2.  A Member who has assigned some, but not all, of its Units shall be treated as a Member and entitled to a vote on all matters such Member would otherwise be entitled to vote on pursuant to the terms of this Agreement to the extent of its retained Units.  For the avoidance of doubt, the assignee of Units shall not be entitled to vote on any matters with respect to the assigned Units unless and until admitted as a substitute Member pursuant to Section 12.9.
 
3.8                              Fiduciary Duties of Theravance Biopharma.  To the fullest extent permitted by law (including Section 18-1101 of the Act) and notwithstanding any duty otherwise existing at law or in equity, none of Theravance Biopharma, its Affiliates or any of its or their respective directors, officers, employees or shareholders shall have any fiduciary or similar duty, at law or in equity, or any liability relating thereto, to the LLC, or any other Member or Affiliate of a Member bound by this Agreement, with respect to or in connection with the LLC or its business or affairs; and, without limitation, Theravance Biopharma, its Affiliates and its or their respective directors, officers, employees or shareholders, when approving or disapproving any action, shall be entitled to consider only such interests and factors as such Person desires and may consider its own interests and shall have no other duty or obligation, fiduciary or otherwise, to give any consideration to any interest of or factors affecting the LLC, or any other Member or Affiliate of any other Member.  For the avoidance of doubt, Theravance Biopharma, its Affiliates and its and their respective directors, officers, employees and shareholders may engage in or possess an interest in other profit-seeking or business ventures of any kind, nature or description, independently or with others, whether or not such ventures are competitive or in conflict with the LLC, any other Member, any Affiliate of any other Member or any other Person bound by this Agreement, and notwithstanding any duty otherwise existing at law or in equity, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to Theravance Biopharma, its Affiliates or their respective directors, officers, employees or shareholders.
 
To the extent that Theravance Biopharma, its Affiliates or its or their respective directors, officers, employees or shareholders acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the LLC, Theravance Biopharma, its Affiliates and its or their respective directors, officers, employees and shareholders shall have no duty to communicate or offer such opportunity to any such Person.  Theravance Biopharma, its Affiliates and its or their respective directors, officers, employees and shareholders shall not be liable to the LLC, any Member, any Affiliate of any other Member or any other Person bound by this Agreement for breach of any fiduciary or other duty by reason of the fact that Theravance Biopharma, its Affiliates or their respective directors, officers, employees or shareholders pursues or acquires for, or directs such opportunity to, another Person
 
20

 
or does not communicate such opportunity or information to the LLC, any Member, any Affiliate of any other Member or any other person bound by this Agreement.  Neither the LLC, any Member, any Affiliate of any other Member nor any other Person bound by this Agreement shall have any rights or obligations by virtue of this Agreement or the relationship created hereby in or to such independent ventures of Theravance Biopharma, its Affiliates, or their respective directors, officers, employees or shareholders or the income or profits or losses derived therefrom, and the pursuit of such ventures, even if competitive or in conflict with the activities of the LLC, shall not be deemed wrongful or improper.  Notwithstanding the foregoing, this paragraph shall not apply to any such opportunity that Theravance Biopharma, its Affiliates or its or their respective directors, officers, employees or shareholders acquires knowledge of solely by virtue of Theravance Biopharma being a member of the LLC, provided  that any Person asserting that Theravance Biopharma, its Affiliates or its or their respective directors, officers, employees or shareholders acquired knowledge of such an opportunity solely by virtue of Theravance Biopharma being a member of the LLC shall bear the burden of proving such assertion.
 
Nothing in this Section 3.8 shall modify, restrict or eliminate (i) any duty or obligation of the Manager or Theravance expressly provided in Section 5.2 or in any other section of this Agreement, (ii) any express obligation or restriction contained in any other written contract or (iii) the implied contractual covenant of good faith and fair dealing.
 
3.9                              Related Party Transactions.  Except as specifically provided in this Agreement (but without limiting the application of Section 5.2), the LLC may not enter into any transaction or contract with Theravance, the Manager or any of their respective Affiliates, and the LLC may not pay Theravance, the Manager or any of their Affiliates fees, compensation or remuneration in connection with such transactions and contracts, unless the terms, conditions, fees, compensation and other remuneration shall be no less favorable to the LLC than those generally being provided to or available from unaffiliated third parties.  Theravance, the Manager or any of their Affiliates entering into any such transaction or contract or receiving such fees, compensation or remuneration shall bear the burden of proving compliance with this Section 3.9, but shall not be required to prove that any transaction or contract is “entirely fair” or that the transaction or contract was the result of a “fair process,” as such terms are interpreted and defined by decisions of Delaware state and federal courts.
 
3.10                       Relationship of Members.  The Members and the Manager intend and agree that the LLC is and shall be an “Affiliate” of Theravance within the meaning of the GSK Agreements, and this Agreement shall be interpreted accordingly.
 
3.11                       Cancellation of Units.  The Class A Units may not be cancelled without the consent of a Majority in Interest of the Class A Members.  The Class B Units may not be cancelled without the affirmative vote of a Majority in Interest of the Class B Members.  The Class C Units may not be cancelled without the affirmative vote of a Majority in Interest of the Class C Members.
 
3.12                       Compliance with GSK Agreements by Theravance and the LLC.  Notwithstanding any other provision contained herein, Theravance, with respect to the rights and obligations under the GSK Agreements not assigned to the LLC pursuant to this Agreement, shall not, and, with respect to the rights and obligations assigned to the LLC pursuant to this
 
21

 
Agreement, shall cause the Manager not to, and the Manager shall not, take (or omit to take) any action (including, without limitation, the disclosure of any information to any Member), that is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any term or condition of the GSK Agreements or otherwise is or would be reasonably expected to give GSK the right to terminate or invalidate any GSK Agreement or any term and condition thereof.  Theravance agrees and understands that monetary damages would not adequately compensate the holders of Class B Units and Class C Units for the breach of this Section 3.12 by Theravance, that this Section 3.12 shall, to the fullest extent permitted by law, be specifically enforceable, and that any breach or threatened breach of this Section 3.12 shall be the proper subject of a temporary or permanent injunction or restraining order.  Further, Theravance waives, 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 anything else to the contrary, in the event of any conflict between Section 3.12, or any covenant, agreement, obligation or duty of Theravance or its Affiliates under this Section 3.12, on the one hand, and any other provision of this Agreement or any Exhibit or Attachment hereto, or any covenant, agreement, obligation or duty of Theravance or its Affiliates thereunder, on the other hand, Section 3.12 shall govern and supersede such other provision, Exhibit, Attachment, covenant, agreement, obligation or duty.
 
3.13                       Performance of Obligations by Manager.  Theravance (i) shall cause the Manager to at all times and in good faith perform fully it duties and obligations set forth in this Agreement and (ii) shall be liable to the Members to the extent the Manager fails to do so.
 
3.14                       Theravance Triggering Event.  Without limiting the rights, including, without limitation, rights to pursue remedies for breaches, of any Member under this Agreement, including, without limitation, Section 5.4(c) hereof, upon the occurrence of a Theravance Triggering Event, Theravance shall pay or cause to be paid to the LLC when due all payments that Theravance would otherwise be entitled to receive from GSK pursuant to Sections 6.1, 6.2 and 6.3 of the Collaboration Agreement and of the Strategic Alliance Agreement relating directly or indirectly to the Assigned Products, as such agreements are in effect as of immediately prior to the Theravance Trigger Event (the “ Theravance Triggering Event Date GSK Agreements ”), had such Theravance Triggering Event not occurred and regardless of whether Theravance actually receives any such payments from GSK.  For the avoidance of doubt, the obligation of Theravance to pay or cause to be paid payments under the Theravance Triggering Event Date GSK Agreements pursuant to the immediately preceding sentence shall not accelerate or change if or when such payments would otherwise be due under such agreements.
 
ARTICLE IV
 
CONTRIBUTIONS TO CAPITAL; WITHDRAWALS; ADVANCES
 
4.1                              Initial Capital Contribution by Theravance.
 
(a)                                At the Contribution Time, Theravance shall (and, effective automatically upon the Contribution Time, hereby does) transfer, contribute, assign, distribute and convey, or cause to be transferred, contributed, assigned, distributed and conveyed, to the LLC all of Theravance’s right, title and interest in and to (i) all of the rights and benefits of Theravance under the Strategic Alliance Agreement, (ii) all of the rights and benefits of Theravance under
 
22

 
the Collaboration Agreement relating to the Assigned Collaboration Products, including the rights and benefits specified on Exhibit C , and (iii) the Assigned Assets (collectively, the “ Assignment ”).
 
(b)                                At the Contribution Time, the LLC shall, and, effective automatically upon the Contribution Time, hereby does, accept the Assignment from Theravance.
 
(c)                                 Except as otherwise specifically set forth in this Agreement, (i) at the Contribution Time, Theravance shall (and, effective automatically upon the Contribution Time, hereby does) assign and delegate to the LLC, and the LLC shall (and, effective automatically upon the Contribution Time, hereby does) accept, assume or, as applicable, retain (A) all Liabilities under the Strategic Alliance Agreement, (B) all of the Liabilities under the Collaboration Agreement relating to the Assigned Collaboration Products, including the Liabilities specified on  Exhibit C  attached hereto, and (C) the Assumed Liabilities and (ii) after the Contribution Time, the LLC shall perform, discharge and fulfill, in accordance with their respective terms, all such Liabilities, in each case, unless specified otherwise in the definition of the Assumed Liabilities, regardless of (A) when or where such Liabilities arose or arise, (B) where or against whom such Liabilities are asserted or determined, (C) which entity is named in any action associated with any Liability, and (D) whether the facts on which they are based occurred prior to, on or after the Contribution Time (the “ Assumption ”).  Notwithstanding the foregoing, the LLC shall not assume any Liability attributable to (i) the failure of Theravance and/or the Manager or their respective officers, directors, employees, agents or Affiliates to perform Theravance’s obligations to the LLC pursuant to this Agreement or the Ancillary Agreements or (ii) any breach of this Agreement, the Ancillary Agreements or any other agreement with any Person, including the GSK Agreements, occurring on or after the Contribution Time, nor any matter to the extent that Theravance and/or the Manager or their respective officers, directors, employees, agents or Affiliates has engaged in any violation of Law, any gross negligence, willful misconduct or fraud.
 
(d)                                If at any time after the Contribution Time, the parties hereto agree that Theravance possesses any assets and/or liabilities related to the LLC Business (and not to the Theravance Business) that constitute Assigned Assets, Theravance shall as promptly as practicable transfer or cause to be transferred to the LLC, at the expense of the LLC, and the LLC shall accept such transfer and/or assume, for no consideration, such asset and/or liability, including any and all economic benefits generated from such asset and/or liability after the Contribution Time, to the LLC.  Each such transferred asset and/or liability shall be deemed a LLC Asset or a LLC Liability, respectively, and shall be subject to the terms and conditions of this Agreement applicable thereto.
 
(e)                                 If at any time, after the Contribution Time, the parties hereto agree that the LLC possesses any assets or liabilities solely related to the Theravance Business (and not to the LLC Business) the rights to which were obtained from Theravance in connection with this Agreement, the LLC shall as promptly as practicable transfer or cause to be transferred, at Theravance’s expense, and Theravance shall accept such transfer and/or assume, for no consideration, such asset and/or liability, including any and all economic benefits generated from such asset and/or liabilities after the Contribution Time, to Theravance.
 
23

 
(f)                                  At the Contribution Time (or thereafter upon reasonable request and at the requesting party’s expense), (i) Theravance 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 Assignment, and (ii) the LLC shall execute and deliver to Theravance 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.
 
(g)                                 To the extent that any part of the Assignment or Assumption requires any Governmental Approvals, the parties hereto shall use commercially reasonable efforts to obtain any such Governmental Approvals.  If and to the extent that such part of the Assignment or Assumption would be a violation of applicable laws or require any Governmental Approval, then, unless Theravance shall otherwise determine, such part of the Assignment to or Assumption by the LLC, shall be automatically deemed deferred and any such purported Assignment or 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.
 
(h)                                The Members shall use commercially reasonable efforts to obtain any Consents required in connection with the transactions contemplated by this Agreement.  Notwithstanding the foregoing, no Member shall be obligated to pay any consideration therefor to any Third Party from whom any such Consent, substitution or amendment is requested.
 
(i)                                    If any Assignment or Assumption intended to be Transferred and assumed hereunder is not consummated as of the Contribution Time, whether as a result of the provisions of  Section 4.1(g)  or otherwise, then Theravance shall thereafter hold such LLC Asset for the use and benefit of the LLC if permitted by Law.  If and when the Consents and/or Governmental Approvals, or any other impediments to Assignment or Assumption, the absence of which caused the deferral of Assignment of any LLC Asset or Assumption pursuant to  Section 4.1(g)  or otherwise, are obtained or removed (as appropriate), the Assignment of the applicable LLC Asset or Assumption of the applicable LLC Liability shall be effected in accordance with the terms of this Agreement.  With respect to any LLC Asset retained by Theravance due to the deferral of the Assignment of such LLC Asset, Theravance shall take such actions with respect to such LLC Asset as may be reasonably requested by the LLC.
 
(j)                                   If the Members are unable to obtain, or to cause to be obtained, any such required Governmental Approvals, Consents, release, substitution or amendment pursuant to  Section 4.1(h)  or otherwise, Theravance shall (i) continue to be bound by such Contract, license or other obligation, which shall not constitute a Liability of Theravance (unless not permitted by Law or the terms thereof), (ii) as agent or subcontractor for the LLC, pay, perform and discharge fully all the obligations or other Assumed Liabilities thereunder after the Contribution Time, and (iii) deliver to the LLC any payments, benefits or other consideration received by Theravance under such Contract, license or other obligation;  provided ,  however , that Theravance 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 Contribution Time.  At the request of the Manager, Theravance shall exercise its rights under such Contract, license or other obligation for the benefit of the LLC.  The LLC shall fully indemnify Theravance and its Affiliates, officers, directors, employees and agents for, and hold each of them harmless against, any and all
 
24

 
obligations or Assumed Liabilities arising in connection therewith and also for any actions requested by the Manager pursuant to this  Section 4.1(j) ,  provided ,  however , that the LLC shall have no obligation to indemnify Theravance or its Affiliates, officers, directors, employees or agents with respect to any matter to the extent that Theravance, the Manager or their respective Affiliates, officers, directors, employees or agents has (i) engaged in any violation of Law, (ii) committed gross negligence or fraud or (iii) breached this Agreement, the Ancillary Agreements or any other agreement with any Person, including the GSK Agreements.  Theravance shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the LLC, all money, rights and other consideration received by it or any of its Affiliates in respect of such performance on behalf of the LLC.  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, Theravance shall promptly assign, or cause to be assigned, all rights, obligations and other Assumed Liabilities thereunder of Theravance’s to the LLC without payment of any further consideration and the LLC, without the payment of any further consideration, shall assume such rights and obligations and other Assumed Liabilities.
 
(k)                                If any Intellectual Property owned by Theravance (or Theravance Biopharma) as of the Contribution Time that is relevant to the LLC Business, Assigned Assets, or Assigned Products is not assigned to the LLC hereunder (or if it is assigned back to Theravance under Section 3.1(e)), the LLC will have and is hereby granted a nonexclusive, worldwide, perpetual, irrevocable, sublicensable, transferable license to exercise such Intellectual Property only with respect to the LLC Business, Assigned Assets and/or Assigned Products.
 
(l)                                    If any Intellectual Property assigned to the LLC hereunder (other than Intellectual Property referred to in clause (a), (b) or (c) of the definition of “Assigned Assets”) is relevant to the Theravance Business or Retained Products, Theravance will have and is hereby granted a nonexclusive, worldwide, perpetual, irrevocable, sublicensable, transferable license to exercise such Intellectual Property only with respect to the Theravance Business and/or Retained Products.
 
4.2                              Additional Capital Contributions.  Except as otherwise provided pursuant to this Section 4.2, no Member shall be permitted or required to make any additional Capital Contribution without the consent of the Manager and such Member.  Notwithstanding the foregoing, the Manager shall request each Member to make a Capital Contribution on the first Business Day of each Fiscal Quarter equal to its LLC Percentage of the Projected Capital Contribution for that Fiscal Quarter.  If a Member fails to make a requested Capital Contribution pursuant to this Section 4.2 (a “ Non-Contributing Member ”) within ten (10) Business Days after receiving such request, any other Member shall be permitted, but not required, to advance any shortfall in the Capital Contribution of such Non-Contributing Member in accordance with Section 4.5 below but only with the prior written consent of the Non-Contributing Member if, and only if, such Non-Contributing Member holds at least a majority of the then outstanding Units.
 
4.3                              Interest.  No Member shall be entitled to any interest or compensation with respect to such Member’s Capital Contribution or share of the capital of the LLC, except as
 
25

 
expressly provided herein.  No Member shall have any liability for the repayment of the Capital Contribution of any other Member and each Member shall look only to the assets of the LLC for return of such Member’s Capital Contributions to the extent permitted herein.
 
4.4                              No Right of Withdrawal.  No Member shall have the right to withdraw or receive any return of, or interest on, any portion of such Member’s contributions to the capital of, or to receive any distributions from, the LLC, except as provided in Articles XI and XIV.
 
4.5                              Advances.  If any Member shall advance any funds to the LLC in excess of its Capital Contributions pursuant to Sections 4.1 and 4.2, the amount of such advance shall neither increase its Capital Account nor entitle that Member to any increase in its share of the distributions of the LLC.  The amount of any such advance shall be a debt obligation of the LLC to such Member and shall be repaid to it by the LLC with interest at a rate and upon such other terms and conditions which the Manager reasonably determines in good faith are, taken as a whole, generally consistent with the interest rate and other terms and conditions that would be available to the LLC from an unrelated commercial lender, as shall be agreed by the Manager and such Member.  Any such advance shall be payable and collectible only out of the assets of the LLC and the other Members shall not be personally obligated to repay any part thereof.  No Person that makes any advance to the LLC pursuant to this Section 4.5 shall have or acquire, as a result of making such loan, any direct or indirect interest in the profits, capital or property of the LLC, other than as a creditor.
 
ARTICLE V
 
MANAGEMENT, EXPENSES AND RESTRICTIONS
 
5.1                              Management by Manager; Manager.
 
(a)                                Management by Manager.  Subject to and in accordance with this Agreement, the Manager shall have decision-making authority as to the LLC, including the authority to (i) manage the business and affairs of the LLC, (ii) exercise all powers of the LLC, and (iii) do all lawful acts on behalf of the LLC.  The Manager may act by one or more committees designated by the Manager in accordance with Section 5.1(c).  The Manager shall be a “ manager ” within the meaning of Section 18-101(10) and Section 18-402 of the Act.  No Member shall have the right, power or authority to act on behalf of or bind the LLC, except that a Member who is also a Manager or an Officer of the LLC may act on behalf of or bind the LLC in its capacity as a Manager or an Officer of the LLC to the extent that he or she is authorized to do so.
 
(b)                                Appointment of the Manager.  The Manager shall be appointed by a Majority in Interest of the Class A Members and must be Theravance or a Theravance Affiliate.  The initial Manager shall be as set forth on Exhibit B.  Any Manager may be removed at any time by a Majority in Interest of the Class A Members,  provided  that they simultaneously appoint a successor Manager that must be Theravance or a Theravance Affiliate.  Upon appointment of any Manager, the Manager shall, and Theravance shall cause such Manager to, execute and deliver to the LLC a counterpart of this Agreement, which execution and delivery shall evidence such Manager’s express agreement to be a party to, and be bound by, this
 
26

 
Agreement.  When the Majority in Interest of the Class A Members act as Manager since no Person is then appointed as Manager pursuant to this Section 5.1, the other holders of Class A Units agree to be bound by the actions of the Majority in Interest of the Class A Members.
 
(c)                                 Committees, General.  The Manager may, by resolution passed by the Manager, designate one or more committees of the LLC.  Any such committee, to the extent provided in the resolution of the Manager, shall have and may exercise all the powers and authority of the Manager.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Manager.  Each committee shall keep regular minutes of its meetings and report the same to the Manager when required.  No employees, consultants or representatives of Theravance Biopharma shall be members of any such committee, except for Permitted Consultants.
 
5.2                              Fiduciary Duties of Theravance and the Manager.  Notwithstanding any duty otherwise existing at law or in equity, to the fullest extent permitted by law (including Section 18-1101 of the Act), the Manager shall have the fiduciary duties of directors of a board of directors, provided that following a Theravance Biopharma Triggering Event, the Manager shall be entitled to the benefit of the business judgment rule in all circumstances other than those in which the Manager has acted in bad faith, and, prior to a Theravance Biopharma Triggering Event, Theravance (for so long as it is the direct or indirect holder of a Majority in Interest of the Class A Units) and any other holder of Class A Units (for so long as such holder, together with its Affiliates, is the direct or indirect holder of a Majority in Interest of the Class A Units) shall have the fiduciary duties of a controlling stockholder, in each case of a for-profit stock corporation organized and existing under the DGCL to which provisions of Subchapter XIV of the DGCL, 8 Del. Ch. §§ 341 ff., are not applicable, as such duties and responsibilities are interpreted and defined by decisions of state and federal courts having jurisdiction to interpret and define the same.  The provisions of this Agreement (including, without limitation, Section 3.8 and this Section 5.2), to the extent that they expand, restrict or eliminate the duties and liabilities of a Member, the Manager or an Affiliate of a Member or the Manager otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Person.
 
5.3                              Duties of the Manager.  Without limiting the generality of Section 5.1 but subject to Section 10.1, at the expense of the Manager, the responsibilities of the Manager shall include the following:
 
(a)                                Subject to Section 3.12, prepare, and maintain at the principal place of business of the LLC the Books and Records of the LLC, including, without limitation, the following:
 
(i)                                    Proper and complete records and books of account, including without limitation Capital Accounts in which shall be entered fully and accurately all transactions relating to the LLC Business in such detail and completeness as is customary and usual for businesses of the type engaged in by the LLC.
 
27

 
(ii)                                 A copy of the Certificate of Formation of the LLC and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed.
 
(iii)                              Copies of the federal, state, and local income tax returns and reports of the LLC for the seven (7) most recent years.
 
(iv)                             Copies of the LLC’s currently effective written operating agreement.
 
(v)                                Copies of financial statements of the LLC for the seven (7) most recent years.  For the avoidance of doubt, the financial statements of the LLC shall at a minimum include a balance sheet, statement of operations (including, without limitation, the Net Income, Net Loss and items thereof of the LLC for the applicable accounting period) and cash flow statement.
 
(vi)                             Minutes of every annual, special meeting and court-ordered meeting.
 
(vii)                          Any written consents obtained from Members for actions taken by Members without a meeting.
 
(b)                                Prior to a Theravance Bipharma Triggering Event, be responsible for the day-to-day management of the Assigned Products in accordance with the terms and conditions of the GSK Agreements;
 
(c)                                 Prior to a Theravance Biopharma Triggering Event, use all commercially reasonable efforts to maximize the commercial value of the Assigned Products in accordance with and subject to the terms of the GSK Agreements;  provided , however , that, for the avoidance of doubt, the Manager shall not be required to cause GSK to take any actions or inactions except to the extent such actions or inactions are required to be performed by GSK pursuant to the GSK Agreements;
 
(d)                                Prior to a Theravance Bipharma Triggering Event, exercise the rights and perform the obligations of the LLC as assignee under the GSK Agreements, including the appointment of representatives to any Joint Steering Committee or Joint Product Committee to the extent permitted under any GSK Agreement;
 
(e)                                 Subject to Section 3.12, prepare a quarterly financial plan for the LLC (a “Financial Plan”), consisting of (i) a balance sheet, (ii) capital expenditures (if any), (iii) Management Costs, (iv) LLC Costs and (v) Projected Capital Contributions.  Subject to Section 3.12, the Manager shall (A) distribute to each Member a draft of each Financial Plan and any amendment or modification thereto at least thirty (30) days prior to the first day of the Fiscal Quarter and a draft of each amendment or other modification to a Financial Plan at least fifteen (15) days before it is effective, (B) provide each Member with a reasonable opportunity to comment on such Financial Plan or amendment or other modification thereto within such timeframe and (C) consider in good faith any and all comments received from the Members.  Notwithstanding anything else in this clause (e) to the contrary, in no event will the Financial
 
28

 
Plan or any amendment or other modification thereto include or be based on any sales forecast provided or delivered by GSK under the GSK Agreements (or other Confidential Information (as defined in the GSK Agreements)) but shall only be based on publicly available information, including analysts’ consensus estimates.
 
(f)                                  Notify each Member at least thirty (30) days before the start of each Fiscal Quarter of such Member’s requested Capital Contribution to the LLC for that Fiscal Quarter pursuant to Section 4.2; and
 
(g)                                 Take all actions necessary to ensure that the formation, structure and operation of the LLC comply with this Agreement, applicable law and the GSK Agreements.
 
5.4                              Limitation of Authority of Manager.  The Manager shall obtain the approval of a Majority in Interest of the Class A Members and a Majority in Interest of the Class B Members before the Manager shall take any of the following actions:
 
(a)                                Except for advances pursuant to Section 4.6, borrow on behalf of the LLC;
 
(b)                                Issue an Interest, or the right to acquire an Interest, in the LLC or any other debt or equity security therein;
 
(c)                                 Take any action or omit to take any action that would be reasonably expected to have a direct or indirect material and adverse effect on (i) the rights, preferences, privileges of or obligations relating to the Class B Units or Class C Units or (ii) the economic interest represented by the Class B Units or Class C Units, in each case, whether by merger, reorganization, transfer of assets, consolidation, dissolution, issuance or sale of securities, amendment, failure to perform or waiver of rights or obligations under this Agreement or the GSK Agreements or otherwise;  provided ,  however , that the Manager’s actions or failure to act with regard to Development and Commercialization (as each such term is defined in the applicable GSK Agreement) matters under the GSK Agreements that are based on the Manager’s good faith determination that GSK is complying with its respective diligent efforts obligations under the GSK Agreements shall not require approval under clause (ii) of this Section 5.4(c); and  provided ,  further however , that (x) following the Transfer of all or any portion of the Interests with respect to any Class B Units to any Person other than Theravance Biopharma, its direct or indirect wholly-owned subsidiaries, or the successors to all or substantially all of the assets of Theravance Biopharma, whether by merger, sale of stock, sale of assets or other similar transaction, or its or their successors or direct or indirect wholly-owned subsidiaries, and (y) pursuant to the dissolution and winding up of the affairs of the LLC in accordance with Article XIV, to the extent the Manager’s actions are consistent with a plan of dissolution and winding up of the affairs of the LLC approved pursuant to Section 14.1(a), the approval by the Class B Members of the actions described in this clause (c) shall not be required (and for the avoidance of doubt shall not be required regardless of whether such other Person continues to hold Class B Units);
 
(d)                                Take any action or omit to take any action that would cause the LLC to be treated as engaged in a trade or business (either directly or through an investment in another
 
29

 
partnership or limited liability company) within the United States for purposes of Sections 875, 882, 884 and 1446 of the Code; and
 
(e)                                 Invest in United States real property interests as that term is defined in Section 897 of the Code.
 
ARTICLE VI
 
NOTICES
 
6.1                              Notices.  Any notice, payment, demand or other communication required or permitted to be given by any provision of this Agreement shall be deemed to have been delivered and given for all purposes (i) if delivered personally to the party or to an officer of the party to whom the same is directed, when received by such party, (ii) if delivered by confirmed telecopy transmission, when received if received on a Business Day during normal business hours of the recipient, and if not, on the next Business Day, (iii) by a nationally recognized overnight courier service or (iv) whether or not the same is actually received, if sent by registered or certified mail, return receipt requested, postage and charges prepaid, addressed as follows:  If to the LLC, at its principal place of business the address of which is set forth in Section 2.2; if to a Member, at such Member’s address set forth on  Exhibit A  hereto, or to such other address as such Member may from time to time specify by written notice to the Members and the LLC; such notice shall be deemed to be given five (5) days after the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as aforesaid.  Any party may by written notice to the other parties specify a different address or facsimile number for notice purposes by sending notice thereof in the foregoing manner.
 
6.2                              Waiver of Notice.  Whenever any notice is required to be given under the provisions of the Act, the Certificate or this Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
 
ARTICLE VII
 
OFFICERS
 
7.1                              Officers.
 
(a)                                The Manager may, from time to time, designate one or more Persons to be officers of the LLC (each such person an “ Officer ”).  Any Officers designated by the Manager shall have such authority and perform such duties as the Manager may, from time to time, delegate to them.  The Manager may assign titles to particular Officers.  Any number of offices may be held by the same person.  No Officer need be a resident of the State of Delaware or of the United States of America.  No Officer shall be an employee, consultant or representative of Theravance Biopharma, except for Permitted Consultants.
 
(b)                                Each Officer shall hold office until his or her successor shall be duly designated and qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.
 
30

 
(c)                                 Any Officer may resign as such at any time.  Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Manager.  The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.
 
(d)                                Any Officer may be removed as such, either with or without cause, by the Manager whenever in its judgment the best interests of the LLC will be served thereby.  Any vacancy occurring in any office of the LLC may be filled by the Manager.
 
(e)                                 To the fullest extent permitted by law, and in all instances solely to the extent not inconsistent with the specific provisions of this Agreement, it is the intention of the parties that those Officers with titles expressly referenced in the DGCL or customarily used in corporations organized under the DGCL, in their respective capacities as such, shall, unless otherwise provided herein or determined by the Manager, have the statutory and customary rights, powers, authority, duties and responsibilities of officers with similar titles of a for-profit stock corporation organized and existing under the DGCL.  Notwithstanding the foregoing, no Officer shall have any right, power or authority to cause the LLC to enter into any transaction or to take or fail to take any other action that requires any consent, approval or waiver (i) of the Managers or any Members (including a Majority in Interest of the Class A Members or a Majority in Interest of the Class B Members), (ii) pursuant to the terms of this Agreement or (iii) under applicable law, in each case without obtaining in advance such consent, approval or waiver.  Each Officer is hereby delegated such rights, powers and authority with respect to the management of the business and affairs of the LLC as may be necessary or advisable to effect the provisions of this Section 7.1(e).
 
(f)                                  The initial Officers of the LLC shall be those individuals designated as the Officers on Exhibit B.
 
7.2                              Reliance by Third Parties.  In dealing with the LLC and its duly appointed agents, no Person shall be required to inquire as to the LLC’s or such agents’ authority to bind the LLC.
 
7.3                              Actions and Determinations of the LLC.  Except as otherwise expressly provided herein, whenever this Agreement provides that a determination shall be made or an action shall be taken by the LLC, such determination or act shall be made or taken by the Manager or, pursuant to this Agreement or with the authorization of the Manager (which may be a general authorization and need not be specific as to any named person, Officer or particular transaction), by any Officer.
 
ARTICLE VIII
 
ACCOUNTING AND RECORDS
 
8.1                              Financial and Tax Reporting.  The Manager shall prepare financial statements for the LLC and the income tax information returns for the LLC using such methods of accounting and tax year as the Manager deems necessary or appropriate as permitted by the Code and Treasury Regulations.
 
31

 
8.2                              Members Access to Certain Information.  Subject to Section 8.6 and the obligation of Theravance and the Manager to withhold information pursuant to Section 3.12, the Manager shall make available, upon at least three (3) Business Days’ prior written notice to the Manager, for inspection at reasonable times during business hours by a Member, for any reason or no reason, the Books and Records of the LLC, in each case including, without limitation, the information, documents and other materials identified in Sections 18-305(a)(1)-(6) of the Act).
 
8.3                              Books and Records.  Proper and complete books and records of the LLC (including those books and records identified in the Act) shall be kept at the LLC’s principal office and at any other place as designated by the Manager.
 
8.4                              Tax Returns.  The LLC shall cause appropriate tax reports and returns (including an IRS Form 1065, Schedule K-1) to be prepared and delivered in a timely manner to each of the Members and to any relevant tax authority within ninety (90) days after the close of each Fiscal Year (subject to reasonable delays in the event of the late receipt of any necessary financial information necessary to prepare tax returns of the LLC, but in no event later than one hundred twenty (120) days after the close of each Fiscal Year).
 
8.5                              Tax Matters Partner.  The Member identified on Exhibit B as the Tax Matters Member is hereby designated as the LLC’s “ Tax Matters Partner ” for purposes of the Code.
 
8.6                              Confidentiality.
 
(a)                                Each Member hereby acknowledges that by virtue of such Member’s Interests, such Member, its Affiliates and its and their respective officers, directors, employees, agents and representatives may have access, or the LLC may allow such Member, its Affiliates and its and their officers, directors, employees, agents and representatives access, to business, technical, other information, materials and/or ideas or this Agreement (“ Proprietary Information ,” which term shall include, without limitation, anything such Member learns or discovers as a result of exposure to or analysis of any Proprietary Information).  Therefore, each Member hereby agrees that such Member will, and shall cause its Affiliates and its and their officers, directors, employees, agents and representatives to hold in confidence and will not, and will cause its officers, directors, employees, agents, representatives and Affiliates not to, possess or use (except as required to exercise rights or perform obligations under this Agreement or to enforce its obligations under this Agreement) or disclose any Proprietary Information without the prior written consent of the Manager, except such information that (i) was in the public domain prior to the time it was furnished to such Member, (ii) is or becomes (through no willful improper action or inaction by such Member) generally available to the public, (iii) was in its possession or known by such Member, its Affiliates or its and their respective officers, directors, employees, agents and representatives without restriction prior to receipt from the LLC, (iv) was rightfully disclosed to such Member, its Affiliates or its and their respective officers, directors, employees, agents and representatives by a third party without restriction, (v) was independently developed without any use of Proprietary Information, (vi) legal counsel, accountants or representatives for such Member, its Affiliates or its and their respective officers, directors, employees, agents and representatives who are bound by a duty of confidentiality request to see, or (vii) subject to the last sentence of clause (b)  below, is required to be disclosed by law or the rules of any national securities exchange, association or marketplace,  provided  that, the Member
 
32

 
shall notify the LLC of any such disclosure requirement as soon as practicable and reasonably cooperate with the LLC (at the LLC’s cost) if the LLC seeks a protective order or other remedy in respect of any such disclosure; and furnish only that portion of the Proprietary Information which the Member is legally required to disclose.  Each Member agrees that is will not reverse engineer or attempt to derive the composition or underlying information, structure or ideas of any Proprietary Information.  The foregoing does not grant any Member a license in or to any of the Proprietary Information.  In accordance herewith, each Member also acknowledges and agrees that due to the unique nature of the Proprietary Information, any breach of this Section 8.6 would cause irreparable harm to the LLC for which damages are not an adequate remedy, and that the LLC shall therefore be entitled to seek equitable relief in addition to all other remedies available at law.
 
(b)                                To the maximum extent permitted by the Act, subject to the provisions of this Agreement (including, without limitation, the obligation of Theravance and the Manager to withhold information pursuant to Section 3.12), the Manager shall have the right to keep confidential from the Members or other Persons, for such period of time as the Manager deems reasonable, any information (including, to the extent permitted by the Act, any information for which a member or manager of a limited liability company may otherwise be entitled to obtain or examine pursuant to Section 18-305 of the Act) which the Manager reasonably in good faith believes to be in the nature of trade secrets or other information the disclosure of which the Manager reasonably in good faith believes is not in the best interest of the LLC or could damage the LLC or its business or which the LLC is required by law or by agreement with a third party (including the GSK Agreements) to keep confidential.  Notwithstanding any other provision of this Agreement, but without limiting any rights of Theravance to disclosure pursuant to Article 10 of the Collaboration Agreement and Strategic Alliance Agreement, no Member shall disclose Confidential Information (as defined in the GSK Agreements) of GSK that would otherwise be permitted to be disclosed solely pursuant to clause (vii) in Section 8.6(a);  provided  that a Member may disclose such information to its outside counsel and outside accountants on a need-to-know basis provided they are subject to customary confidentiality obligations.
 
ARTICLE IX
 
CAPITAL ACCOUNTS AND
ALLOCATIONS OF NET INCOME AND NET LOSS
 
9.1                              Capital Accounts.
 
(a)                                A separate capital account (the “Capital Account”) shall be established and maintained for each Member.  The Capital Account of each Member shall be credited with such Member’s Capital Contributions to the LLC (net of any liabilities secured by any contributed property that the LLC is considered to assume or take subject to), all Net Income allocated to such Member pursuant to Section 9.2 and any items of income or gain which are specially allocated pursuant to Section 9.3; and shall be debited with all Net Losses allocated to such Member pursuant to Section 9.2, any items of loss or deduction specially allocated to such Member pursuant to Section 9.3, and all cash and the Carrying Value of any property (net of liabilities assumed by such Member and the liabilities to which such property is subject) distributed to such Member.  To the extent not provided for in the preceding sentence, the
 
33

 
Capital Accounts of the Members shall be adjusted and maintained in accordance with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv), as the same may be amended or revised.  Any references in any section of this Agreement to the Capital Account of a Member shall be deemed to refer to such Capital Account as the same may be credited or debited from time to time as set forth above.  In the event of any Transfer of any Interest in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest.  Whenever the LLC would be permitted to adjust the Capital Accounts of the Members pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect revaluations of the property of the LLC, the Manager may adjust the Capital Accounts of the Members if it determines that doing so would be appropriate.  If Code Section 704(c) applies to LLC property, the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain and loss, as computed for book purposes, with respect to such property.  The Capital Accounts shall be maintained for the sole purpose of determining the allocation of items of income, gain, loss and deduction among the Members for tax purposes and shall have no effect on the amount of any distributions to any Members in liquidation or otherwise.
 
(b)                                No Member shall be required to pay to the LLC or to any other Member the amount of any negative balance which may exist from time to time in such Member’s Capital Account.
 
9.2                              Allocations of Net Income and Net Loss.  Net Income, Net Loss and items thereof of the LLC for each Fiscal Year (or other Accounting Period) shall be allocated to the Members in such manner that:
 
(a)                                Net Income for each Fiscal Quarter or Interim Period shall be allocated to the Capital Accounts of the Members in proportion to their respective LLC Percentages as of the end of such Fiscal Quarter or Interim Period.
 
(b)                                Net Loss for each Fiscal Quarter or Interim Period shall be allocated to the Capital Accounts of the Members in proportion to their respective LLC Percentages as of the end of such Fiscal Quarter or Interim Period.
 
9.3                              Special Allocation Provisions.  Notwithstanding any other provision in this Agreement:
 
(a)                                Minimum Gain Chargeback.  If there is a net decrease in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain (determined in accordance with the principles of Treasury Regulations Sections 1.704-2(d) and 1.704-2(i)) during any Fiscal Year or other Accounting Period taxable year, the Members shall be specially allocated items of LLC income and gain for such year (and, if necessary, subsequent years) in an amount equal to their respective shares of such net decrease during such year, determined pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5).  The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f).  This Section 9.3(a) is intended to comply with the minimum gain chargeback requirements in such Treasury Regulations Sections and shall be interpreted consistently therewith; including that no
 
34

 
chargeback shall be required to the extent of the exceptions provided in Treasury Regulations Sections 1.704-2(f) and 1.704-2(i)(4).
 
(b)                                Qualified Income Offset.  In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of LLC income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate the deficit balance in its Capital Account (in excess of the amounts described in clauses (i) and (ii) of Section 9.3(c) below) created by such adjustments, allocations or distributions as promptly as possible.  This Section 9.3(b) is intended to constitute a “qualified income offset” within the meaning of Treasury Regulation Section 1.704-1(b)(ii)(d).
 
(c)                                 Limitation on Net Losses.  If any allocation of Net Loss or an item of deduction, expenditure or loss to be made pursuant to Section 9.2 or this Section 9.3 for any Fiscal Year or other Accounting Period would cause a deficit in any Member’s Capital Account (or would increase the amount of any such deficit) after (i) crediting to that Capital Account the amount that such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), and (ii) debiting to such Capital Account the items described in Treasury Regulations 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6), then such Net Loss or item of deduction, expenditure or loss shall be allocated to the Members that have positive Capital Account balances (in excess of the amounts described in clauses (i) and (ii) of this section for such Member) in proportion to the respective amounts of such positive balances until all such positive balances have been reduced to zero.
 
(d)                                Gross Income Allocation.  In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore, if any, pursuant to any provision of this Agreement, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of LLC income and gain in the amount of such excess as quickly as possible;  provided  that an allocation pursuant to this Section 9.3(d) shall be made only if and to the extent that a Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article IX have been tentatively made as if Section 9.3(c) and this Section 9.3(d) were not in this Agreement.
 
(e)                                 Nonrecourse Deductions.  Nonrecourse Deductions shall be allocated in accordance with the number of Units held by each Member and in the same manner as if such Nonrecourse Deductions were taken into account in determining Net Income and Net Loss for such Accounting Period or fiscal year.
 
(f)                                  Partner Nonrecourse Deductions.  Partner Nonrecourse Deductions for any taxable period shall be allocated to the Member who bears the economic risk of loss with respect to the liability to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(j).
 
35

 
(g)                                 Change in Interests.  If there is a change in any Member’s Interest during any Fiscal Year, the principles of Section 706(d) of the Code shall apply in allocating Net Income and Net Loss and items thereof for such Fiscal Year to account for the variation.  For purposes of applying Section 706(d), the Manager may adopt any method or convention permitted under applicable Treasury Regulations.  If there is a change in the Interest of any Member, then for purposes of applying Section 9.2 with respect to the Fiscal Period ending on the date of change, the hypothetical liquidating distributions under Section 9.2 shall be made on the basis of the Interests of each Member as applied before giving effect to such change.
 
9.4                              Curative Allocations.  If the Manager determines, after consultation with counsel experienced in income tax matters, that the allocation of any item of LLC income, gain, loss, deduction or credit is not specified in this Article IX (an “ unallocated item ”), or that the allocation of any item of LLC income, gain, loss, deduction or credit hereunder is clearly inconsistent with the Members’ economic interests in the LLC (determined by reference to the general principles of Treasury Regulation Section 1.704-1(b) and the factors set forth in Treasury Regulation Section 1.704-1(b)(3)(ii)) (a “ misallocated item ”), then the Manager may allocate such unallocated items, or reallocate such misallocated items, to reflect such economic interests;  provided  that no such allocation shall have any effect on the amounts distributable to any Member (other than tax distributions), including the amounts to be distributed upon the complete liquidation of the LLC.
 
9.5                              Tax Allocations.  For income tax purposes only, each item of income, gain, loss and deduction of the LLC shall be allocated in the same manner as the corresponding items of Net Income and Net Loss and specially allocated items are allocated for Capital Account purposes;  provided  that in the case of any asset of the LLC the Carrying Value of which differs from its adjusted tax basis for U.S. federal income tax purposes, income, gain, loss and deduction with respect to such asset shall be allocated solely for income tax purposes in accordance with the principles of Section 704(c) of the Code so as to take account of the difference between the Carrying Value and adjusted tax basis of such asset.  Unless otherwise agreed by the Manager, for purposes of applying the principles of Section 704(c), the LLC shall use the “traditional method” of Treasury Regulation Section 1.704-3(b).
 
9.6                              Compliance with Section 704(b) of the Code.  The allocation provisions contained in this Article IX are intended to comply with Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, and shall be interpreted and applied in a manner consistent therewith.
 
9.7                              Section 754 Election.  The Manager shall cause the LLC to make an election under Section 754 of the Code effective for the taxable year in which the Effective Time occurs upon the timely request of Theravance Biopharma.  In the event of an adjustment to the adjusted tax basis of any LLC asset under Code Section 734(b) or Code Section 743(b) pursuant to a Section 754 election by the LLC, subsequent allocations of tax items shall reflect such adjustment consistent with the Treasury Regulations promulgated under Sections 704, 734 and 743 of the Code.
 
36

 
ARTICLE X
 
EXPENSES
 
10.1                       Expenses.  All LLC Costs shall be borne by the LLC.  For the avoidance of doubt, the Capital Contributions paid by the Members pursuant to Section 4.3, together with the existing cash balance of the LLC, are intended to provide the LLC with a sufficient cash balance to pay the LLC Costs.
 
ARTICLE XI
 
DISTRIBUTIONS
 
11.1                       Distributions.
 
(a)                                Except as provided in Section 11.2, the Net Cash of the LLC as of the end of each Fiscal Quarter (or Interim Period) shall be distributed to the Members as of the end of such Fiscal Quarter (or Interim Period).  No Member shall be entitled to any distribution or payment with respect to such Member’s Interest, except as set forth in this Agreement.
 
(b)                                Other than distributions pursuant to Section 11.2 and distributions pursuant to Section 14.4, any distribution of cash or other assets to the Members pursuant to this Section 11.1 shall be made in proportion to the Member’s respective LLC Percentage.
 
(c)                                 Except as otherwise provided by law, no Member shall be required to restore or repay to the LLC any funds properly distributed to it pursuant to Section 11.1.
 
11.2                       Tax Distributions.  Notwithstanding Section 11.1, within ninety (90) days of the end of each Fiscal Year, the LLC shall make a distribution to each Member of any available cash of the LLC (as determined by the Manager) of an amount equal to the excess of (A) the sum of (i) the product of (x) the amount of net income and gain taxable at ordinary tax rates allocated to such Member with respect to its Interest (as shown on Schedule K-1 to the LLC’s IRS Form 1065) for such Fiscal Year and all prior Fiscal Years and (y) the maximum marginal rate of federal, state and local income tax applicable to a corporation subject to tax in the Designated Jurisdiction with respect to such income or gain, (ii) the product of (x) the amount of net income and gain taxable at long-term capital gains rates allocated to such Member with respect to its Interest (as shown on Schedule K-1 to the LLC’s IRS Form 1065) for such Fiscal Year and all prior Fiscal Years and (y) the maximum marginal rate of federal, state and local income tax applicable to a corporation subject to tax in the Designated Jurisdiction with respect to such income or gain and, (iii) in the event of allocation by the LLC of net income or gain taxable at a rate other than the ordinary or long-term capital gains rates contemplated in clauses (i) and (ii) above, the product of (x) the amount of such net income and gain taxable at such other rate allocated to such Member with respect to its Interest (as shown on Schedule K-1 to the LLC’s IRS Form 1065) for such Fiscal Year and all prior Fiscal Years and (y) the maximum marginal rate of federal, state and local income tax applicable to a corporation subject to tax in the Designated Jurisdiction with respect to such income or gain, over (B) the cumulative cash distributions previously made to such Member with respect to its Interest pursuant to this Section
 
37

 
11.2 and Section 11.1(b) during such Fiscal Year and all prior Fiscal Years.  The determination of the tax rates to be used for purposes of the preceding sentence shall be made by the Manager in its good faith discretion after consulting with the LLC’s tax advisors, taking into account among other things changes in applicable tax rates over the relevant period, the deductibility of state and local taxes and any limitations on the ability of an individual to deduct any items of expense or loss under United States federal income tax principles.  For the avoidance of doubt, the references to “net income and gain” in clauses (A)(i)(x), (A)(ii)(x), and (A)(iii)(x) above shall mean that amount of such gross income and gain of the LLC allocated to such Member with respect to its Interest for all such Fiscal Years reduced by the gross amount of loss and deduction allocated to such Member with respect to its Interest for all such Fiscal Years that is available as an offset to such income and gain.  Without prejudice to the foregoing, the LLC may make a distribution out of any available cash of the LLC (as determined by the Manager) to each Member as soon as practicable following the close of each Estimated Tax Period of each Fiscal Year in amounts equal to the estimated tax liability of each Member relating to such Estimated Tax Period (as estimated by the Manager in its good faith discretion after consulting with the LLC’s tax advisors and based on the results of such quarter and using the methodology and assumptions described in the preceding sentences).
 
11.3                       No Other Withdrawals.  Except as expressly provided in this Agreement, no withdrawals or distributions shall be required or permitted.
 
11.4                       Distribution Limitations.  Notwithstanding any provision to the contrary contained in this Agreement, the LLC shall not make a distribution to any Member on account of its Interest if such distribution would violate the Act or other applicable law or breach any contract or agreement to which the LLC is a party.
 
ARTICLE XII
 
TRANSFER OF MEMBERSHIP; OTHER MATTERS
 
12.1                       Transfer.
 
(a)                                Transfer of Class A Units.  No holder of Class A Units may Transfer all or any portion of its Interest with respect to the Class A Units other than to (x) GSK or its Affiliates or (y) such holder’s direct or indirect wholly-owned subsidiaries or successors to all or substantially all of the assets of such holder whether by merger, sale of stock, sale of assets or other similar transaction,  provided  that such transfer (i) does not result in a violation of the Securities Act or the Securities Exchange Act, and (ii) is in accordance with the other applicable provisions of this Article XII.
 
(b)                                Transfer of Class C Units and Class B Units.  A holder of Class B Units or Class C Units may freely Transfer all or any portion of its Interest with respect to the Class B Units or Class C Units, respectively,  provided  that such Transfer (i) does not result in a violation of the Securities Act or the Securities Exchange Act, and (ii) is in accordance with the other applicable provisions of this Article XII.  For the avoidance of doubt, this Section 12.1(b) shall not limit the effect of the second proviso clause beginning “provided, further however,” of Section 5.4(c).
 
38

 
12.2                       Transfer Void.  Any Transfer or attempted Transfer of an Interest in contravention of this Agreement shall, to the fullest extent permitted by law, be absolutely null and void ab initio and of no force or effect, on or against the LLC, any Member, any creditor of the LLC or any claimant against the LLC and may be enjoined, and shall not be recorded or otherwise registered on the books and records of the LLC.  No distributions of cash or property of the LLC shall be made to any transferee of any Interest Transferred in violation hereof.  The Transfer or attempted Transfer of any Interest in violation hereof shall not affect the beneficial ownership of such Interest, and, notwithstanding such Transfer or attempted Transfer, the Member making such prohibited Transfer or attempted Transfer shall retain the right to vote, if any, and the right to receive distributions with respect to such Interest.
 
12.3                       Effect of Assignment.  Following a Transfer of an Interest that is permitted under this Article XII, the assignee of such Interest (i) shall be a mere assignee, holding only the economic interest of the transferring Member and shall have no other rights (including, without limitation, voting or information rights) unless and until such assignee is admitted to the LLC as a member of the LLC in accordance with Section 12.9, (ii) shall be treated as having made all of the Capital Contributions in respect of, and received all of the distributions received in respect of, such Interest, (iii) shall succeed to the Capital Account associated with such Interest and (iv) shall receive allocations and distributions under Articles IX and XI in respect of such Interest as if such transferee were a Member.  For the avoidance of doubt, with respect to the Theravance Biopharma Transfer, Theravance Biopharma shall be treated as having made all of the Capital Contributions in respect of such Interest and shall succeed to the Capital Account associated with such Interest.  The Manager shall cause Exhibit A to be appropriately amended to reflect any Transfer of an Interest.
 
12.4                       Legends.
 
(a)                                In the event the Units become certificated Units, any certificate representing Units shall be endorsed with the following legend, as well as with any legends as may be required by applicable federal and state securities laws:
 
“THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE UNITS REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN WRITTEN AGREEMENT BETWEEN THE REGISTERED HOLDERS OF THE UNITS OF THE LLC (OR THE PREDECESSOR IN INTEREST TO THE UNITS).  SUCH AGREEMENT RESTRICTS THE TRANSFER OF UNITS.  SUCH AGREEMENT CONTAINS PROVISIONS REGARDING THE VOTING OF THE UNITS REPRESENTED BY THIS CERTIFICATE.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED FROM THE ISSUER UPON WRITTEN REQUEST.  BY ACCEPTING ANY INTEREST IN SUCH UNITS THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT.”
 
(b)                                Any certificate issued at any time in exchange or substitution for any certificate bearing such legends shall also bear such legends, unless the Units represented thereby are no longer subject to the provisions of this Agreement or, in the opinion of the LLC (with
 
39

 
advice from counsel to the LLC, as the LLC may deem appropriate), the restrictions imposed under the Securities Act or state securities laws are no longer applicable, in which case the applicable legend (or legends) may be removed.
 
12.5                       Publicly Traded Partnership Limitations.  Notwithstanding any other provision of this Agreement, no Transfer shall be permitted if (i) the Manager determines in its sole discretion that such transaction will either cause the LLC to be characterized as a “publicly traded partnership” or will materially increase the risk that the LLC will be so characterized or (ii) such Transfer would occur in a transaction registered or required to be registered under the Securities Act.  For purposes of this Section 12.5, the phrase “publicly traded partnership” shall have the meanings set forth in Section 7704(b) and 469(k) of the Code.  In particular and without limiting the foregoing, no Transfer shall be permitted, given effect or otherwise recognized, and such Transfer (or purported Transfer) shall, to the fullest extent permitted by law, be void  ab initio , if at the time of such Transfer (or as a result of such Transfer) Units are (or would become) traded on an “established securities market” (within the meaning of Treasury Regulation Section 1.7704-1(b)) or are (or would become) “readily tradable on a secondary market or the equivalent thereof” (within the meaning of Treasury Regulation Section 1.7704-1(c)).
 
12.6                       Effective Date.  Any Transfer in compliance with this Article XII shall be deemed effective on the first date as of which the relevant requirements of this Agreement have been satisfied.
 
12.7                       Redemption.  The Units shall not be redeemable at the option of the holder thereof or otherwise.
 
12.8                       Assignment of Reverted Drug Programs.  Theravance and the LLC shall assign to Theravance Biopharma all rights to any Assigned Product reverted to Theravance or the LLC pursuant to the GSK Agreements, and following such assignment Theravance Biopharma shall be free to pursue the development of any such Assigned Product to the extent permitted under the GSK Agreements and without any obligations to the LLC, to any Member or to any other Person bound by this Agreement except as otherwise provided in the GSK Agreement.
 
12.9                       Admission of Permitted Assignee as a Member.  Any assignee of an Interest permitted in accordance with the terms and conditions of this Agreement shall, upon its request, be admitted as a substitute Member by the Manager. If a Member assigns its entire Interest pursuant to this Article XII in accordance with the requirements of this Agreement, such admission shall be deemed effective immediately prior to such assignment, and immediately following such admission, such assignor Member shall cease to be a member of the LLC. The Manager shall cause Exhibit A to be appropriately amended to reflect any admission of a new Member and cessation of an existing Member.
 
12.10                Transfer to Theravance Biopharma at Effective Time; Admission of Theravance Biopharma at Effective Time .  Notwithstanding any other provision of this Agreement, at the Effective Time:
 
40

 
(a)           Theravance shall Transfer to Theravance Biopharma all two thousand one hundred twenty-five (2,125) Class B Units, six thousand three hundred seventy-five (6,375) Class C Units and all of the respective rights and responsibilities appurtenant thereto hereunder, including (i) with respect to a Member (but not an assignee), the right, if any, to vote to the extent set forth herein, (ii) the right to have a Capital Account maintained for such Member (or assignee), (iii) the right to receive allocations of Net Income and Net Losses pursuant to Article IX, and (iv) the right to receive distributions of cash or property from the LLC;
 
(b)           Theravance Biopharma shall be admitted as a Member pursuant to Section 12.9; and
 
(c)           Theravance Biopharma shall execute and deliver such instruments of transfer as shall be necessary to evidence and effect such Transfer.
 
ARTICLE XIII
 
INDEMNIFICATION AND LIMITATION OF LIABILITY
 
13.1        Indemnification.
 
(a)           For purposes of this Section 13.1(a), (i) “agent” means the Manager, any former Manager, Officer, any former Officer, any direct or indirect subsidiary of the LLC or any Affiliate, officer, director or employee of the foregoing; (ii) “proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative, legislative or investigative; (iii) “Member” means each Member and any former Member, any direct or indirect subsidiary of such Member or any Affiliate, officer, director or employee of the foregoing and (iv) “expenses” include, without limitation, reasonable attorneys’ fees and other expenses of establishing a right of indemnification under this Section 13.1(a).  The LLC shall, (i) to the fullest extent permitted under the DGCL (as if the LLC were a Delaware corporation and agent was a director or officer of a Delaware corporation), indemnify and hold harmless each agent (and his heirs and legal and personal representatives) and (ii) to the fullest extent permitted under the Act, indemnify and hold harmless each Member (and its successors and permitted assigns), in each case against losses and damages arising out of liabilities or expenses incurred by him as a result of serving in the capacity by reason of which such Person is deemed to be an “agent” or Member pursuant to this subsection (a), regardless of whether the agent or Member is or continues to serve in such capacity at the time any such liability or expense is paid.  Without limiting the generality of the foregoing, the LLC hereby agrees (i) to the fullest extent permitted under the DGCL (as if the LLC were a Delaware corporation and the agent was a director or officer of a Delaware corporation) to indemnify each agent (and his heirs and legal and personal representatives) and (ii) to the fullest extent permitted under the Act, indemnify and hold harmless each Member (and its successors and permitted assigns), and to save and hold such Person harmless, from and in respect of all (1) fees, costs and expenses reasonably incurred in connection with or resulting from any demand, claim, action or proceeding against such agent (and his heirs and legal and personal representatives) or such Member (and its successors and permitted assigns) or the LLC that arises out of or in any way relates to the agent’s or Member’s service in the capacity by reason of which such Person is deemed to be an “agent” or “Member” pursuant to this subsection (a), and (2) such demands, claims, actions and proceedings and any
 
41

 
losses or damages resulting therefrom, including judgments, fines and amounts paid in settlement or compromise of any such demand, claim, action or proceeding.  Notwithstanding the foregoing, the LLC shall not indemnify any agent (or his heirs or legal or personal representatives) or Member (or its successors or permitted assigns) for (i) losses, damages or expenses incurred with respect to any demand, claim, action or proceeding if such Person’s conduct was undertaken in bad faith, recklessly or with gross negligence or if such Person’s conduct or its acts or omissions constituted fraud, intentional wrongdoing, or breach of this Agreement (including, in the case of Theravance or the Manager, the failure of Theravance or the Manager to comply with its fiduciary duties under Section 5.2) or any other agreement, including the GSK Agreements, as determined by a court of competent jurisdiction pursuant to Section 15.10, or (ii) any liability arising by reason of any act or omission of an agent or Member subsequent to his ceasing to be an agent or Member, as applicable, subsequent to the termination of the LLC.  The termination of any proceeding by a judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the agent’s or Member’s conduct was undertaken in bad faith, recklessly or with gross negligence or that such Person’s conduct or its acts or omissions constituted fraud, intentional wrongdoing or breach of this Agreement (including, in the case of Theravance or the Manager, the failure of Theravance or the Manager to comply with its fiduciary duties under Section 5.2) or any other agreement, including the GSK Agreements.  The LLC shall be required to advance the expenses incurred by any Person indemnified hereunder in connection with any proceeding in advance of the final disposition or other termination of such proceeding upon receipt of an undertaking by or on behalf of such Person to repay such payment if there shall be an adjudication or determination that such agent is not entitled to indemnification as provided herein.
 
(b)           The indemnification accorded to an agent (or his heirs or legal or personal representatives) under Section 13.1(a) shall be made solely out of the assets of the LLC, and no Member, Manager or Officer shall have any personal liability or other obligation therefor.  Nothing in Section 13.1(a) shall be deemed to require any Member to make any additional Capital Contribution.
 
13.2        Exculpation.  For purposes of this Section 13.2, the terms “Member” and “agent” shall have the meanings assigned to such terms in Section 13.1(a).  No agent shall be liable to the LLC or any Member or any other Person who is bound by this Agreement for (a) honest mistakes in judgment, or for action or inaction, taken reasonably and in good faith and for a purpose that was reasonably believed to be in the best interests of the LLC or (b) losses sustained or liabilities incurred as a result of any act or omission of such agent if such agent’s conduct were not undertaken in bad faith, recklessly or with gross negligence or if such agent’s conduct and its acts or omissions did not constitute fraud, intentional wrongdoing or breach of this Agreement (including, in the case of Theravance or the Manager, the failure of Theravance or the Manager to comply with its fiduciary duties under Section 5.2) or any other agreement, including the GSK Agreements.  To the fullest extent permitted under the Act, no Member shall be liable to the LLC or any Member or any other Person who is bound by this Agreement for any action or inaction taken by such Member or for any losses sustained or liabilities incurred as a result of any act or omission of such Member.  Each agent and Member may consult with counsel, accountants and other professionals in respect of LLC affairs and shall be fully protected and justified in acting, or failing to act, if such action or failure to act is in accordance with the reasonable advice or opinion of such counsel, accountant or other professional and if
 
42

 
such counsel, accountant or other professional shall have been selected with reasonable care.  Notwithstanding the foregoing, the provisions of this Section 13.2 shall not relieve any Person of liability arising by reason of such Person’s acting in bad faith, recklessly or with gross negligence, or if such Person’s conduct in the performance of its duties hereunder, or its acts or omissions, constitute fraud, intentional wrongdoing, or breach of this Agreement (including, in the case of Theravance or the Manager, the failure of Theravance or the Manager to comply with its fiduciary duties under Section 5.2) or any other agreement, including the GSK Agreements.  This Agreement shall be construed to give effect to the provisions of this Section 13.2 to the fullest extent permitted by law.
 
13.3        Limitation of Liability.  Notwithstanding anything to the contrary herein contained, the debts, obligations and liabilities of the LLC shall be solely the debts, obligations and liabilities of the LLC and no Member, Manager or Officer shall be obligated personally for any such debt, obligation or liability of the LLC solely by reason of being a Member, Manager or Officer.
 
ARTICLE XIV
 
DISSOLUTION AND TERMINATION
 
14.1        Dissolution.  The LLC shall be dissolved, its assets disposed of and its affairs wound up upon the first to occur of the following:
 
(a)           the consent of a Majority in Interest of the Class A Members, a Majority in Interest of the Class B Members and a Majority in Interest of the Class C Members; or
 
(b)           the entry of a decree of judicial dissolution under the Act; or
 
(c)           at any time there are no members of the LLC, unless the LLC is continued without dissolution in accordance with this Agreement or the Act.
 
Except as otherwise provided herein, the death, bankruptcy, incompetency, retirement, resignation, expulsion or dissolution of a Member, or the occurrence of any event that terminates the continued membership of a Member in the LLC, shall not, in and of itself, dissolve or terminate the LLC.  Notwithstanding any other provision of this Agreement, the bankruptcy (as defined in Sections 18-101(1) and 18-304 of the Act) of a Member will not cause that Member to cease to be a member of the LLC, and upon the occurrence of such an event, the business of the LLC shall continue without dissolution.
 
14.2        Authority to Wind Up.  Upon the dissolution of the LLC as set forth in Section 14.1, the Manager shall have all necessary power and authority required to marshal the assets of the LLC, to satisfy the LLC’s creditors, to distribute assets and otherwise wind up the business and affairs of the LLC.  In particular, the Manager shall have the authority to continue to conduct the business and affairs of the LLC insofar as such continued operation remains consistent, in the reasonably judgment of the Manager, with the orderly winding up of the LLC.
 
14.3        Winding Up and Certificate of Cancellation.  The winding up of the LLC shall be completed when all debts, liabilities and obligations of the LLC have been paid and
 
43

 
discharged or reasonably adequate provision therefor has been made, and all of the remaining property and assets of the LLC have been distributed to the Members.
 
14.4        Distribution of Assets.  Upon dissolution of the LLC, the affairs of the LLC shall be wound up and the LLC shall be liquidated by the Manager.  The assets of the LLC shall be distributed as follows in accordance with the Act:
 
(a)           To creditors of the LLC, including to the payment of the expenses of the dissolution, winding up and liquidation of the LLC and, in accordance with the terms agreed among them or otherwise on a pro rata basis (based on amounts owed to them), Members who are creditors (other than in respect of distributions owing to them or to former Members hereunder), to the extent otherwise permitted by law, in satisfaction of the liabilities of the LLC (whether by payment or the making of reasonable provision for payment thereof, including by establishing reserves, in amounts established by the Manager to meet other liabilities of the LLC, including contingent, conditional and unmatured liabilities (other than liabilities to the Members or former Members in respect of distributions owing to them hereunder));
 
(b)           The remaining assets of the LLC shall be applied and distributed to the Members in proportion to their respective LLC Percentages.
 
(c)           The distribution of cash, securities and other property to a Member in accordance with the provisions of this Section 14.4 shall constitute a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Interest and all the LLC’s property, and shall constitute a compromise to which all Members have consented within the meaning of the Act.  If such cash, securities and other property are insufficient to return such Member’s Capital Contributions or returns thereon, the Member shall have no recourse against the Manager, other Members or Officers.  If any amounts distributable to the Members are other than cash, their value shall be deemed to be the fair market value as determined in good faith by the Manager.
 
14.5        Contingent Distribution.  For the avoidance of doubt, if any portion of the amount distributable to the Members pursuant to Section 14.4(b) is placed into escrow and/or is payable to such holders subject to contingencies, such dissolution or termination shall be effected such that the portion of such amount that is placed in escrow and/or subject to any contingencies (the “ Contingent Distribution ”) shall be allocated to the Members in accordance with this Section 14.5 as if all of consideration ultimately payable in the transaction, including the Contingent Distribution, is paid without restrictions at the time of closing of such dissolution or termination (so that the Contingent Distribution shall be allocated among the Members pro rata based on the amount of such consideration otherwise payable to each Member pursuant to this Section 14.5).  Each Member agrees to take such actions as may be required, necessary or advisable to effect the intent of this Section 14.5.
 
44

 
ARTICLE XV
 
MISCELLANEOUS
 
15.1        Amendment.
 
(a)           Except as expressly set forth herein (including without limitation, Section 5.4), this Agreement may be amended, revised and modified and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively), including any amendment, revision, modification or waiver of or to this Agreement by merger, reorganization, transfer of assets, consolidation, dissolution, issuance or sale of securities or otherwise, only with the consent of a Majority in Interest of the Class A Members,  provided ,  however , that any amendment, revision, modification or waiver of or to this Agreement, including any amendment, revision, modification or waiver of or to this Agreement by merger, reorganization, transfer of assets, consolidation, dissolution, issuance or sale of securities or otherwise, directly or indirectly adversely affecting the interest of the Class B Members or the Class C Members in the Assigned Drug Programs or Assigned Products (including, for the avoidance of doubt, any amendment to the rights, preferences, privileges and obligations of Theravance, the LLC, the Manager or the Class A Units under this Agreement having such an effect) or directly or indirectly adversely affecting the rights, preferences, privileges or obligations of the Class B Units under this Agreement may be made only with the consent of a Majority in Interest of the Class B Members.  Any amendment, revision, modification or waiver so effected shall be binding upon all the Parties hereto.
 
(b)           No Party shall, without a Majority in Interest of the Class A Members and a Majority in Interests of the Class B Members:
 
(i)            by amendment of this Agreement or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid, or consummate or agree to consummate any such action that has the effect of avoiding, the observance or performance of any of the terms to be observed or performed under this Agreement by the LLC, but will at all times in good faith assist in the carrying out of all the provisions of this Agreement; or
 
(ii)           amend, alter or repeal this Section 15.1 of this Agreement (or any other provision of this Agreement having the effect of amending, altering or repealing this Section 15.1).
 
(c)           Notwithstanding the foregoing provisions, the Manager may amend and modify the provisions of this Agreement (including Article IX) and  Exhibits A  and  B  hereto to the extent necessary to reflect the admission, substitution or removal of any Member permitted under this Agreement and the election, designation, removal, vacancy or resignation of any Manager (in each case subject to the approval of any such action by the requisite vote of Members entitled to vote pursuant to this Agreement).  Furthermore, the Manager may amend this Agreement, without the consent of the Members, (i) to make a change that is reasonably necessary to cure any ambiguity or inconsistency and to make changes to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling,
 
45

 
regulation or statute of any governmental body which will not be inconsistent with this Agreement, in both cases, subject to the requirement that no Member be materially and adversely affected; or (ii) to prevent any material and adverse effect to the LLC or any Member arising from the application of legal restrictions to any Member, subject to the requirement that no Member be adversely affected without its consent.
 
(d)           No Party shall amend, revise, modify or waive this Agreement, including by merger, reorganization, transfer of assets, consolidation, dissolution, issuance or sale of securities or otherwise, in a manner that, directly or indirectly, has an adverse effect on the rights, preferences, privileges of or obligations of the Class C Units under this Agreement or applicable law without the consent of a Majority in Interest of the Class C Members.
 
(e)           Promptly after entering into any amendment pursuant to this Section 15.1, the Manager shall provide the Members a copy of such amendment.
 
(f)            Section 3.8 of this Agreement may not be amended without the consent of Theravance Biopharma.
 
15.2        Power of Attorney.
 
(a)           By signing this Agreement, each Member hereby makes, constitutes and appoints the Manager with full power of substitution and resubstitution, its true and lawful agent or agents and attorney- or attorneys-in-fact for it and in its name, place and stead, to sign, execute, certify, acknowledge, file and record (i) the Certificate, (ii) all instruments amending, restating or canceling the Certificate, as the same may hereafter be amended or restated, pursuant to the Act or this Agreement, and (iii) such other agreements, instruments, elections or documents (a) that may be necessary to reflect the exercise by a Member of any of the powers granted to it under this Agreement, and (b) that may be required of the LLC or of the Members by the laws of Delaware or any other jurisdiction.  Each Member authorizes such agent or attorney-in-fact to take any further action that such agent or attorney-in-fact shall consider necessary in connection with any of the foregoing, hereby giving such agent or attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in and about the foregoing as fully as such Member might or could do if personally present, and hereby ratifying and confirming all that such agent or attorney-in-fact shall lawfully do or cause to be done by virtue hereof.  The Manager shall provide to each Member copies of all documents executed pursuant to the power of attorney contained in this Section 15.2.
 
(b)           The power of attorney granted pursuant to this Section 15.2:
 
(i)            is a special power of attorney coupled with an interest and is irrevocable;
 
(ii)           may be exercised by such attorney-in-fact by listing all of the Members executing any agreement, certificate, instrument or document with the single signature of such attorney-in-fact acting as attorney-in-fact for all of them; and
 
46

 
(iii)          shall survive the assignment by a Member of its Interest, except that where the assignee thereof is admitted as a Member, the power of attorney shall survive such assignment as to the assignor Member for the sole purpose of enabling such attorney-in-fact to execute, acknowledge and file any such agreement, certificate, instrument or document as is necessary to effect such admission.
 
15.3        Withholding.  The LLC shall at all times be entitled to make payments with respect to any Member in amounts required to discharge any obligation of the LLC to withhold or make payments to any governmental authority with respect to any federal, state, local, or other jurisdictional tax liability of such Member arising as a result of such Member’s Interest.  To the extent each such payment satisfies an obligation of the LLC to withhold, with respect to any distribution to a Member on which the LLC did not withhold or with respect to any Member’s allocable share of the income of the LLC, each such payment shall be deemed to be a loan by the LLC to such Member (which loan shall be deemed to be immediately due and payable) and shall not be deemed a distribution to such Member.  The amount of such payments made with respect to such Member, plus interest, on each such amount from the date of each such payment until such amount is repaid to the LLC at an interest rate per annum equal to the prime rate published in the  Wall Street Journal  on the date of such payment by the LLC with respect to such Member, shall be repaid to the LLC by (a) deduction from any cash distributions made to such Member pursuant to this Agreement, or (b) earlier payment by such Member to the LLC, in each case as determined by the LLC in its discretion.  The LLC may, in its discretion, defer making distributions to any Member owing amounts to the LLC pursuant to this Section 15.3 until such amounts are paid to the LLC and shall in addition exercise any other rights of a creditor with respect to such amounts.  Each Member agrees to indemnify and hold harmless the LLC and each of the Members, from and against liability for taxes, interest, or penalties which may be asserted by reason of the failure to deduct and withhold tax on amounts distributable or allocable to said Member.  Any amount payable as indemnity hereunder by a Member shall be paid promptly to the LLC upon request for such payment from the LLC, and if not so paid, the LLC shall be entitled to claim against and deduct from the Capital Account of, or from any distribution due to, the affected Member for all such amounts.
 
15.4        Apportionment of Amounts Withheld at the Source or Paid by the LLC.
 
(a)           If the LLC receives securities disposition proceeds or other income with respect to which taxes have been withheld at the source or with respect to which the LLC makes payments to any taxing authority, the aggregate amount of such taxes so withheld or paid shall be deemed for all purposes of this Agreement to have been received by the LLC and then distributed by the LLC to and among the Members based on the amount of such withholding or other taxes attributable to each Member, as determined by the Manager after consulting with the LLC’s accountants or other advisers, taking into account any differences in the amount of such withholding or other taxes attributable to each Member because of such Member’s status, nationality or other characteristics.  The intent of the preceding sentence is to have the burden of taxes withheld at the source or paid or reimbursed by the LLC borne by those Members to which such withholding or other taxes are attributable to the maximum extent possible.  If the amounts deemed distributed to the Members in accordance with such sentence do not comport with the provisions of this Agreement relating to the apportionment of distributions among the Members,
 
47

 
then, notwithstanding such distribution provisions, subsequent distributions to the Members shall be adjusted in an equitable manner by the Manager to reflect the intent of such sentence.
 
(b)           If the LLC is required to remit cash to a governmental agency in respect of a withholding obligation arising from an in-kind distribution by the LLC or the LLC’s receipt of an in-kind payment, the Manager may cause the LLC to sell an appropriate portion of the property at issue and, to the extent permitted by applicable law (as determined by the Manager), any resulting income or gain shall be allocated solely for income tax purposes entirely to the Member or Members in respect of which such withholding obligation arises (in such proportion as the Manager shall determine in its reasonable discretion).
 
15.5        Notice to and Consent of Members.  By executing this Agreement, each of the parties hereto acknowledges that it has actual notice of and consents to (a) all of the provisions hereof (including the restrictions on Transfer), and (b) all of the provisions of the Certificate.
 
15.6        Further Assurances.  The parties agree to execute and deliver any further instruments or documents and perform any additional acts which are or may become necessary to effectuate and carry on the LLC created by this Agreement.
 
15.7        Binding Effect.  Subject to the restrictions on Transfer set forth in this Agreement, this Agreement shall be binding on and inure to the benefit of the Members and their respective transferees, successors, permitted assigns and legal representatives.  If Theravance or the Manager or any of their respective successors or assigns shall (i) consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or (ii) sell, lease, license, transfer or otherwise dispose of all or substantially all of its business or assets to any Person, then, in each case, proper provision shall be made so that such Persons assume the obligations of Theravance and the Manager hereunder.
 
15.8        Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware.
 
15.9        Title to LLC Property.  Legal title to all property of the LLC will be held and conveyed in the name of the LLC.
 
15.10      Dispute Resolution.
 
(a)           In the event of any dispute, controversy or claim arising under or relating to this Agreement (a “ Claim ”), the party asserting the Claim (the “ Claimant ”) shall give written notice (a “ Claim Notice ”) to the other parties to this Agreement (the “ Respondents ”).
 
(b)           The Claim Notice shall specify in reasonable detail the basis of the Claim, including (i) the provisions of this Agreement that it alleges have been breached and (ii) to the extent known to it, the factual basis of such alleged breach.  The Claim Notice need not specify the factual basis of such alleged breach to the extent such facts are not available to Claimant due to confidentiality or other restrictions applicable to the Assigned Drug Programs or Assigned Products or to the extent any Respondent has or could reasonably obtain access to such facts, but
 
48

 
has withheld them from Claimant (without regard to any confidentiality obligation or other restriction on disclosure).
 
(c)           The parties to the dispute (i.e., the Claimant and the Respondents) shall negotiate in good faith to seek to achieve a mutually agreeable resolution of the Claim for fifteen (15) business days after receipt of such Claim by Respondents, or such longer period as they shall mutually agree.  Any such resolution shall be set forth in a written agreement signed by all parties to the dispute.
 
(d)           If the parties to the dispute do not achieve a mutually agreeable resolution within such time period, the sole recourse of the Claimant to resolve the Claim shall be through binding arbitration in accordance with this Agreement (“ Arbitration ”).  To initiate such arbitration, the Claimant shall furnish the Respondents written notice (“ Arbitration Notice ”) of its intent to pursue arbitration within fifteen (15) business days after the end of such time period.
 
(e)           Each party to the dispute shall (i) take all reasonable steps necessary or advisable in order to properly submit the Claim to Arbitration; (ii) raise no objection to the submission of the Claim to Arbitration; (iii) irrevocably waive, to the fullest extent permitted by law, any objection such party has, or may have, to the submission of the Claim to Arbitration; (iv) irrevocably waive, to the fullest extent permitted by law, any right to have the Claim submitted for resolution in any jurisdiction or venue other than the Arbitration; (v) irrevocably waive, to the fullest extent permitted by law, any and all rights to have the Claim decided by a jury; and (vi) irrevocably waive, to the fullest extent permitted by law, any and all rights to any appeal of the ruling or award of the Arbitrator(s).
 
(f)            The scope of the arbitration shall be limited solely to the Claim in accordance with this Agreement (including this dispute resolution process).  No other matter may be brought before the Arbitration.
 
(g)           The Arbitration shall be conducted before a former member of the Delaware Court of Chancery or the Delaware Supreme Court selected in good faith by mutual agreement of the Parties within fifteen (15) business days after the date the Arbitration Notice is delivered by the Claimant, provided that if the Parties cannot reach such mutual agreement within such period, then any party may petition the Delaware Court of Chancery to appoint an arbitrator who shall be a former member of the Delaware Court of Chancery or the Delaware Supreme Court.  If no former member of the Court is willing or able to serve in such capacity, then within ten (10) business days of learning of such unwillingness or unavailability, each party shall select one person to act as arbitrator from a list of arbitrator candidates provided by JAMS, and, within five (5) business days after their selection, the two so selected shall select a third arbitrator (all three collectively, the “ Arbitrators ”). If the Arbitrators selected by the parties are unable or fail to agree upon the third Arbitrator within the allotted time, the third Arbitrator shall be appointed by JAMS. All Arbitrators shall serve as neutral, independent and impartial arbitrators.
 
(h)           Subject to the availability of the Arbitrator(s), the parties shall use their commercially reasonable best efforts to complete the Arbitration within ninety (90) days after the
 
49

 
Arbitrator(s) is/are appointed (or as promptly thereafter as possible), on a schedule to be negotiated in good faith among the Parties.
 
(i)            This arbitration provision (including the validity and applicability of the agreement to arbitrate, the conduct of any arbitration, the enforcement of any arbitration award made hereunder and any other questions of arbitration law or procedure arising hereunder) and its interpretation, and any Claim, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware.  The location of any arbitration shall be Wilmington, Delaware or such other location as mutually agreed to by the parties.
 
(j)            The Parties agree that, except as otherwise provided herein, the Arbitration shall proceed in accordance with the JAMS Streamlined Arbitration Rules and Procedures (“ JAMS Rules ”) effective July 15, 2009, unless the Parties mutually agree to proceed under different rules and procedures.  For the avoidance of doubt, to the extent any rule or procedure set forth in the JAMS Rules conflicts with this Agreement, this Agreement supersedes and trumps any such conflict.  Unless the Parties mutually agree, the following Jams Rules shall not apply to the Arbitration:  Rule 3 and Rule 19(f).  Rule 15(a)(3) shall be limited to exclude exhibits intended to be used solely on cross examination.  Rule 16 shall be further limited such that any subpoena shall be issued only upon prior order of the Arbitrator(s) and upon good cause shown.
 
(k)           The Claimant shall have the burden of proving any Claim by a preponderance of the evidence, provided that if evidence is not available to Claimants (or any of its parent entities or other Affiliates) due to confidentiality or other restrictions applicable to the Assigned Drug Programs or Assigned Products or the Respondents have obtained or reasonably could obtain access to facts that are relevant to the Arbitration, but have not disclosed them to the Claimant (without regard to any confidentiality obligation or other restriction on disclosure), then the allegations set forth in the Claim Notice shall be taken as true by the Arbitrator and Respondents shall have the burden of refuting such Claim by a preponderance of the evidence.
 
(l)            The Arbitrator(s) shall be entitled to award any legal and equitable remedies he, she or they deem appropriate in resolving any Claim, provided that no remedy shall violate or give rise to a right to terminate the GSK Agreements.
 
(m)          A party to a dispute liable to pay a damage remedy shall pay such amount within ten (10) business days after the ruling by the Arbitrator(s).  If any such party (other than the LLC) is liable to pay a damage remedy to another party, it shall pay such amount directly to the party entitled to receive such payment and not to the LLC as a capital contribution.  Theravance shall be required to pay on behalf of the Manager any damage remedy to which the Manager is found liable.
 
(n)           An Arbitration award, if any, (i) shall be the sole and exclusive remedy with respect to a Claim by a party to a dispute, and (ii) shall be final, non-appealable and binding on the parties to the dispute and may be entered as a judgment in any court of competent
 
50

 
jurisdiction as described more fully below.  The parties to this Agreement further agree that any claim, cause of action or proceeding relating to any arbitration sought, compelled or performed hereunder will be brought and pursued only in the U.S. District Court for the District of Delaware or, solely in the case that such federal court does not have jurisdiction, in any Delaware State court (collectively, the “ Delaware Courts ”).  The parties to this Agreement submit to the exclusive jurisdiction and venue of the Delaware Courts for such purposes, except that any confirmed arbitration award may be enforced in any court having jurisdiction over a party or, to the extent of any in rem action, any of its assets.  The parties to this Agreement further irrevocably waive any objection to the laying of the venue of any such proceeding in the Delaware Courts, any claim that any such proceeding has been brought in an inconvenient or inappropriate forum and any right to a jury trial with regard to any such proceeding.  The relationship between the parties to any dispute arising under this Agreement shall be deemed commercial in nature, and the Claim shall be deemed commercial.
 
(o)           The parties to this Agreement agree that, subject to any non-waivable disclosure obligations under applicable law, the Arbitration, and all matters relating thereto or arising thereunder, including, without limitation, the existence of any Claim, the proceeding and all of its elements (including any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, any third-party discovery proceedings, including any discovery obtained pursuant thereto, and any decision of the Arbitrator(s) or award), shall be kept strictly confidential, and each party hereby agrees that such information shall not be disclosed beyond:  (i) the Arbitrator(s); (ii) the participants in the Arbitration and their respective legal counsel; (iii) those agents assisting the Parties in the preparation or presentation of the Arbitration; provided such agents are contractually or legally required to preserve the confidentiality of such information as contemplated by this Agreement; (iv) other employees or agents of the Parties with a need to know such information who are contractually required to preserve the confidentiality of such information as contemplated by this Agreement.  The parties to this Agreement further agree that they will, to the fullest extent permitted by law, file under seal any claim, cause of action or proceeding relating to any arbitration sought, compelled or performed hereunder or any arbitration ruling or award issued.  Disclosure under this Section 15.10, including any authorized disclosure by the disclosing party, does not relieve the receiving party of its obligations of confidentiality generally under this Agreement.  In no event will the receiving party or its officers, directors, employees, attorneys, accountants, financial advisors, contractors or agents oppose an action by the disclosing party to obtain a protective order, order sealing documents, or other relief requiring that confidential information to be disclosed shall be treated confidentially in connection with any claim, action or proceeding.
 
(p)           Each party to a dispute shall pay its own costs and expenses in any Arbitration, except that the Arbitrator(s) at his, her or their sole discretion may require the non-prevailing party to the Arbitration to pay the costs and expenses of the prevailing party.
 
15.11      Entire Agreement.  This Agreement, the Exhibits and Attachments hereto, and the portions of the Master Agreement that relate to the LLC (collectively, the “Entire Agreements”) constitute the entire agreement among the parties with respect to the subject matter herein.  The Entire Agreements replace and supersede all prior agreements by and among the Members or any of them with respect to the subject matter herein.  The Entire Agreements supersede all prior written and oral statements with respect to the subject matter herein; and no
 
51

 
representation, statement, condition or warranty not contained in the Entire Agreements with respect to the subject matter herein will be binding on the Members or the LLC or have any force or effect whatsoever.
 
15.12      Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  For the avoidance of doubt, affirmation or signature of this Agreement or Unit purchase or issuance agreement by electronic means (an “ Electronic Signature ”) shall, to the extent permitted by law, constitute the execution and delivery of a counterpart of this Agreement or a Unit purchase or issuance agreement by or on behalf of such Person intending to be bound by the terms of this Agreement.  The parties hereto agree that this Agreement, each Unit purchase or issuance agreement and any additional information incidental thereto may be maintained as electronic records.  Any Person providing an Electronic Signature further agrees to take any and all additional actions, if any, evidencing their intent to be bound by the terms of this Agreement, as may be reasonably requested by the Manager.
 
15.13      No State-law Partnership. The Members intend that the LLC not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes other than for U.S. federal income tax purposes as set forth in Section 15.14, and neither this Agreement nor any other document entered into by the LLC or any Member relating to the subject matter hereof shall be construed to suggest otherwise.
 
15.14      Tax Classification. It is the intent of the Members that, prior to any conversion of the LLC to a corporate legal entity in compliance with the provisions of this Agreement, the LLC shall always be operated in a manner consistent with its treatment as a “partnership” for federal, state and local income and franchise tax purposes at all times that it has two (2) or more Members and as a disregarded entity for federal, state and local income and franchise tax purposes at all times that it has one (1) Member.  In accordance therewith, (a) no Member or Manager shall file any election with any taxing authority to have the LLC treated otherwise, and (b) each Member and Manager hereby represents, covenants, and warrants that it shall not maintain a position inconsistent with such treatment.  The Members and Manager agree that at all times that the LLC has two (2) or more Members, except as otherwise required by applicable law, they (i) will not cause or permit the LLC to elect (A) to be excluded from the provisions of Subchapter K of the Code, or (B) to be treated as a corporation or an association taxable as a corporation for any tax purposes; (ii) will cause the LLC to make any election reasonably determined by the Tax Matters Member to be necessary or appropriate in order to ensure the treatment of the LLC as a partnership for all tax purposes; (iii) will cause the LLC to file any required tax returns in a manner consistent with its treatment as a partnership for tax purposes; and (iv) have not taken, and will not take, any action that would be inconsistent with the treatment of the LLC as a partnership for such purposes.
 
15.15      Severability.  If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any present or future laws applicable to the LLC effective during the term of this Agreement, or in conflict with or prohibited by Section 3.12: (i) such provision will be fully severable; (ii) this Agreement will be construed and enforced as if such illegal, invalid, unenforceable or conflicting provision had never comprised a part of this Agreement and to give
 
52

 
effect to Section 3.12 to the maximum extent possible to reflect the intention of the parties; and (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid, unenforceable or conflicting provision or by its severance from this Agreement.
 
15.16      No Third Party Beneficiary. This Agreement is made solely and specifically among and for the benefit of the parties hereto and their respective successors and permitted assigns, and no other Person will have any rights, interest, or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise.  Notwithstanding the foregoing, any Person that is entitled to be indemnified by the LLC pursuant to Section 13.1 shall be entitled to enforce its right to indemnification therein.
 
15.17      Interpretation.  The titles and section headings set forth in this Agreement are for convenience only and shall not be considered as part of agreement of the parties.  When the context requires, the plural shall include the singular and the singular the plural, and any gender shall include all other genders.  The parties intend that no provision of this Agreement shall be interpreted or construed against any party because such party or its counsel was the drafter thereof.
 
15.18      Aggregation of Units.  All Units held or acquired by Affiliates of Members shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
 
53

 
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.
 
 	MEMBERS:	

 	THERAVANCE, INC.	

 	By:	 	
 	 	 	
 	Name:	 	
 	 	 	
 	Title:	 	

 	THERAVANCE BIOPHARMA, INC.	

 	By:	 	
 	 	 	
 	Name:	 	
 	 	 	
 	Title:	 	

 	MANAGER:	

 	THERAVANCE, INC.	

 	By:	 	
 	 	 	
 	Name:	 	
 	 	 	
 	Title:	 	

SIGNATURE PAGE TO THERAVANCE RESPIRATORY COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT

 
 	LLC:	

 	THERAVANCE RESPIRATORY COMPANY, LLC	

 	By:	 	
 	 	 	
 	Name:	 	
 	 	 	
 	Title:	 	

SIGNATURE PAGE TO THERAVANCE RESPIRATORY COMPANY, LLC
LIMITED LIABILITY COMPANY AGREEMENT

 
EXHIBIT A
 
MEMBERS; UNITS
 
Class A Members	 	Number of Class A Units	 	
Theravance, Inc.
901 Gateway Boulevard
South San Francisco, CA 94080	 	750	 	
 	 	 	 	
Total Class A Units	 	750	 	
 
Class B Members(1)	 	Number of Class B Units(1)	 	
Theravance Biopharma, Inc.
Ugland House, South Church Street
George Town
Grand Cayman, Cayman Islands	 	2,125	 	
 	 	 	 	
Total Class B Units	 	2,125	 	
 
Class C Members(1)	 	Number of Class C Units(1)	 	
Theravance, Inc.
901 Gateway Boulevard
South San Francisco, CA 94080	 	750	 	
 	 	 	 	
Theravance Biopharma, Inc.
Ugland House, South Church Street
George Town
Grand Cayman, Cayman Islands	 	6,375	 	
 	 	 	 	
Total Class C Units	 	7,125	 	
 	 	 	 	
TOTAL UNITS	 	10,000	 	

(1)  After giving effect to the Theravance Biopharma Transfer.
 
A-1

 
EXHIBIT B
 
MANAGER; OFFICERS; TAX MATTERS MEMBER
 
Manager:
 
Theravance, Inc.
 
Officers:
Rick E. Winningham, Chief Executive Officer and President
Michael W. Aguiar, Chief Financial Officer, Treasurer and Secretary
 
Tax Matters Member:
Theravance, Inc.
 
B-1

 
EXHIBIT C
 
ASSIGNED RIGHTS AND BENEFITS AND ASSUMED LIABILITIES
 
The Assignment of rights and benefits of Theravance under the Collaboration Agreement relating to Assigned Collaboration Products and the Assumption of Liabilities of Theravance under the Collaboration Agreement relating to Assigned Collaboration Products shall include, without limitation, the following rights, benefits and Liabilities (capitalized terms not otherwise defined shall have the meaning given them in the Collaboration Agreement):
 
1.                                     The obligation of the LLC pursuant to Section 2.1 of the Collaboration Agreement to license to GSK any Theravance Patents, Theravance Know-How and Theravance’s rights in the Joint Inventions to the extent such any such assets are included in the Assigned Assets assigned to the LLC pursuant to this Agreement.
 
2.                                     The right to grant the prior written consent to any sublicense or subcontract relating to the development or manufacture of any Assigned Collaboration Product pursuant to Section 2.2 of the Collaboration Agreement, and to require GSK to secure all appropriate covenants, obligations and rights from any such sublicensee or subcontractor relating to such sublicense or subcontract.
 
3.                                     The right to enforce the obligations of GSK with respect to trademark and housemarks under Section 2.3 of the Collaboration Agreement to the extent such obligations relate to any Assigned Collaboration Product and the obligation to perform the obligations of Theravance under Section 2.3 of the Collaboration Agreement to the extent relating to the Assignment Collaboration Products.  For the avoidance of doubt, the LLC shall own all Theravance Inventions invented after the Contribution Date that relate primarily to the Assigned Collaboration Products and shall have a non-exclusive license to all Joint Inventions invented after the Contribution Date to the extent useful in the development and commercialization of the Assigned Collaboration Products.
 
4.                                     The right to enforce GSK’s obligations to use Diligent Efforts, as modified pursuant to Section 3.1 of the Collaboration Amendment Agreement (as defined in the Agreement), to the extent relating to any Assigned Collaboration Product.
 
5.                                     The right to require GSK to bear costs and expenses pursuant to Section 4.2.2 of the Collaboration Agreement to the extent such costs and expenses relate to Assigned Collaboration Products.
 
6.                                     The right to receive update reports pursuant to Section 4.2.3(c) of the Collaboration Agreement to the extent such reports relate to Assigned Collaboration Products.
 
7.                                     The right to enforce GSK’s obligations pursuant to Section 4.2.4 to the extent relating to the Development of Assigned Collaboration Products.
 
C-1

 
8.                                     The right to enforce GSK’s obligations pursuant to Section 4.5.2. of the Collaboration Agreement to the extent relating to any GSK Discontinued Compound to the extent such compound is an Assigned Collaboration Product.
 
9.                                     The right to receive a Theravance Discontinued Compound that is reverted pursuant to Section 4.5.3 of the Collaboration Agreement to the extent such compound is an Assigned Collaboration Product,  provided  that the LLC shall comply with the obligations with respect to such reverted compound set for in such section.
 
10.                              The right to enforce GSK’s obligations pursuant to, and the obligation to comply with Section 4.5.4 of the Collaboration Agreement to the extent there is an Assigned Collaboration Product being Developed under the Collaboration Agreement.
 
11.                              The right to require GSK to Commercialize Assigned Collaboration Products pursuant to Article 5 of the Collaboration Agreement, including the right to enforce GSK’s obligation to bears costs and expenses pursuant to Section 5.3.1 of the Collaboration Agreement to the extent related to Assigned Collaboration Products and to receive any reports relating thereto pursuant to Article 5, as modified by the Collaboration Amendment Agreement.
 
12.                              The obligation to comply with Section 5.3.3 to the extent it applies to Assigned Collaboration Products.
 
13.                              The right to receive all milestone payments payable by GSK pursuant to Section 6.2 of the Collaboration Agreement relating to Assigned Collaboration Products.
 
14.                              The obligation to make all milestone payments payable pursuant to Section 6.2.3 of the Collaboration Agreement relating to Assigned Collaboration Products.
 
15.                              The right to receive and the obligation to deliver notices of Development Milestones pursuant to Section 6.2.4 of the Collaboration Agreement relating to Assigned Collaboration Products.
 
16.                              The right to receive all royalties payable by GSK pursuant to Section 6.3 of the Collaboration Agreement relating to Assigned Collaboration Products.
 
17.                              The right to enforce the obligations of GSK pursuant to Section 6.4 through 6.10 of the Collaboration Agreement with respect to royalties payable by GSK relating to Assigned Collaboration Products.
 
18.                              The right to enforce the obligations of GSK, and the obligation to perform the obligations of Theravance, pursuant to Article 7 of the Collaboration Agreement with respect to promotional materials and samples relating to the Assigned Collaboration Products.
 
19.                              The right to enforce the obligations of GSK, and the obligation to perform the obligations of Theravance, pursuant to Article 8 of the Collaboration Agreement with respect to regulatory matters relating to the Assigned Collaboration Products.
 
C-2

 
20.                              The right to enforce the obligations of GSK pursuant to Article 9 of the Collaboration Agreement with respect to orders, supply and returns relating to the Assigned Collaboration Products.
 
21.                              The right to enforce the obligations of GSK pursuant to Article 10 of the Collaboration Agreement to the extent applicable to the Assigned Collaboration Products, and the obligation to comply with the confidentiality and use restrictions applicable to Confidential Information in Section 10.1 of the Collaboration Agreement (including Section 10.5 thereof) to the extent relating to Confidential Information received by the LLC, subject to the permitted disclosure and use restriction set forth in Section 10.2 of the Collaboration Agreement.
 
22.                              The obligation to comply with the restrictions on publications and public announcements in Sections 10.3 and 10.4 of the Collaboration Agreement, respectively, to the extent relating to Confidential Information received by the LLC.
 
23.                              The obligation to comply with Section 11.4 of the Collaboration Agreement and the right to enforce the obligations of GSK pursuant to Section 11.4 of the Collaboration Agreement, in each case to the extent applicable to the rights and obligations under the Collaboration Agreement assigned to the LLC pursuant to Section 4.1(a)(ii) hereof.
 
24.                              The right to be indemnified by GSK pursuant to Section 12.1 of the Collaboration Agreement, subject to the limitations and conditions contained therein, relating to the rights and benefits assigned to it pursuant to Section 4.1(a)(ii) hereof.
 
25.                              The obligation to indemnify GSK and others pursuant to Section 12.2 of the Collaboration Agreement, subject to the limitations and conditions contained therein, for Losses relating to the Liabilities assumed by the LLC pursuant to the first sentence of Section 4.1(c)(ii) hereof.
 
26.                              The obligations pursuant to Section 13.1.1 of the Collaboration Agreement to prosecute and maintain Theravance Patents and related applications to the extent they primarily relate to the Assigned Collaboration Products and the right to enforce GSK’s obligations to pay out-of-pocket costs and expenses pursuant to such section.
 
27.                              The right to enforce the obligations of GSK, and perform the obligations of Theravance, pursuant to Section 13.1.2 of the Collaboration Agreement to prosecute and maintain Patents covering Joint Inventions, to the extent primarily related to an Assigned Collaboration Products.
 
28.                              The right to enforce the obligations of GSK pursuant to Section 13.1.3 of the Collaboration Agreement to prosecute and maintain GSK Patents and related applications to the extent primarily related to an Assigned Collaboration Product.
 
29.                              The right to (i) exercise the step-in rights pursuant to Section 13.1.5 of the Collaboration Agreement, to the extent such GSK Patents or claims primarily relate to an Assigned Collaboration Product, and (ii) require GSK to perform, and the obligation to perform,
 
C-3

 
the rights and obligations of the Parties set forth in Sections 13.1.6 and 13.1.7, to the extent they relate to the Assigned Collaboration Products.
 
30.                              The obligation to assist and cooperate, and the right to require GSK to assist or cooperate, with respect to Patent Infringement Claims pursuant to Section 13.2.1 of the Collaboration Agreement to the extent such claims primarily relate to an Assigned Collaboration Product.
 
31.                              The rights to defend the infringement of a Theravance Patents pursuant to Section 13.2.2 of the Collaboration Agreement to the extent primarily relate to an Assigned Collaboration Product.
 
32.                              The right to join GSK as a party-plaintiff in an infringement action pursuant to Section 13.2.3 of the Collaboration Agreement to the extent that such action primarily relates to an Assigned Collaboration Product.
 
33.                              The right to receive, and the obligation to give, a Hatch-Waxman Certification under Section 13.3 of the Collaboration Agreement to the extent the GSK Patent or Theravance Patent which is the subject of such notice primarily relates to an Assigned Collaboration Product.
 
34.                              The right to receive and the obligation to give assistance pursuant to Section 13.4 of the Collaboration `Agreement with respect to a legal action covered by Article 13 of the Collaboration Agreement to the extent such legal action primarily relates to an Assigned Collaboration Product.
 
35.                              The right and obligation to give written consent with respect to a suit pursuant to Section 13.5 of the Collaboration Agreement to the extent such suit primarily relates to an Assigned Collaboration Product.
 
36.                              The right to terminate the Agreement pursuant to Section 14.2 of the Collaboration Agreement if GSK materially breaches or defaults in the performance of any obligations under the Collaboration Agreement, subject to the cure rights specified therein, if such breach or default relates to an Assigned Collaboration Product.
 
37.                              The right to dispute GSK’s termination of a Terminated Development Collaboration Product pursuant to Section 14.3 of the Collaboration Agreement, if such product is an Assigned Collaboration Product.
 
38.                              The right to dispute GSK’s termination of a Terminated Commercialized Collaboration Product pursuant to Section 14.4 of the Collaboration Agreement, if such product is an Assigned Collaboration Product.
 
39.                             Upon termination of the Collaboration Agreement to which Section 14.6.1(a) of the Collaboration Agreement applies, the obligation to transfer data and materials related to specified Collaboration Products to the extent such products are Assigned Collaboration Products.
 
C-4

 
40.                              Upon termination of the Collaboration Agreement to which Section 14.6.1(b) of the Collaboration Agreement applies, the right to receive (i) data and materials related to Theravance Compounds, (ii) regulatory filings, (iii) access rights, and (iv) rights to bring an action against GSK, in each case to the extent such compounds are Assigned Collaboration Products.
 
41.                              Upon termination of the Collaboration Agreement to which Section 14.6.2 of the Collaboration Agreement applies, if the Collaboration Product terminated after initiation of the first Phase III Study with respect to such product is an Assigned Collaboration Product, the rights set forth in Sections 14.6.2(a) through (d) thereof, subject to Section 14.6.2(e) thereof.
 
42.                              Upon termination of the Collaboration Agreement to which Section 14.6.3 of the Collaboration Agreement applies, if the Terminated Commercialized Collaboration Product is an Assigned Collaboration Product, the rights set forth in Sections 14.6.3(a) through (d) and (f) thereof, subject to Sections 14.6.3(e) thereof.
 
43.                              Upon termination of the Collaboration Agreement to which Section 14.6.4 of the Collaboration Agreement applies, the right receive the (i) materials, (ii) regulatory filings, (iii) license filings and (iv) stock, as specified therein, and the right to limit further Development work by GSK, as specified therein, in each case to the extent such rights relate to an Assigned Collaboration Product.
 
44.                              The right to receive royalties payable by GSK pursuant to Section 14.9, and the obligation to pay royalties to GSK after termination of the Collaboration Agreement pursuant to Section 14.9 thereof to the extent that the product giving rise to such payment obligation is developed and commercialized by the LLC.
 
C-5

Exhibit 10.25
 
EXTENSION AGREEMENT
 
This Extension Agreement (the “Agreement”) is entered into on March 3, 2014 between Theravance Biopharma, Inc., a Cayman Islands exempted company (“Theravance Biopharma”), and Glaxo Group Limited, a private company limited by shares registered under the laws of England and Wales (“GSK”).
 
WHEREAS, Theravance, Inc., a Delaware corporation (“Theravance”), and GSK are parties to (i) the Collaboration Agreement entered into as of November 14, 2002, as amended on April 11, 2006 and on the date hereof (the “Collaboration Agreement”); and (ii) the Strategic Alliance Agreement entered into as of March 30, 2004, as amended on September 13, 2004, February 11, 2005, February 8, 2006, February 27, 2006, February 27, 2009, June 22, 2009, July 16, 2010, October 3, 2011 and on the date hereof (the “Strategic Alliance Agreement”).
 
WHEREAS, Theravance intends to spin-off Theravance Biopharma as a separate, publicly traded company through a pro rata dividend of Theravance Biopharma ordinary shares to Theravance stockholders, as more fully described in the preliminary Form 10 Registration Statement filed by Theravance Biopharma with the United States Securities and Exchange Commission, as will be amended to reflect the Spin-Off Documents (the “Spin-Off”); and
 
WHEREAS, the Spin-Off contemplates an assignment by Theravance to Theravance Respiratory Company, LLC, an Affiliate of Theravance (“TRC”), of (i) the Strategic Alliance Agreement and (ii) specified portions of the Collaboration Agreement; and
 
WHEREAS, Theravance Biopharma will have an economic interest in certain respiratory programs Developed and Commercialized under the Collaboration Agreement and the Strategic Alliance Agreement as provided in the TRC Limited Liability Company Agreement (the “TRC LLC Agreement”); and
 
WHEREAS, following the Spin-off, GSK and Theravance Biopharma desire and intend for Theravance Biopharma to be bound by certain provisions of the Collaboration Agreement and Strategic Alliance Agreement as if party thereto.
 
NOW THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements contained herein, Theravance Biopharma and GSK, intending to be legally bound, hereby agree as follows:
 
1.                           Effective Date and Expiration Date.  This Agreement will become effective simultaneously with the Spin-Off, provided the Spin-Off occurs on or before June 30, 2014.  If the Spin-Off does not occur on or prior to June 30, 2014, this Agreement will terminate and be of no effect whatsoever.
 
2.                           Definitions.  Capitalized terms used herein but not defined shall have the meaning given them in the Collaboration Agreement or the Strategic Alliance Agreement, as applicable.
 
1

 
3.                           Extension to Theravance Biopharma of Restrictions on Certain Clinical Development Activities.
 
3.1                Collaboration Agreement.
 
3.1.1        For so long as there is at least one Collaboration Product being Developed or Commercialized under the Collaboration Agreement in which Theravance Biopharma has an economic interest pursuant to the TRC LLC Agreement, Theravance Biopharma shall not carry out clinical Development inside the Field with any Long Acting B2 Adrenoceptor Agonist that is not a Pooled Compound under the Collaboration Agreement; provided, however, that this restriction shall not apply to any compound or product (including new product line extensions and/or re-formulation work) where the original compound or product was, as of the date of signature of the Collaboration Agreement, already Commercialized.
 
3.1.2        For the avoidance of doubt, any license by Theravance Biopharma of its LAMA compound known as TD-4208 to a third party that chooses to combine TD-4208 with a LABA compound will be permitted provided that Theravance Biopharma does not direct the development or commercialization efforts of such third party or disclose any GSK Confidential Information to such third party.
 
3.2                Strategic Alliance Agreement
 
3.2.1        For so long as: (i) the Supplemental MABA Alliance Products have not been returned to Theravance or to TRC pursuant to Section 14.5.2(b) of the Strategic Alliance Agreement and (ii) the compound known as batefenterol (also known as GSK961081) or any Supplemental MABA Alliance Product in which Theravance Biopharma has an economic interest pursuant to the TRC LLC Agreement remains in active Development, Theravance Biopharma will not, whether alone or with a Third Party, conduct a clinical study with respect to a MABA compound (or a product containing a MABA compound) outside of the Strategic Alliance Agreement.
 
3.2.2        For the avoidance of doubt, any license by Theravance Biopharma of a non-MABA compound to a third party that chooses to combine the compound with a MABA compound will be permitted provided that Theravance Biopharma does not direct the development or commercialization efforts of such third party or disclose any GSK Confidential Information to such third party.
 
4.                           Extension/Modification of Subsequent Royalties Provision.  Theravance Biopharma hereby agrees to be bound by Section 14.9 of the Collaboration Agreement (“Section 14.9”) as fully as if it were Theravance.  GSK acknowledges and confirms that pursuant to Section 6 of the Collaboration Agreement Amendment that in the event that GSK is obligated to make any royalty payments under Section 14.9 of the Collaboration Agreement, it will make those payments directly to Theravance
 
2

 
Biopharma (and not to Theravance) in accordance with the terms of the Collaboration Agreement.
 
5.                           Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.  References in this Agreement to other agreements or documents shall refer to such agreements or documents as they may be amended.  This Agreement may be altered, amended or changed only in writing and by making specific reference to this Agreement and signed by duly authorized representatives of GSK and Theravance Biopharma.
 
6.                           Alternative Dispute Resolution.  Any dispute arising out of or relating to this Agreement, or the breach, termination or validity thereof (a “Dispute”), shall be finally resolved pursuant to the following provision:
 
(i)                          Negotiation. In the event a Dispute arises, the Parties agree that they shall attempt in good faith to resolve the Dispute by referring it to GSK’s Chief Executive Officer, on the one hand, and Theravance Biopharma’s Chief Executive Officer, on the other hand (or their respective designee with power and authority to resolve such dispute) (the “Senior Officers”).  Either Party may refer a Dispute to the Senior Officers.  If the Parties are unable for any reason to resolve a Dispute within fifteen (15) days of referring such dispute to the Senior Officers, the Dispute will be finally resolved by arbitration pursuant to clause (ii) below.
 
(ii)                       Arbitration.  The Parties agree that any legal proceeding to enforce or interpret any provision of this Agreement shall be conducted through binding arbitration (“Arbitration”).  Either Party can initiate Arbitration on thirty (30) days written notice to the other Party.  The Arbitration shall be conducted pursuant to the American Arbitration Association’s (“AAA”) Commercial Arbitration Rules (the “Rules”) then in effect, except that notwithstanding the Rules, the following provisions shall apply to the Arbitration hereunder.
 
a.             Panel.  The Arbitration shall be conducted by a panel of three (3) arbitrators (the “Arbitration Panel”) in New York, New York.  The Arbitration Panel shall consist of one arbitrator selected by each of the Parties from a pool of arbitrators to be presented to the Parties by the AAA.  The Parties shall make their selection within thirty (30) days of the commencement of the arbitration.  Each of these two arbitrators shall have expertise in pharmaceutical product Development and Commercialization.  Within thirty (30) days of appointment, these two arbitrators shall jointly select the chairman from a pool of arbitrators to be presented to the Parties by the AAA.
 
b.             Process.  The time periods set forth in the Rules shall be followed, unless a Party can demonstrate to the Arbitration Panel that the urgency of the dispute or other reasons warrant contraction of one or more of the timetables.  For good cause shown, the Arbitration Panel may contract
 
3

 
such timetables. Interpretation of and enforcement of this Section shall be governed by the Federal Arbitration Act. The fees of the Arbitration Panel and the AAA shall be paid by the losing Party, which shall be designated by the Arbitration Panel or in such proportions as may be designed by the Arbitration Panel where a Party does not prevail with respect to all issues.
 
c.              Confidentiality.  The Arbitration proceeding shall be confidential and the Arbitration Panel shall issue appropriate protective orders to safeguard each Party’s Confidential Information.  Except as required by Law, no Party shall make (or instruct the Arbitration Panel to make) any public announcement with respect to the proceedings or decision of the Arbitration Panel without prior written consent of each other Party.  The existence of a dispute submitted to Arbitration, and the outcome, shall be kept in confidence by Arbitration Panel and the Parties, their affiliates, their counsel, insurers and re-insurers, accountants and auditors, and any person necessary to the conduct of the proceeding. The confidentiality obligations shall not apply if (i) disclosure is required by law or (ii) to the extent necessary to enforce the rights arising out of the award.
 
d.             Findings of Arbitration Panel.  The decision of the Arbitration Panel will be final and binding on the Parties; provided that either Party shall retain all rights to bring an action against the other for damages and other monetary relief related to or arising out of the issue decided by the Arbitration Panel.  Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party.
 
(iii)                    Injunctive Relief.  Notwithstanding the foregoing, any Party has the right to apply to any court of competent jurisdiction for interim relief necessary to preserve the Party’s rights until the arbitrators are appointed.  After appointment of the arbitrators, the arbitrators shall have the exclusive jurisdiction to consider applications for interim relief.
 
7.                           Governing Law.  Except as provided otherwise herein, this Agreement shall be construed, and the respective rights of the Parties determined, according to the substantive law of the State of Delaware notwithstanding the provisions governing conflict of laws under such Delaware law to the contrary.
 
8.                           Severability.  In the event of the invalidity of any provisions of this Agreement or if this Agreement contains any gaps, the Parties agree that such invalidity or gap shall not affect the validity of the remaining provisions of this Agreement.  The Parties will replace an invalid provision or fill any gap with valid provisions which most closely approximate the purpose and economic effect of the invalid provision or, in case of a gap, the parties’ presumed intentions.  In the event that the terms and conditions of this Agreement are materially altered as a result of the preceding sentences, the Parties shall renegotiate the terms and conditions of this Agreement in order to resolve any inequities.  Nothing in this Agreement shall be interpreted so as to require any Party to violate any applicable laws, rules or regulations.
 
4

 
9.                           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
 
10.                    No Third Party Beneficiaries.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party, including without limitation any creditor of either Party hereto. No such Third Party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party hereto.
 
5

 
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the date first written above.

THERAVANCE BIOPHARMA, INC.	 	
 	 	
By:	/s/ Rick E Winningham	 	
 	 	
Name: Rick E Winningham	 	
 	 	
Title: Chief Executive Officer	 	

GLAXO GROUP LIMITED	 	
 	 	
By:	/s/ Paul Williamson	 	
 	 	
Name:	Paul Williamson	 	
 	 	
Title:	Authorized Signatory
For and on behalf of
Edinburgh Pharmaceutical Industries Limited
Corporate Director	 	

[SIGNATURE PAGE TO EXTENSION AGREEMENT]

Exhibit 10.26
 
GOVERNANCE AGREEMENT
 
This GOVERNANCE AGREEMENT (this “Agreement”) is dated as of March 3, 2014 among Glaxo Group Limited, a limited liability company organized under the laws of England and Wales (“GSK”), Theravance Biopharma, Inc., a Cayman Islands exempted company (the “Company” and with GSK, each a “Party”), provided that this Agreement shall only become effective upon the Effective Date (as defined below).
 
WHEREAS, the Company is a wholly-owned subsidiary of Theravance, Inc., a Delaware corporation (“Parent”), and Parent plans to distribute via a pro rata stock dividend to holders of Parent common stock all of the outstanding Ordinary Shares of the Company (the “Spin-Off”);
 
WHEREAS, GSK, GlaxoSmithKline plc, SmithKline Beecham Corporation and Parent are parties to that certain Amended and Restated Governance Agreement, dated as of June 4, 2004, as amended (the “Parent Governance Agreement”) that provides, among other matters, for certain terms and conditions concerning the acquisition, disposition and voting of securities of Parent beneficially owned by GSK and its Affiliates (as defined herein);
 
WHEREAS, GSK holds shares of the common stock of Parent and will receive Ordinary Shares of the Company upon the Spin-Off; and
 
WHEREAS, the Parties desire to agree on terms and conditions concerning the acquisition, disposition and voting of securities of the Company beneficially owned by GSK and its Affiliates following the Spin-Off.
 
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements contained herein, each Party hereto hereby agrees as follows:
 
ARTICLE I
 
CONSOLIDATION MATTERS
 
SECTION 1.1.                                         Consolidation with GSK.  At such time as GSK or any parent entity of GSK is required by applicable accounting standards to include the Company’s results in the consolidated financial results for GSK or such parent entity, the Company (i) shall provide such information based on or derived from the Company’s U.S. GAAP financial reporting and (ii) shall provide such additional information and take such steps that are reasonably requested by GSK to comply with applicable law or to prepare its consolidated financial statements on such time schedule as GSK may reasonably request for purposes of preparation of GSK’s or such parent entity’s consolidated financial results; provided, however, that GSK or any of its affiliates shall be required to pay all incremental documented expenses (personnel or otherwise) arising out of the Company’s obligations pursuant to subsection (ii) of this Section 1.1.  The Company shall take all such steps necessary in order to comply with its obligations (if any) under the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto.

 
ARTICLE II
 
LIMITATIONS RELATING TO COMPANY EQUITY SECURITIES
 
SECTION 2.1.                                         Acquisition of Company Equity Securities.
 
(a)                                Acquisition of Equity Securities.  Except as contemplated by this Agreement, as permitted by Section 2.1(b), (c) or (d), as contemplated by Section 13 of the March 3, 2014 Master Agreement by and among the Company, GSK and Parent, or as otherwise agreed in writing by the Company (following approval of a majority of the Independent Directors), GSK and its Affiliates will not (and will not assist or encourage others to) directly or indirectly in any manner:
 
(i)                                    acquire, or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, gift or otherwise, any direct or indirect beneficial ownership (within the meaning of Rule l3d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or interest in any securities or direct or indirect rights, warrants or options to acquire, or securities convertible into or exchangeable for, any Equity Securities;
 
(ii)                                 make, or in any way participate in, directly or indirectly, alone or in concert with others, any “solicitation” of “proxies” to vote (as such terms are used in the proxy rules of the Securities and Exchange Commission (the “SEC”) promulgated pursuant to Section 14 of the Exchange Act); provided, however, that the prohibition in this Section 2.1(a)(ii) shall not apply to solicitations exempted from the proxy solicitation rules by Rule 14a-2 under the Exchange Act or any successor provision;
 
(iii)                              form, join or in any way participate in a “group” within the meaning of Section 13(d)(3) of the Exchange Act with any person not bound by the terms of this Agreement (other than persons deemed to be a member of such group solely by virtue of being an Affiliate of GSK) with respect to any Voting Shares;
 
(iv)                             acquire or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, exchange or otherwise, (A) any of the assets, tangible or intangible, of the Company or (B) direct or indirect rights, warrants or options to acquire any assets of the Company, except for such assets as are then being offered for sale by the Company;
 
(v)                                enter into any arrangement or understanding with others to do any of the actions restricted or prohibited under Sections 2.1 (a) (i), (ii), (iii) or (iv); or
 
(vi)                             otherwise act in concert with others, to seek to offer to the Company or any of its shareholders any business combination, restructuring, recapitalization or similar transaction to or with the Company or otherwise seek in concert with others, to control, change or influence the management, board of directors or policies of the Company or nominate any person as a director of the Company who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the shareholders of the Company.
 
2

 
(b)                                Exceptions for Certain Acquisitions of Equity Securities of the Company.  Nothing herein shall prevent GSK or its Affiliates (or in the case of Section 2.1(b)(iii), their employees) from:
 
(i)                                    purchasing additional Equity Securities of the Company after the Effective Date to maintain GSK’s Percentage Interest in accordance with Section 2.1(d) hereof;
 
(ii)                                 acquiring securities of the Company issued in connection with stock splits or recapitalizations;
 
(iii)                              purchasing Equity Securities of the Company for (A) a pension plan established for the benefit of GSK’s employees, (B) any employee benefit plan of GSK, (C) any stock portfolios not controlled by GSK or any of its Affiliates that invest in the Company among other companies, or (D) any account of a GSK employee in such employee’s personal capacity;
 
(iv)                             acquiring securities of another biotechnology or pharmaceutical company that beneficially owns any of the Equity Securities, provided that any Equity Securities so acquired shall be subject to the provisions of Sections 2.1(a), 2.2 and 2.3 of this Agreement on the same basis as the shares received upon the Spin-Off;
 
(v)                                in the event that GSK’s Percentage Interest is 50.1% or greater at any time, GSK and/or its Affiliates may make an offer that does not include any condition as to financing to the Company’s shareholders to merge the Company or otherwise to acquire outstanding Voting Shares that would bring GSK’s Percentage Interest to 100%, provided that such offer is approved by a majority of the Independent Directors and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Shares not owned by GSK or any of its Affiliates shall have accepted the offer by tendering such shares or voting such shares in favor thereof; or
 
(vi)                             GSK and/or its Affiliates may make an offer that does not include any condition as to financing to the Company’s shareholders to acquire outstanding Voting Shares that would bring GSK’s Percentage Interest to no greater than 60%, provided that such offer is approved by a majority of the Independent Directors and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Shares not owned by GSK or any of its Affiliates shall have accepted the offer by tendering such shares in the offer; provided, further, that, any Equity Securities so acquired shall be subject to the provisions of Sections 2.1(a), 2.2 and 2.3 of this Agreement.
 
(c)                                 Third Party Offers.  Nothing herein shall prevent GSK or its Affiliates from, in the event that (A) the Board formally acts to cause the Company to (i) enter into a written agreement pursuant to which a Change in Control transaction with a third party is provided for, (ii) amend the Rights Plan (as defined in Section 5.10) in order to render the Rights Plan inapplicable with respect to any specific third party or third parties, but not all third parties generally, or (iii) render inapplicable to any specific third party or third parties, but not all third parties generally, the restrictions contained in any anti-takeover provision applicable to the
 
3

 
Company under applicable law or under the organizational documents of the Company, if any, or (B) a person or group (within the meaning of 13(d)(3) of the Exchange Act but not including GSK or any of its Affiliates or any underwriter in connection with a public offering) (each, a “Third Party Acquiror”) acquires 20% or more of the then outstanding Voting Shares (a “Significant Third Party Acquisition”), making an offer to acquire, and acquiring, Equity Securities pursuant to the terms of GSK’s offer; provided that GSK’s offer must be an offer for 100% of the Voting Shares of the Company that does not include any condition as to financing and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Shares not owned by GSK or any of its Affiliates or by any such Third Party Acquiror (or its or their Affiliates) shall have accepted the offer by tendering such shares or voting such shares in favor of thereof.
 
(d)                                Exceptions for Acquisitions to Maintain GSK’s Percentage Interest.
 
(i)                                    In the event that the Company proposes to issue (an “Offering”) any Equity Securities (other than pursuant to exercise of options or vesting of restricted shares issued as compensation to directors, officers, employees or consultants of the Company or purchases under the Company’s Employee Stock Purchase Plan (“ESPP”)) the Company shall deliver to GSK at least fifteen (15) days prior to the issuance of such Equity Securities, a notice (the “Offer Notification”) stating (i) its bona fide intention to offer such Equity Securities, (ii) the number of such Equity Securities to be offered, and (iii) the price, or if relevant, the anticipated range of prices, and other terms upon which the Company proposes to offer such Equity Securities.  By written notification received by the Company prior to the issuance of Equity Securities described in the Offer Notification, GSK may elect to purchase in such Offering (or, if such purchase is not then permitted under applicable laws, rules or regulations, as soon thereafter as such purchase is so permitted), Equity Securities (the “First Offer Shares”) at the same price as the Equity Securities are sold to others in such Offering and up to such amount as required to maintain GSK’s Percentage Interest at the same level as immediately prior to such issuance.
 
(ii)                                 With respect to exercise of stock or share options, vesting of restricted stock or purchase of shares pursuant to the ESPP, on a quarterly basis, GSK shall be afforded the opportunity by the Company to purchase Ordinary Shares sufficient to maintain GSK’s Percentage Interest at the same level as prior to the exercises, vestings and purchases during such quarter.  The Company shall deliver to GSK as soon as reasonably practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal year, a schedule (the “Schedule”) setting forth the number of shares of Equity Securities issued upon exercise of options, the number of shares of restricted stock that have vested and the number of shares purchased pursuant to the ESPP during such quarter.  The Schedule shall also set forth the number of Ordinary Shares necessary for GSK to purchase to maintain its Percentage Interest pursuant to this Section 2.1(d)(ii) (the “Catch-up Shares”).  By written notification received by the Company within twenty (20) days after receipt of the Schedule, GSK may elect to purchase the Catch-up Shares from the Company.  GSK or its Affiliates shall acquire the Catch-up Shares either from the Company at the then Fair Market Value Per Share on the date of such notification or, at the discretion of the Company, via written notification to GSK, through open market purchases.
 
4

 
(e)                                 Rights Plan.  The Company may, subject to applicable law and the Board’s exercise of its fiduciary duties, implement a Rights Plan.  The Company shall take all necessary action to render inapplicable to GSK during the term of this Agreement any Rights Plan. As of immediately prior to the Spin-Off and from time to time thereafter the Company will, subject to applicable law, take all reasonable action that can be taken without shareholder approval to render inapplicable to GSK during the term of this Agreement any “fair price,” “merger moratorium,” “control share acquisition,” “business combinations with interested stockholders” or similar anti-takeover provision, in each case, that is or may become applicable to the Company under applicable law or under the organizational documents of the Company.
 
SECTION 2.2.                                         Disposition of Equity Securities.
 
(a)                                Prior to Six-Month Anniversary of Effective Date.  Prior to the date six months after the Effective Date, neither GSK nor any of its Affiliates shall dispose of beneficial ownership of any Voting Shares held by them without the prior approval of a majority of the Board, except:  (A) to any other Affiliate of GSK who agrees in writing to be bound hereunder; or (B) pursuant to a Change in Control transaction of the Company approved by a majority of the Board.
 
(b)                                Following the Six-Month Anniversary of the Effective Date.
 
(i)                                    Following the expiration of the prohibition on disposition of Voting Shares set forth in Section 2.2(a), if GSK or any of its Affiliates disposes of Voting Shares after that date, neither GSK nor any of its Affiliates may purchase any Voting Shares without the prior approval of a majority of Independent Directors for one year after the date of any such disposition.
 
(ii)                                 Neither GSK nor any of its Affiliates may make any public disclosure of any holdings of or disposition of beneficial ownership of the Voting Shares unless such disclosure is approved in advance in writing by the Company, such approval not to be unreasonably withheld or delayed.  Notwithstanding the foregoing, no consent of the Company shall be required for any filing that GSK or any of its Affiliates is required to make under applicable Law in any jurisdiction, including without limitation any Form 144 under the Securities Act, any Form 4 under the Exchange Act, or any Schedule 13D or 13G or any amendments thereto under the Exchange Act; provided that, prior to making any such filings, GSK shall use reasonable efforts to (A) provide the Company notice and a copy of such proposed filings and (B) consult with the Company on the content of such filings.
 
(iii)                              Notwithstanding the foregoing, GSK shall be permitted to dispose of beneficial ownership of any Voting Shares pursuant to a Change in Control transaction of the Company approved by a majority of Independent Directors.
 
(c)                                 Required Dispositions.  Notwithstanding anything to the contrary contained herein, GSK shall be permitted to dispose of beneficial ownership of Voting Shares as and to the extent (but only to the extent) GSK reasonably determines such disposition to be necessary in order for it to comply with its obligations under Section 3.1.
 
5

 
(d)                                Further Action.  Notwithstanding anything to the contrary contained in the Memorandum and Articles of Association of the Company (or any amendments thereto) in effect from time to time, the Company and the Board shall take all ministerial actions necessary to effect any disposition by GSK in accordance with this Agreement, including registering such disposition in the books and records of the Company.
 
SECTION 2.3.                                         Voting.
 
(a)                                Except as set forth in Sections 2.3(b) and 2.3(c), GSK shall ensure that all Voting Shares beneficially owned by GSK and/or any GSK Affiliate shall be voted on all matters, at the election of GSK, either (i) in accordance with the recommendation of the Independent Directors of the Board or (ii) in proportion to the votes cast by the other holders of the Company’s Voting Shares.
 
(b)                                So long as GSK’s Percentage Interest is less than 50.1%, GSK shall ensure that all Voting Shares beneficially owned by GSK and/or any GSK Affiliate is voted as set forth in Section 2.3(a),  unless  the matter being voted upon involves any of the following:
 
(i)                                    any proposal to issue Equity Securities to one or more parties in one transaction or a series of transactions that result in any person or group (within the meaning Section 13(d)(3) of the Exchange Act) other than GSK and its Affiliates owning or having the right to acquire or intent to acquire beneficial ownership of Equity Securities with aggregate voting power of greater than 20% or more of the aggregate voting power of all outstanding Equity Securities (for the avoidance of doubt, in no event shall any such proposed issuance covered by this clause (ii) include a sale of the Company’s securities in a public offering); or
 
(ii)                                 any Change in Control.
 
(c)                                 After, and so long as, GSK’s Percentage Interest is 50.1% or greater, GSK shall ensure that all Voting Shares beneficially owned by GSK and/or any GSK Affiliate is voted as set forth in this Section 2.3(a),  unless  the matter being voted upon involves any of the following:
 
(i)                                    any Change in Control;
 
(ii)                                 the acquisition by the Company of any business or assets that would constitute a substantial portion of the business or assets of the Company, whether such acquisition be by merger or consolidation or the purchase of stock or assets or otherwise;
 
(iii)                              the sale, lease, license, transfer or other disposal of all or a substantial portion of the business or assets of the Company; provided, however that the sale, license or transfer to another party, in the ordinary course of business, of any Company asset (regardless of its value or what portion of the Company’s business or assets it may represent) shall be considered an ordinary matter pursuant to which GSK must vote its shares in accordance with the recommendation of the Independent Directors of the Board; or
 
6

 
(iv)                             any proposal to issue Equity Securities to one or more parties in one transaction or a series of transactions that result in any person or group (within the meaning Section 13(d)(3) of the Exchange Act) other than GSK and its Affiliates owning or having the right to acquire or intent to acquire beneficial ownership of Equity Securities with aggregate voting power of greater than 20% or more of the aggregate voting power of all outstanding Equity Securities (for the avoidance of doubt, in no event shall any such proposed issuance covered by this clause (iv) include a sale of the Company’s securities in a public offering).
 
(d)                            Notwithstanding anything to the contrary herein, following a Significant Third Party Acquisition, GSK shall be entitled to vote its Voting Shares without any restrictions.
 
(e)                                 GSK hereby appoints the Board as its proxy and GSK hereby grants to the Board an irrevocable proxy to vote, or execute and deliver written consents or otherwise act with respect to all Voting Shares now owned or hereafter acquired by GSK in the manner in which GSK is obligated to vote, consent or act pursuant to this Section 2.3.  Such proxy shall be irrevocable until this Agreement terminates pursuant to its terms or this Section 2.3 is amended to remove such grant of proxy in accordance with Section 5.2 hereof, and is coupled with an interest in all Voting Shares owned by GSK.  This Agreement shall constitute the proxy granted pursuant hereto.
 
ARTICLE III
 
REGULATORY FILINGS
 
SECTION 3.1.                                         Required Regulatory Filings.  GSK and the Company agree to take all actions necessary to make all required filings and thereafter make any other required submissions with respect to the transactions contemplated under this Agreement under any applicable law, including, without limitation, any applicable federal or state securities Law, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and foreign antitrust regulations.  GSK and the Company shall respond as promptly as practicable to all inquiries or requests received from any such antitrust regulator.  The parties shall cooperate with each other in connection with the making of all such filings or requests.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
 
SECTION 4.1.                                         Representations of the Company.
 
(a)                                The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and have been duly authorized by all necessary corporate action.  This Agreement constitutes a valid and binding agreement of the Company.
 
7

 
(b)                                The execution, delivery and performance by the Company of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority.
 
(c)                                 The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not (i) contravene or conflict with the Memorandum and Articles of Association of the Company or the Amended and Restated Memorandum and Articles of Association of the Company to be in effect prior to the Spin-Off, and (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Company.
 
SECTION 4.2.                                         Representations of GSK.
 
GSK represents that:
 
(a)                                The execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby are within its corporate powers and have been duly authorized by all necessary corporate action.  This Agreement constitutes its valid and binding agreement.
 
(b)                                The execution, delivery and performance by it of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority.
 
(c)                                 The execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby do not and will not (i) contravene or conflict with its charter or Bylaws, and (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to it.
 
ARTICLE V
 
MISCELLANEOUS
 
SECTION 5.1.                                         Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given:
 
If to the Company:
 
Theravance Biopharma, Inc.
901 Gateway Boulevard
South San Francisco, CA 94080
Facsimile:  650-808-6095
Attn:  General Counsel
 
8

 
With a copy to:
 
Gunderson Dettmer et al.
1200 Seaport Boulevard
Redwood City, CA
Facsimile:  650-321-2800
Attn:  David T. Young
 
If to GSK:
 
Glaxo Group Limited
980 Great West Road
Brentford, London
TW8 9GS
United Kingdom
Facsimile: +44 (020) 804 76904
Attention:  Company Secretary
 
With a copy to:
 
GlaxoSmithKline
980 Great West Road
Brentford, London
TW8 9GS
United Kingdom
Facsimile:  +44 (0) (208) 046-0641
Attention: Vice President, Corporate Development
 
and with a copy to:
 
Kirkland & Ellis LLP
601 Lexington Ave.
New York, NY 10036
Attn:  Daniel Wolf
Facsimile:  212-446-6460
 
or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  Each such notice, request or other communication shall be effective (i) if given by facsimile when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate answerback is received or (ii) if given by any other means, when delivered at the address specified in this Section 5.1.
 
SECTION 5.2.                                         Amendments; Waivers.
 
(a)                                Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by GSK and the Company, or in the case of a waiver, by the party against whom the waiver is to be
 
9

 
effective; provided that, in the case of the Company, no such amendment or waiver shall be effective without the approval of a majority of the Independent Directors.
 
(b)                                No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
 
SECTION 5.3.                                         Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the written consent of the other party hereto.
 
SECTION 5.4.                                         Governing Law.  This Agreement shall be governed by and construed in accordance with and governed by the law of the State of Delaware, without regard to the conflicts of laws principles thereof.  Any action brought, arising out of, or relating to this Agreement shall be brought in the Court of Chancery of the State of Delaware.  Each party hereby irrevocably submits to the exclusive jurisdiction of said Court in respect of any claim relating to the validity, interpretation and enforcement of this Agreement, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding in which any such claim is made that it is not subject thereto or that such action suit or proceeding may not be brought or is not maintainable in such courts, or that the venue thereof may not be appropriate or that this agreement may not be enforced in or by such courts.  The parties hereby consent to and grant the Court of Chancery of the State of Delaware jurisdiction over such parties and over the subject matter of any such claim and agree that mailing of process or other papers in connection with any such action, suit or proceeding in the manner provided in Section 5.1, or in such other manner as may be permitted by law, shall be valid and sufficient thereof.
 
SECTION 5.5.                                         Counterparts; Effectiveness.  This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and which together shall constitute one and the same document.
 
SECTION 5.6.                                         Specific Performance.  Each party acknowledges and agrees that their respective remedies at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and, in recognition of that fact, agrees that, in the event of a breach or threatened breach by the Company, on the one hand, or GSK, on the other hand, of the provisions of this Agreement, in addition to any remedies at law, GSK and the Company, respectively, without posting any bond shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.
 
SECTION 5.7.                                         Termination.  This Agreement shall terminate at the earliest of (i) such time as GSK and its Affiliates beneficially own 100% of the outstanding Voting Shares, (ii) the effective time of a Change in Control, and (iii) December 31, 2017.
 
10

 
SECTION 5.8.                                         Severability.  In the event of the invalidity of any provisions of this Agreement or if this Agreement contains any gaps, the parties agree that such invalidity or gap shall not affect the validity of the remaining provisions of this Agreement.  The parties will replace an invalid provision or fill any gap with valid provisions which most closely approximate the purpose and economic effect of the invalid provision or, in case of a gap, the parties’ presumed intentions.  In the event that the terms and conditions of this Agreement are materially altered as a result of the preceding sentences, the parties shall renegotiate the terms and conditions of this Agreement in order to resolve any inequities.  Nothing in this Agreement shall be interpreted so as to require either party to violate any applicable laws, rules or regulations.
 
SECTION 5.9.                                         Registration and Filing of This Agreement.  To the extent, if any, that either the Company, on the one hand, or GSK, on the other hand, concludes in good faith that such party or the other party is required to file or register this Agreement or a notification thereof with any governmental authority, including without limitation the SEC, the Competition Directorate of the Commission of the European Communities or the U.S. Federal Trade Commission and the Antitrust Division of the Department of Justice, in accordance with Law, such party shall inform the other party thereof.  Should the Company and GSK jointly agree that either of them is required to submit or obtain any such filing, registration or notification, they shall cooperate, each at its own expense, in such filing, registration or notification and shall execute all documents reasonably required in connection therewith.  The parties shall promptly inform each other as to the activities or inquiries of any such Governmental Authority relating to this Agreement, and shall reasonably cooperate to respond to any request for further information therefrom on a timely basis.
 
SECTION 5.10.                                  Certain Definitions.
 
(a)                                As used in this Agreement, the following terms shall have the following meanings:
 
(i)                                    “Affiliate” of a party means any Person, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with such Person for so long as such control exists, where “control” means the decision-making authority as to such Person and, further, where such control shall be presumed to exist where a Person owns more than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct the affairs of the entity; it being specified that for purposes of this Agreement, the Company and its direct and indirect subsidiaries, if any, shall not be deemed to be Affiliates of GSK.
 
(ii)                                 “Board” means the Board of Directors of the Company.
 
(iii)                              “Change in Control” means, with respect to (A) the Company, any transaction or series of related transactions (including mergers, consolidations and other forms of business consolidations) following which continuing shareholders of the Company hold less than 50% of the outstanding voting securities of either the Company, the entity surviving such transaction or any direct or indirect parent entity of such continuing or surviving entity or (B) the sale, lease, license, transfer or other disposal of all or substantially all
 
11

 
of the business or assets of the Company other than to a Person that is and for so long as it continues to be majority owned and controlled, directly or indirectly, subsidiary of the Company (provided, however, that the direct or indirect sale, license or transfer to another party of the Company’s interests in its antibiotics business, including telavancin (regardless of its value or what portion of the Company’s business or assets it may represent) shall not, in and of itself, be considered a Change in Control transaction); provided, further that the Spin-Off or a transaction solely for purposes of the redomestication of the Company shall not be a Change in Control.
 
(iv)                             “Effective Date” means the date that shares of the Company are distributed to shareholders of Parent via a dividend, provided that such dividend distribution occurs on or before June 30, 2014.  If the Effective Date does not occur on or prior to June 30, 2014, this Agreement will terminate and be of no effect whatsoever.
 
(v)                                “Equity Security” means any (i) Voting Shares of the Company, (ii) securities of the Company convertible into or exchangeable for Voting Shares and (iii) options, rights and warrants issued by the Company to acquire Voting Shares.
 
(vi)                             “Fair Market Value Per Share” means, with respect to an Equity Security as of a particular date, (a) if the Equity Security is traded on a securities exchange, the closing price of the Equity Security on such exchange or system on such date or (b) if the Equity Security is not traded on a securities exchange, the value on such date as determined in good faith after consultation with a nationally recognized financial advisor by a majority of the Independent Directors.
 
(vii)                          “Independent Director” shall mean a director who complies with the independence requirements for directors with respect to the Company (without reference to any applicable exemptions from such requirements) for companies listed on Nasdaq and shall be individuals who have business or technical experience, stature and character as is commensurate with service on the board of a publicly traded enterprise.  For the avoidance of doubt, a person affiliated with GSK may not be an Independent Director.
 
(viii)                       “Law” means any law, statute, rule, regulation, ordinance and other pronouncement having the binding effect of any court, tribunal, arbitrator, agency, legislative body, commission, official or other instrumentality of (x) any government of any country, (y) a federal, state, province, county, city or other political subdivision thereof or (z) any supranational body.
 
(ix)                             “Ordinary Shares” shall mean the ordinary shares, par value $0.00001 per share, of the Company.
 
(x)                                “Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, proprietorship or other business organization.
 
(xi)                             “Rights Plan” means any rights plan or similar arrangement adopted by the Company that has the effect (or similar effect), upon the acquisition of a specified percentage of Voting Shares by a third party without the approval of the Board, of adversely affecting in any material respect the rights of such acquiring party as a shareholder of the
 
12

 
Company in a manner materially different than the effect on shareholders of the Company generally.
 
(xii)                          “Voting Shares” shall mean the Ordinary Shares and any other outstanding securities of the Company having the right to vote generally in any election of directors of the Board.
 
(b)                                The following terms shall have the meanings defined for such terms in the Sections of this Agreement set forth below:
 
Term	 	Section	
Agreement	 	Preamble	
Catch-up Shares	 	2.1(d)(ii)	
Company	 	Preamble	
ESPP	 	2.1(d)(i)	
Exchange Act	 	2.1(a)(i)	
First Offer Shares	 	2.1(d)(i)	
GSK	 	Preamble	
HSR Act	 	3.1	
NASD	 	2.1(d)(i)	
NASDAQ	 	2.1(d)(i)	
Number of Withheld Shares	 	2.1(d)(iii)	
Offer Notification	 	2.1(d)(i)	
Offering	 	2.1(d)(i)	
Parent Governance Agreement	 	Recitals	
Party	 	Preamble	
Schedule	 	2.1(d)(ii)	
SEC	 	2.1(a)(ii)	
Securities Act	 	2.2(b)(ii)	
Significant Third Party Acquisition	 	2.1(c)	
Tax Value Per Share	 	2.1(d)(iii)	
Third Party Acquiror	 	2.1(c)	
Withheld Shares	 	2.1(d)(iii)	
 
SECTION 5.11.                                  Captions.  The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way limit or amplify the terms and provisions hereof.
 
13

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
 
 	THERAVANCE BIOPHARMA, INC.	

 	By:	/s/ Rick E Winningham	
 	Name:	Rick E Winningham	
 	Title:	Chief Executive Officer	
 	 	
 	GLAXO GROUP LIMITED	

 	By:	/s/ Paul Williamson	
 	 	 	
 	Name:	Paul Williamson	
 	 	 	
 	Title:	Authorized Signatory
For and on behalf of
Edinburgh Pharmaceutical Industries Limited
Corporate Director	
 
SIGNATURE PAGE TO GOVERNANCE AGREEMENT

Use these links to rapidly review the document
Table of Contents
INDEX TO COMBINED FINANCIAL STATEMENTS

Exhibit 99.1

901 Gateway Boulevard
South San Francisco, California

                        , 2014

Dear Theravance, Inc. Stockholder:

        On April 25, 2013, we announced our intention to spin off our drug discovery and development business (the "Drug Discovery and Development Business") into a separate publicly traded company, Theravance Biopharma, Inc. ("Theravance Biopharma"). Theravance, Inc. ("Theravance") will continue to own certain late-stage partnered respiratory assets and associated potential royalty revenues (the "Royalty Business").

        We expect to complete this spin-off on                        , 2014. We will accomplish the spin-off through a pro rata dividend of the ordinary shares of Theravance Biopharma to Theravance's stockholders. You will not need to take any action to receive Theravance Biopharma shares and you will not be required to pay anything for the new Theravance Biopharma shares or surrender any of your Theravance shares.

        At the time of the spin-off, you will receive one ordinary share of Theravance Biopharma for every          shares of Theravance common stock that you hold at 5:00 p.m., Eastern Time, on                        , 2014, the record date for this dividend. However, if you sell your shares of Theravance common stock prior to or on                        , 2014, the distribution date, you also will be selling your right to receive ordinary shares of Theravance Biopharma. We will not issue any fractional shares of Theravance Biopharma, so if you otherwise would have been entitled to a fractional share of Theravance Biopharma in the spin-off, you will receive the net cash value of such fractional share instead. We have applied to have the ordinary shares of Theravance Biopharma listed on the Nasdaq Global Market to trade under the symbol "TBPH". Shares of Theravance will continue to be listed on the Nasdaq Global Market when the spin-off is completed and will trade under the symbol "THRX".

        Our board of directors has determined that a strategic separation of our two businesses is in the best interests of our stockholders. We believe that the spinning off of the Drug Discovery and Development Business will provide several opportunities and benefits, including the following:

•
Market Recognition:  The investment community, including analysts, stockholders and prospective investors in each company, will be better able to realize the value of each company fully and independently and enhance the market recognition of each company;

•
Business Focus:  Each company will be better able to focus its efforts on and allocate its resources towards its own business opportunities and challenges;

•
Facilitate Return of Capital to Stockholders:  Following the spin-off, Theravance will have minimal staffing to support its operations and will be structured with the goal of distributing a significant portion of any future royalty revenues from the Royalty Business, net of operating expenses, debt service and income taxes, to its stockholders;

•
Improved Capital Flexibility:  Each company will be able to deploy capital and access additional financing, if appropriate, in accordance with its unique needs and business model; and

•
Employee Incentives:  Each company will be better able to attract, retain and motivate employees by providing equity compensation tied more directly to its performance.

        All or a portion of the Theravance Biopharma shares you receive is expected to be taxable to you as a dividend. In connection with the spin-off, we submitted a private letter ruling request to the Internal Revenue Service (the "IRS") regarding the tax treatment of the distribution of the spin-off. In

the course of discussions with the IRS regarding the ruling request, the IRS has indicated its intention to treat the distribution of Theravance Biopharma ordinary shares as a taxable transaction. As a taxable transaction, an amount equal to the fair market value of the Theravance Biopharma ordinary shares received by you (including any fractional shares deemed to be received) on the distribution date will be treated as a taxable dividend to the extent of your ratable share of any current and accumulated earnings and profits of Theravance, measured as of the end of the year in which the distribution occurs, with the excess treated as a non-taxable return of capital to the extent of your tax basis in Theravance common stock and any remaining excess treated as a capital gain. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including the applicability and effect of any U.S. federal, state, local and non-U.S. tax laws.

        Enclosed please find an Information Statement that describes the spin-off and the business of Theravance Biopharma, which we are providing to all Theravance stockholders in accordance with U.S. law. The Information Statement describes in detail the distribution of Theravance Biopharma ordinary shares to holders of Theravance common stock and contains important business and financial information about Theravance Biopharma. We encourage you to read this information carefully. Please note that stockholder approval is not required for this spin-off, so we are not asking you for a proxy.

        If you have any questions regarding the spin-off, please contact our investor relations department by calling (650) 808-4100 or sending a letter to: Theravance, Inc., 901 Gateway Blvd., South San Francisco, CA 94080 Attention: Investor Relations.

Sincerely,

Rick E Winningham
Chief Executive Officer
Theravance, Inc.	 	 	

Table of Contents

This Information Statement is first being mailed to stockholders on or about                        , 2014. This Information Statement is furnished for informational purposes only.

Ugland House, South Church Street
George Town, Grand Cayman, Cayman Islands

                        , 2014

Dear Future Theravance Biopharma Shareholder:

        It is my great pleasure to welcome you as a shareholder of Theravance Biopharma, Inc. ("Theravance Biopharma") and introduce you to our company. We are a biopharmaceutical company that focuses on the discovery, development and commercialization of small-molecule medicines in areas of significant unmet medical need. As you know, the board of directors of our parent company, Theravance, Inc. ("Theravance"), has approved a plan to spin off Theravance Biopharma into a separate publicly traded company. We expect to complete the spin-off on                        , 2014. We have applied to have our ordinary shares listed on the Nasdaq Global Market under the symbol "TBPH".

        Theravance Biopharma will continue to leverage Theravance's expertise in multivalent drug discovery and develop its small-molecule product candidate pipeline currently focused on bacterial infections, central nervous system (CNS)/pain, respiratory disease, and gastrointestinal (GI) motility dysfunction. Theravance Biopharma also will continue to make VIBATIV® (telavancin) commercially available in the United States. VIBATIV® (telavancin) is the bactericidal, once-daily injectable antibiotic discovered by Theravance in a research program dedicated to finding new antibiotics for serious infections due to Staphylococcus aureus  and other Gram-positive bacteria, including methicillin-resistant (MRSA) strains. Theravance Biopharma also will have an economic interest in the revenues from Theravance agreements with Glaxo Group Limited with regard to the combination of umeclidinium, vilanterol and fluticasone furoate (UMEC/VI/FF), the Bifunctional Muscarinic Antagonist-Beta 2  Agonist (MABA) drug 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 these agreements with Glaxo Group Limited. Theravance Biopharma will be capitalized with approximately $300 million in cash, which is expected to fund operations through significant potential corporate milestones over the following two to three years.

        With our promising clinical pipeline, drug discovery capabilities, experienced management team and strong balance sheet, we believe that we will begin our future as an independent public company from a position of considerable strength. The spin-off is designed to enable us to operate our business with greater focus. As a Theravance Biopharma shareholder, you can share in our progress as we strive to strengthen and grow our business. I invite you to learn more about Theravance Biopharma and our opportunity as a soon-to-be independent publicly traded company by reading the attached Information Statement.

Sincerely,

Rick E Winningham
Chief Executive Officer
Theravance Biopharma, Inc.	 	 	

Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission.

Preliminary and Subject to Completion, dated April 8, 2014

The date of this Information Statement is                        , 2014

Information Statement

Theravance Biopharma, Inc. Ordinary Shares
(par value $0.00001 per share)

        We are furnishing this Information Statement to the stockholders of Theravance, Inc. ("Theravance") in connection with Theravance's distribution via stock dividend to holders of its common stock of all outstanding ordinary shares of Theravance Biopharma, Inc. ("Theravance Biopharma"). At this time, Theravance Biopharma is a wholly-owned subsidiary of Theravance. After the spin-off is completed, Theravance Biopharma will be a separate publicly traded company and will own and operate the drug discovery and development business (the "Drug Discovery and Development Business") currently owned and operated by Theravance. Theravance will continue to own certain late-stage partnered respiratory assets and associated potential royalty revenues (the "Royalty Business").

        If you are a holder of record of Theravance common stock at 5:00 p.m., Eastern Time, on                        , 2014, which is the record date for the distribution, you will be entitled to receive one ordinary share of Theravance Biopharma for every            shares of Theravance common stock that you hold on the record date. However, if you sell your shares of Theravance common stock prior to or on                        , 2014, the distribution date, you also will be selling your right to receive ordinary shares of Theravance Biopharma. Unless requested otherwise, our ordinary shares will be issued in book-entry form. No fractional shares of Theravance Biopharma will be issued. If you otherwise would have been entitled to a fractional share of Theravance Biopharma in the distribution, you will receive the net cash value of such fractional share instead. Immediately after the distribution is completed on the distribution date, we will be an independent publicly traded company. We expect the distribution to occur on                        , 2014.

        No stockholder vote is required for the spin-off to occur.We are not asking you for a proxy, and you are requested not to send us a proxy. No action is necessary for you to receive ordinary shares of Theravance Biopharma to which you are entitled in the spin-off.  This means that:

•
You do not need to pay any consideration to Theravance Biopharma or to Theravance; and

•
You do not need to surrender or exchange any shares of Theravance common stock to receive the ordinary shares of Theravance Biopharma to which you are entitled in the spin-off.

        Currently, there is no public trading market for the ordinary shares of Theravance Biopharma, although we expect that a "when-issued" trading market will develop on or about the record date for the distribution. We have applied to have our ordinary shares listed on the Nasdaq Global Market under the symbol "TBPH".

        As you review this Information Statement, you should carefully consider the matters described in "Risk Factors" beginning on page 16.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This Information Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        If you have inquiries related to the distribution, you should contact Theravance's transfer agent, Computershare Shareowner Services, at 250 Royall Street, Canton, MA 02021, or (877) 884-3485.

Table of Contents
Table of Contents

 
	 	Page	 	
Explanatory Note	 	 	1	 	
Summary	 	 	2	 	
Summary Historical Combined Financial Information	 	 	14	 	
Risk Factors	 	 	16	 	
The Spin-Off	 	 	44	 	
Dividend Policy	 	 	62	 	
Capitalization	 	 	63	 	
Our Business	 	 	64	 	
Historical Selected Financial Data	 	 	77	 	
Management's Discussion and Analysis of Financial Condition and Results of Operations	 	 	78	 	
Our Relationship with Theravance, Inc. after the Spin-Off	 	 	96	 	
Unaudited Pro Forma Condensed Combined Financial Statements	 	 	100	 	
Management	 	 	102	 	
Board of Directors	 	 	105	 	
Compensation of Non-Employee Directors	 	 	111	 	
Compensation of Named Executive Officers	 	 	113	 	
Security Ownership of Certain Beneficial Owners and Management	 	 	125	 	
Description of Share Capital	 	 	127	 	
No Dissenters' Rights	 	 	138	 	
Indemnification of Directors and Officers	 	 	138	 	
Related Person Transactions	 	 	139	 	
Distribution of Information Statement	 	 	139	 	
Where to Obtain More Information	 	 	139	 	
Index to Combined Financial Statements	 	 	F-1	 	
Report of Independent Registered Public Accounting Firm	 	 	F-2	 	

Table of Contents
Explanatory Note

        Theravance Biopharma is furnishing this Information Statement to you solely to provide you with information regarding both the spin-off and our company. It is not, and should not be construed as, an inducement or encouragement to buy or sell any securities of Theravance Biopharma or Theravance.

        You should rely only on the information contained in this Information Statement. We have not authorized any other person to provide you with information different from that contained in this Information Statement. The information contained in this Information Statement is believed by us to be accurate as of its date. Therefore, you should assume that the information contained in this Information Statement is accurate only as of the date on the front cover of this Information Statement or other date stated in this Information Statement, regardless of the time of delivery of this Information Statement. Our business, financial condition, results of operations and prospects may have changed since that date, and neither we nor Theravance will update the information except in the normal course of our respective public disclosure obligations and practices or as specifically indicated in this Information Statement.

        We will own or have rights to numerous trademarks, trade names, copyrights and other intellectual property used in our business. All other company names, tradenames and trademarks included in this Information Statement are trademarks, registered trademarks or trade names of their respective owners.

        As used in this Information Statement, the terms "we," "us," "our," and the "Company" mean Theravance Biopharma together with its subsidiaries and affiliates through which it intends to conduct its operations (unless the context indicates a different meaning) and the term "GSK" means GlaxoSmithKline plc together with its affiliates, including Glaxo Group Limited.

        We describe in this Information Statement the Drug Discovery and Development Business to be transferred to us by Theravance in connection with the spin-off as though the Drug Discovery and Development Business were our business for all historical periods described. However, Theravance Biopharma is a newly-formed entity that has not conducted any operations prior to the spin-off and most of the actions necessary to transfer assets and liabilities of Theravance to us have not occurred but will occur before the effectiveness of the spin-off. References in this Information Statement to the historical assets, liabilities, products, business or activities of our business are intended to refer to the historical assets, liabilities, products, business or activities of the Drug Discovery and Development Business as those were conducted as part of Theravance prior to the spin-off.

1

Table of Contents
Summary

        The following is a summary of some of the information contained in this Information Statement. We urge you to read this entire document carefully, including the risk factors, our historical combined financial statements and the notes to those financial statements and our unaudited pro forma combined balance sheet.

Our Company

Theravance Biopharma, Inc.

        Theravance Biopharma is a biopharmaceutical company with one approved product that was discovered and developed internally, a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical companies. In addition, we have an economic interest in future payments that may be made by GSK pursuant to its agreements with Theravance relating to certain drug programs, including the combination of umeclidinium ("UMEC"), vilanterol ("VI") and fluticasone furoate ("FF") ("UMEC/VI/FF"), the combination of the Bifunctional Muscarinic Antagonist-Beta 2  Agonist ("MABA") GSK961081 (" '081") and FF (" '081/FF"), and MABA monotherapy. We are focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including bacterial infections, central nervous system ("CNS")/pain, respiratory disease, and gastrointestinal ("GI") motility dysfunction. By leveraging our proprietary insight of multivalency to drug discovery, we are pursuing a best-in-class strategy designed to discover superior medicines in areas of significant unmet medical need.

        Our strategy focuses on the discovery, development and commercialization of medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. Multivalency refers to the simultaneous attachment of a single molecule to multiple binding sites on one or more biological targets. When compared to monovalency, whereby a molecule attaches to only one binding site, multivalency can significantly increase a compound's potency, duration of action and/or selectivity. Multivalent compounds generally consist of several individual small molecules, at least one of which is biologically active when bound to its target, joined by linking components. In addition, we believe that we can enhance the probability of successfully developing and commercializing medicines by identifying at least two structurally different product candidates, whenever practicable, in each therapeutic program.

Our Programs

        The following table summarizes the status of our approved product and our most advanced product candidates for internal development or co-development. The table also includes the status of respiratory programs in which we have an economic interest that are being developed and commercialized by GSK pursuant to agreements with Theravance, which we refer to as the GSK-partnered respiratory programs. We have an economic interest in these programs through our non-voting interest in Theravance Respiratory Company LLC ("TRC"), a Delaware limited liability company controlled by Theravance. See "The Spin-Off—Formation of Theravance Respiratory Company LLC" and "Business—Economic Interests in GSK Respiratory Programs Partnered with Theravance."

2

Table of Contents

Programs

Key:
CNS: Central Nervous System;FF: Fluticasone Furoate;GI: Gastrointestinal;LAMA: Long-Acting Muscarinic Antagonist;MABA: Bifunctional Muscarinic Antagonist-Beta 2  Agonist; UMEC:  Umeclidinium; VI:  Vilanterol

In the table above:

Status indicates the most advanced stage of clinical development that has been completed or is in process.

Phase 1 indicates initial clinical safety testing in healthy volunteers, or studies directed toward understanding the mechanisms of action of the drug.

3

Table of Contents

Phase 2 indicates further clinical safety testing and preliminary efficacy testing in a limited patient population.

Phase 3 indicates evaluation of clinical efficacy and safety within an expanded patient population.

Filed indicates that a marketing application has been submitted to a regulatory authority.

Approved indicates the drug has been approved for marketing in at least one jurisdiction.

We consider programs in which at least one compound has successfully completed a Phase 2a study showing efficacy and tolerability as having demonstrated Proof-of-Concept.

Corporate and Available Information

        We were incorporated as a Cayman Islands exempted company limited by shares in July 2013 under the name Theravance Biopharma, Inc. Our principal executive offices are located at Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. Our principal wholly-owned operating subsidiary, Theravance Biopharma US, Inc., is incorporated in Delaware but will not commence operations prior to the spin-off.

Reasons for the Spin-Off

        On April 25, 2013, Theravance announced a plan to spin off its Drug Discovery and Development Business into a separate publicly traded company. Theravance and we believe that the spin-off of the Drug Discovery and Development Business to us will provide several opportunities and benefits, including the following:

•
Market Recognition:  The investment community, including analysts, stockholders and prospective investors in each company, will be better able to realize the value of each company fully and independently and enhance the market recognition of each company;

•
Business Focus:  Each company will be better able to focus its efforts on and allocate it resources towards its own business opportunities and challenges, with the management of Theravance Biopharma focusing on the discovery, development and commercialization of small-molecule medicines in areas of significant unmet medical need and the management of Theravance focusing on maximizing the commercial value of the potential royalty streams from its agreements with GSK;

•
Facilitate Return of Capital to Stockholders:  Following the spin-off, Theravance will have minimal staffing to support its operations and will be structured with the goal of distributing a significant portion of any future royalty revenues from the Royalty Business, net of operating expenses, debt service and income taxes, to its stockholders;

•
Improved Capital Flexibility:  Each company will be able to deploy capital and access additional financing, if appropriate, in accordance with its unique needs and business model; and

•
Employee Incentives:  Each company will be better able to attract, retain and motivate employees by providing equity compensation tied more directly to its performance, and in particular in the case of Theravance Biopharma, to our research and development efforts.

4

Table of Contents

Selected Risks of our Business and Industry and of the Spin-Off

        We face a number of risks associated with our business and industry and must overcome a variety of challenges in completing the spin-off and in implementing our operating strategy in order to be successful. These risks and challenges include the following:

•
we expect to incur losses for the foreseeable future, we will require additional financing to meet our future capital needs and we may not be able to obtain additional financing on terms favorable to us, if at all;

•
if our development of new product candidates is delayed, or if our product candidates do not demonstrate safety or effectiveness or are terminated, our business will be harmed;

•
the adverse effect on developing and commercializing product candidates that could result if we are unable to enter into future collaborations;

•
if our future partners do not satisfy their obligations under our agreements with them or if they terminate our partnerships with them, as Astellas Pharma Inc. and Merck did to Theravance, we may not be able to develop or commercialize our partnered product candidates as planned;

•
our reliance on single-source manufacturers and suppliers may damage our commercial prospects, as occurred to Theravance in the past when commercialization of VIBATIV® was halted due to supply issues;

•
if we cannot identify a suitable commercialization partner for VIBATIV® in the U.S., we will not be able to leverage a commercialization partner's capabilities and infrastructure and we will incur all of the costs and expenses associated with our reintroduction of VIBATIV® in the U.S., including the creation of an independent sales and marketing organization with appropriate technical expertise, supporting infrastructure and distribution capabilities, expansion of medical affairs presence, manufacturing and third party vendor logistics and consultant support;

•
VIBATIV® and our product candidates, once approved, may not be accepted by physicians, patients, third party payors, or the medical community in general;

•
the uncertainty of the trading value of our common stock as a new publicly-traded company and the heightened risks that we will face operating as a standalone independent public company after the spin-off from Theravance;

•
the expected taxable nature of the spin-off;

•
the significant costs and expenses that will be incurred to effect the spin-off and the duplication of costs for operating two separate independent public companies;

•
the process of preparing for and effecting the spin-off may distract management from managing the ongoing business to be conducted by us; and

•
after the spin-off, certain of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in Theravance and, in the case of our Chairman and Chief Executive Officer, because he will hold the same positions for Theravance.

For a further discussion of these challenges and other risks we face, see "Risk Factors" beginning on page 16.

5

Table of Contents

Summary of the Spin-Off

        The following is a brief summary of the terms of the spin-off. Please see "The Spin-Off" for a more detailed description of the matters described below.
 	 	 	
Distributing company	 	Theravance, Inc.	
Distributed company	 	Theravance Biopharma, Inc.	
Distribution ratio	 	Each holder of Theravance common stock will receive one of our ordinary shares for every             shares of Theravance common stock held on the record date.	
Securities to be distributed	 	Approximately        million of our ordinary shares. Our ordinary shares to be distributed will constitute all of our outstanding ordinary shares immediately after the spin-off.	
Distribution agent, transfer agent and registrar for Theravance Biopharma shares	 	Computershare Shareowner Services	
Record Date	 	5:00 p.m. Eastern Time on            , 2014	
Distribution Date	 	            , 2014	
Stock exchange listing	 	Currently there is no public market for our ordinary shares. We have applied to have our ordinary shares listed on the Nasdaq Global Market under the symbol "TBPH".	
U.S. federal income tax consequences	 	All or a portion of the Theravance Biopharma shares you receive is expected to be taxable to you as a dividend. In connection with the spin-off, we submitted a private letter ruling request to the Internal Revenue Service (the "IRS") regarding the tax treatment of the spin-off. In the course of discussions with the IRS regarding the ruling request, the IRS has indicated its intention to treat the distribution of Theravance Biopharma ordinary shares as a taxable transaction. As a taxable transaction, an amount equal to the fair market value of our ordinary shares received by you (including any fractional shares deemed to be received) on the distribution date will be treated as a taxable dividend to the extent of your ratable share of any current and accumulated earnings and profits of Theravance, measured as of the end of the year in which the distribution occurs, with the excess treated as a non-taxable return of capital to the extent of your tax basis in Theravance common stock and any remaining excess treated as capital gain. Theravance will not be able to advise stockholders of the amount of such earnings and profits of Theravance until approximately January 2015.	
 	 	Theravance and other applicable withholding agents will withhold an amount equal to 30% of the fair market value of our ordinary shares distributed to a non-U.S. holder (as if the gross amount of such distribution was a taxable dividend) unless a reduced rate of withholding or an exemption from withholding is applicable.	
6

Table of Contents
 	 	 	
 	 	Theravance Biopharma should be respected as a foreign corporation for U.S. federal income tax purposes under Section 7874 of the Code because the assets contributed to Theravance Biopharma by Theravance in connection with the spin-off do not constitute "substantially all" of the assets of Theravance.	
 	 	For a more detailed discussion see "The Spin-Off—U.S. Federal Income Tax Consequences" beginning on page 50.	
Purposes of the Distribution	 	The spin-off is designed to enhance long-term stockholder value by providing the benefits set forth above and under the caption "The Spin-Off—Reasons for the Spin-Off."	
Conditions to the Distribution	 	The distribution of our ordinary shares is subject to the satisfaction of the following conditions, among other conditions described in this information statement:	
 	 	•
the Securities and Exchange Commission, or SEC, shall have declared effective our registration statement on Form 10, of which this Information Statement is a part, under the Securities Exchange Act of 1934, as amended, or the Exchange Act; and no stop order relating to the registration statement shall be in effect;	
 	 	•
all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the U.S. or of other foreign jurisdictions in connection with the distribution shall have been received;	
 	 	•
the listing of our ordinary shares on the Nasdaq Global Market shall have been approved, subject to official notice of issuance;	
 	 	•
all material government approvals and other consents necessary to consummate the distribution shall have been received;	
 	 	•
the transfers of the assets and liabilities contemplated by the Separation and Distribution Agreement shall be in effect; and	
 	 	•
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution or any of the transactions related thereto, including those contemplated by the Separation and Distribution Agreement, shall be in effect.	
 	 	The fulfillment of these conditions does not create any obligation on Theravance to effect the distribution, and the Theravance board of directors has reserved the right, in its sole discretion, to amend, modify or abandon the distribution and related transactions at any time prior to or on the distribution date. Theravance has the right not to complete the distribution if, at any time, the Theravance board of directors determines, in its sole discretion, that the distribution is not in the best interests of Theravance or its stockholders or that market conditions are such that it is not advisable to separate the Drug Discovery and Development Business from Theravance.	
7

Table of Contents
 	 	 	
Agreements and Relationships with Theravance	 	Theravance and Theravance Biopharma each will be independent, publicly traded companies. However, we will enter into a Separation and Distribution Agreement, a Transition Services Agreement, an Employee Matters Agreement and a Tax Matters Agreement and other agreements with Theravance to effect the separation and distribution and provide a framework for our relationship with Theravance after the separation. These agreements will govern the relationships between us and Theravance after the completion of the separation and provide for the allocation between us and Theravance of Theravance's assets, liabilities and obligations (including employee benefits and tax-related assets and liabilities) attributable to periods prior to our separation from Theravance.	
 	 	After the spin-off, Rick E Winningham will serve as our Chairman and Chief Executive Officer and will also serve in the same positions for Theravance. He and other members of our management will also have significant financial interests in Theravance equity. For a discussion of these arrangements and relationships, see "Risk Factors—Risks Related to the Spin-Off," beginning on page 16, "Our Relationship with Theravance, Inc. after the Spin-Off" beginning on page 96 and "Compensation of Named Executive Officers" beginning on page 113.	
Interest in Theravance Respiratory Company LLC	 	Prior to the spin-off, Theravance will form a Delaware limited liability company to be called Theravance Respiratory Company LLC ("TRC"). Theravance will assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. TRC will be controlled by Theravance and jointly owned by Theravance and us. Our equity interest in TRC will entitle us to an 85% economic interest in any future payments made by GSK under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. These other drug programs include UMEC/VI/FF and the MABA program, as monotherapy and in combination with other therapeutically active components, such as an inhaled corticosteriod (ICS), and any other product or combination of products that may be discovered and developed in the future under the strategic alliance agreement with GSK or collaboration agreement with GSK, which we refer to as the GSK agreements. Theravance's equity interest in TRC will entitle it to 15% of the economic interest in all future payments by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC. See "The Spin-Off—Formation of Theravance Respiratory Company LLC" beginning on page 48.	
8

Table of Contents
 	 	 	
Questions and Answers about the Spin-off	
How will the spin-off work?	 	Theravance will contribute to us its Drug Discovery and Development Business (including assets and liabilities) and an equity interest in TRC, and approximately $300 million in cash and cash equivalents, which we refer to as the contribution, and Theravance will distribute to its stockholders all of our outstanding ordinary shares on a pro rata basis, which we refer to as the distribution. When we refer to the occurrence of the spin-off, we are referring to the date the spin-off is finalized and our stock is distributed to you. For additional information on the transactions in the spin-off, see "The Spin-Off—Manner of Effecting the Spin-Off" beginning on page 46.	
How will Theravance fund the contribution of cash and cash equivalents to us?	 	As of December 31, 2013, Theravance held an aggregate of approximately $520 million of cash, cash equivalents, short-term investments, and long-term securities. Theravance will continue to manage both its short-term investment and long-term marketable securities portfolios to ensure that at spin-off cash and cash equivalents of a minimum of $300 million is available for transfer to us. Post spin-off, Theravance is expected to maintain the necessary amount of cash, cash equivalents and marketable securities that will be sufficient to meet its anticipated operating needs for at least the next twelve months based on then current operating plans and financial forecasts.	
When will the spin-off be completed?	 	Theravance expects to complete the spin-off by distributing our ordinary shares on            , 2014 to holders of record of Theravance common stock on the record date. As discussed under "The Spin-Off—Trading of Theravance Common Stock After the Record Date and Prior to or on the Distribution Date," if you sell your shares of Theravance common stock in the "regular way" market after the record date and prior to or on the distribution date, you also will be selling your right to receive our ordinary shares in connection with the spin-off. For additional information on the spin-off, see "The Spin-Off—Results of the Spin-Off" beginning on page 49.	
What do I have to do to participate in the distribution?	 	Nothing. You are not required to take any action to receive our ordinary shares in the spin-off. No vote of Theravance stockholders will be taken for the spin-off. If you own shares of Theravance common stock as of the close of business on the record date and do not sell those shares in the "regular way" market prior to or on the distribution date, unless requested otherwise, a book-entry account statement reflecting your ownership of our ordinary shares will be mailed to you, or your brokerage account will be credited for the shares, on or about            , 2014. Do not mail in Theravance common stock certificates in connection with the spin-off.	
9

Table of Contents
 	 	 	
How many of your ordinary shares will I receive?	 	Theravance will distribute one of our ordinary shares for every            shares of Theravance common stock you own of record as of the close of business on the record date and do not sell in the "regular way" market prior to or on the distribution date. Cash will be distributed in lieu of fractional shares, as described below. Based on approximately        million shares of Theravance common stock that we expect to be outstanding on the record date, Theravance will distribute a total of approximately        million of our ordinary shares. The number of our ordinary shares that Theravance will distribute to its stockholders will be reduced to the extent that cash payments are to be made in lieu of the issuance of fractional shares of Theravance Biopharma and to the extent that our ordinary shares are held back and sold on the market to satisfy backup withholding taxes and non-U.S. holder dividend withholding taxes and brokerage and other costs, and will be increased to the extent, if any, that Theravance options are exercised prior to the record date. For additional information on the distribution, see "The Spin-Off—Results of the Spin-Off" beginning on page 49.	
How will Theravance distribute fractional ordinary shares of Theravance Biopharma?	 	Theravance will not distribute any fractional shares of Theravance Biopharma to its stockholders. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds of the sales pro rata to each holder who otherwise would have been entitled to receive a fractional share in the distribution. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders as described in "The Spin-Off—U.S. Federal Income Tax Consequences" beginning on page 50.	
Can Theravance decide to cancel the distribution of Theravance Biopharma ordinary shares even if all the conditions have been met?	 	Yes. Theravance has the right to terminate the distribution, and the spin-off, even if all of the conditions set forth in the Separation and Distribution Agreement are satisfied, if at any time the board of directors of Theravance determines that the distribution is not in the best interest of Theravance and its stockholders or that market conditions are such that it is not advisable to separate the Drug Discovery and Development Business from Theravance.	
Will I receive physical certificates representing Theravance Biopharma ordinary shares following the separation?	 	Unless you provide us instructions to do otherwise, Theravance, with the assistance of Computershare Shareowner Services, the distribution agent, will electronically issue our ordinary shares to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. The book-entry system allows registered shareholders to hold their shares without physical share certificates. A benefit of issuing shares electronically in book-entry form is that there will be none of the physical handling and safekeeping responsibilities that are inherent in owning physical share certificates. For additional information, see "The Spin-Off—Manner of Effecting the Spin-Off" beginning on page 46.	
10

Table of Contents
 	 	 	
How will the distribution affect my tax basis and holding period in Theravance common stock and what will my tax basis and holding period be in the ordinary shares received in the distribution?	 	The treatment of the distribution of Theravance Biopharma ordinary shares as taxable will result in your basis in your shares of Theravance common stock being reduced by the excess, if any, of the fair market value of the Theravance Biopharma ordinary shares received over the amount treated as a taxable dividend. Your holding period for such Theravance shares will not be affected by the distribution.
You will have a tax basis in your Theravance Biopharma ordinary shares equal to the fair market value of such shares at the time of the distribution. Your holding period for the Theravance Biopharma ordinary shares received in the distribution will begin on the day after the distribution.
You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including the applicability of any U.S. federal, state, local and non U.S. tax laws. For a more detailed discussion see "U.S. Federal Income Tax Consequences" beginning on page 50.	
Is there a chance I may incur taxable gain as a result of the distribution?	 	All or a portion of the Theravance Biopharma shares you receive are expected to be taxable to you as a dividend. In connection with the spin-off, we submitted a private letter ruling request to the IRS regarding the tax treatment of the distribution of the spin-off. In the course of discussions with the IRS regarding the ruling request, the IRS has indicated its intention to treat the distribution of Theravance Biopharma ordinary shares as a taxable transaction. As a taxable transaction, an amount equal to the fair market value of our ordinary shares received by you (including any fractional shares deemed to be received) on the distribution date will be treated as a taxable dividend to the extent of your ratable share of any current and accumulated earnings and profits of Theravance, measured as of the end of the year in which the distribution occurs, with the excess treated as a non-taxable return of capital to the extent of your tax basis in Theravance common stock and any remaining excess treated as a capital gain.	
What will happen to Theravance equity awards?	 	Holders of Theravance restricted stock awards will receive ordinary shares of Theravance Biopharma upon the distribution subject to the same terms and conditions as apply to Theravance common stock. The number of shares and exercise price, if applicable, of Theravance stock options and restricted stock units that are outstanding on the date of the spin-off will adjust in accordance with the plans under which they were issued. In addition, Theravance equity awards held by Theravance employees who join Theravance Biopharma in connection with the spin-off have been amended so that the awards will remain outstanding and continue to vest based on service to Theravance Biopharma following the spin-off. Further, Theravance equity awards held by Theravance non-employee directors who join Theravance Biopharma in connection with the spin-off have been amended, effective as of immediately prior to the spin-off, so that the vesting of the awards will accelerate and the awards will remain outstanding for the remainder of their respective terms based on service to Theravance Biopharma following the spin-off. See "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off." We also expect to issue new Theravance Biopharma options to our employees and non-employee directors following the spin-off.	
11

Table of Contents
 	 	 	
Do you intend to pay dividends on your ordinary shares?	 	We currently do not intend to pay dividends on our ordinary shares. The declaration and amount of dividends will be determined by our board of directors and will depend on our financial condition, earnings, capital requirements, legal requirements, regulatory constraints, contractual restrictions, and any other factors that our board of directors believes are relevant. See "Dividend Policy" on page 62 for additional information on our dividend policy following the spin-off.	
What if I want to sell my Theravance common stock or Theravance Biopharma ordinary shares?	 	You should consult your financial advisors, such as your stockbroker, bank or tax advisor. Neither Theravance nor Theravance Biopharma makes any recommendation as to the purchase, retention or sale of shares of Theravance common stock or the Theravance Biopharma ordinary shares to be distributed.	
 	 	If you decide to sell any shares of Theravance common stock prior to or on the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your Theravance common stock or the Theravance Biopharma ordinary shares you will receive in the distribution or both.	
Where will I be able to trade Theravance Biopharma ordinary shares?	 	There is no current trading market for our ordinary shares. We have applied to have our ordinary shares listed on the Nasdaq Global Market under the symbol "TBPH." We expect that a limited market, commonly known as a "when-issued" trading market, for our ordinary shares will begin shortly after                , 2014. The term "when-issued" means that shares can be traded prior to the time shares are actually available or issued. We expect that on the distribution date or the first trading day after the distribution date, "when-issued" trading in our ordinary shares will end and "regular way" trading will begin. "Regular way" trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of a trade. Our ordinary shares generally will be freely tradable following the spin-off. For additional information regarding the trading of our ordinary shares, see "The Spin-Off—Market for Our Ordinary Shares; Trading of Our Ordinary Shares in Connection with the Spin-Off" beginning on page 57.	
Will the number of Theravance shares I own change as a result of the spin-off?	 	No. The number of shares of Theravance common stock you own will not change as a result of the spin-off.	
What will happen to the listing of Theravance common stock?	 	Nothing. It is expected that after the distribution of Theravance Biopharma ordinary shares, Theravance common stock will continue to be traded on the Nasdaq Global Market under the symbol "THRX".	
Are there any risks to owning Theravance Biopharma ordinary shares?	 	Yes. Our business is subject to both general and specific risks relating to our operations, anticipated net losses, and our operating as a standalone company. Our business is also subject to risks relating to the separation. These and other risks are described in "Risk Factors" beginning on page 16. We encourage you to read that section carefully.	
12

Table of Contents
 	 	 	
Who do I contact for information regarding you and the spin-off?	 	Before the spin-off, you should direct inquiries relating to the spin-off to:	
 	 	Investor Relations
Theravance, Inc.
901 Gateway Boulevard
South San Francisco, CA 94080	
 	 	After the spin-off, you should direct inquiries relating to our ordinary shares to:	
 	 	Investor Relations
Theravance Biopharma US, Inc.
901 Gateway Boulevard
South San Francisco, CA 94080	
 	 	After the spin-off, the transfer agent and registrar for our ordinary shares will be:	
 	 	Computershare Shareowner Services
250 Royall Street
Canton, MA 02021	
13

Table of Contents
Summary Historical Combined Financial Information

        The following table sets forth certain summary historical financial information as of December 31, 2011, 2012 and 2013, which has been derived from our audited combined financial statements that are included elsewhere in this Information Statement. We derived the balance sheet data as of December 31, 2011 from our audited combined financial statements which are not included in this Information Statement. At each of these dates, Theravance Biopharma was an integrated business of Theravance. The summary historical financial information may not be indicative of the results of operations or financial position that we would have obtained if we had been an independent company during the periods presented or of our future performance as an independent company. See "Risk Factors."

        The following tables also set forth the pro forma combined balance sheet as of December 31, 2013, which has been derived from our historical combined balance sheet as of such date. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. Please see the notes to the unaudited pro forma combined financial statement included elsewhere in this Information Statement for a discussion of adjustments reflected in the pro forma combined financial statements.

        You should read these tables together with "Historical Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Combined Financial Statement" and our historical combined financial statements and the notes thereto included elsewhere in this Information Statement.

Combined Statements of Operations Data

	 	Year Ended December 31,	 	
(in thousands, except per share data)
	 	2011	 	2012	 	2013	 	
Revenue	 	$	14,854	 	$	130,145	 	$	226	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	98,850	 	 	113,995	 	 	120,579	 	
Selling, general and administrative	 	 	25,339	 	 	25,725	 	 	35,931	 	
 	 	 	 	 	 	 	 	
Total operating expenses(1)	 	 	124,189	 	 	139,720	 	 	156,510	 	
 	 	 	 	 	 	 	 	
Net loss	 	$	(109,335	)	$	(9,575	)	$	(156,284	)	
 	 	 	 	 	 	 	 	
14

Table of Contents

Combined Balance Sheet Data

	 	Year ended December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	2013	 	

	 	 
	 	 
	 	Pro Forma (Unaudited)
	 	
Cash and cash equivalents(2)	 	$	—	 	$	—	 	$	—	 	$	300,000	 	
Restricted cash	 	 	893	 	 	833	 	 	833	 	 	833	 	
Working capital (deficit)	 	 	(33,565	)	 	(11,837	)	 	(22,747	)	 	277,253	 	
Total assets	 	 	13,821	 	 	20,962	 	 	25,177	 	 	325,739	 	
Long-term liabilities(3)	 	 	118,664	 	 	5,280	 	 	5,359	 	 	5,359	 	
Total parent company (deficit)/stockholders' equity(4)	 	 	(140,724	)	 	(6,990	)	 	(17,035	)	 	283,527	 	

(1)
The following table discloses the allocation of stock-based compensation expense included in total operating expenses:

	 	Year Ended
December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Research and development	 	$	12,696	 	$	13,192	 	$	15,444	 	
Selling, general and administrative	 	 	8,767	 	 	8,131	 	 	7,032	 	
 	 	 	 	 	 	 	 	
Total stock-based compensation	 	$	21,463	 	$	21,323	 	$	22,476	 	
 	 	 	 	 	 	 	 	
(2)
Cash and cash equivalents pro forma include a cash capital contribution by Theravance, Inc. of approximately $300 million based on the anticipated post-separation capital structure.

(3)
Long-term liabilities include the long-term portion of deferred revenue as follows:

	 	December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	2013	 	

	 	 
	 	 
	 	Pro Forma
(Unaudited)
	 	
Deferred revenue	 	$	112,843	 	$	206	 	$	585	 	$	585	 	
(4)
Total parent company equity, pro forma at December 31, 2013 for Theravance Biopharma, Inc. assumes the issuance of approximately                     shares at $0.00001 par value, which is based on the number of outstanding shares of Theravance, Inc. as of rate of one ordinary share of Theravance Biopharma, Inc. for every      shares of Theravance common stock.

15

Table of Contents
Risk Factors

        This Information Statement includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. All statements in this Information Statement, other than statements of historical facts, including statements regarding the spin-off, our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, expectations and objectives could be forward-looking statements. The words "anticipates," "believes," "could," "designed," "estimates," "expects," "goal," "intends," "may," "plans," "projects," "pursuing," "will," "would" and similar expressions (including the negatives thereof) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward-looking statements that we make. Factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to, those discussed below in "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Information Statement. Our forward-looking statements in this Information Statement are based on current expectations and we do not assume any obligation to update any forward-looking statements.

RISKS RELATING TO THE SPIN-OFF

We may not realize the potential benefits from the spin-off; Theravance stockholders may not realize the potential benefits of the spin-off.

        We may not realize the potential benefits that we expect from our spin-off from Theravance, Inc. ("Theravance"). Further, Theravance stockholders may not realize the intended benefits of the spin-off. We have described those anticipated benefits elsewhere in this Information Statement. See "The Spin-Off—Reasons for the Spin-Off." By separating from Theravance, there is a risk that our company may be more susceptible to market fluctuations and other adverse events than we would have been were we still a part of the current Theravance. In addition, we will incur significant costs, including those described below, which may exceed our estimates, and we will incur some negative effects from our separation from Theravance, including the loss of potential royalty revenue derived from certain of Theravance's late-stage partnered respiratory assets (the "Royalty Business").

Our historical and pro forma financial information may not reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented and is not necessarily indicative of our future financial position, future results of operations or future cash flows.

        Our historical financial information included in this Information Statement does not necessarily reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented and is not necessarily indicative of our future financial position, future results of operations or future cash flows. This is primarily a result of the following factors:

•
Prior to the separation, our business was operated by Theravance as part of its broader corporate organization rather than as a stand-alone company, and our business was able to leverage Theravance's financial resources and creditworthiness;

•
Certain general administrative functions are performed by Theravance for the combined entity. Our historical combined financial statements reflect allocations of costs for services shared with Theravance. These allocations may differ from the costs we will incur for these services as an independent company;

16

Table of Contents

•
After the spin-off, our cost of capital may be higher than Theravance's cost of capital prior to our separation; and

•
After the spin-off, we will also be responsible for the additional costs associated with being an independent, public company, including costs related to corporate governance and listed and registered securities.

        The unaudited pro forma combined balance sheet as of December 31, 2013 assumes the cash funding by Theravance of approximately $300 million for a capital contribution based on the anticipated post-separation capital structure. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Combined Balance Sheet" and our historical combined financial statements and the notes thereto included elsewhere in this Information Statement.

        Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the transactions. If we are unable to achieve and maintain effective internal controls, our business, financial position and results of operations could be adversely affected.

        Our financial results previously were included within the consolidated results of Theravance. However, we were not directly subject to the reporting and other requirements of the Exchange Act. As a result of the separation, we will be directly subject to the reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will require annual management assessments of the effectiveness of our internal control over financial reporting. When and if we are a "large accelerated filer" or an "accelerated filer" and are no longer an "emerging growth company," each as defined in the Exchange Act, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources.

        To comply with these requirements, it is anticipated that we may need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional legal, accounting and/or finance staff. If we are unable to upgrade our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. In addition, if we are unable to conclude that our internal control over financial reporting is effective (or if the auditors are unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports.

        Our management will be responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Any failure to achieve and maintain effective internal controls could have an adverse effect on our business, financial position and results of operations.

We have no history operating as an independent company upon which you can evaluate us.

        We do not have an operating history as a stand-alone entity. While our drug discovery and development business (the "Drug Discovery and Development Business") has constituted a substantial part of the historic operations of Theravance, we have not operated as a stand-alone company without the Royalty Business. After the spin-off, as an independent company, our ability to satisfy our

17

Table of Contents

obligations and achieve profitability will be primarily dependent upon the future performance of our Drug Discovery and Development Business, and we will not be able to rely upon the revenues, capital resources and cash flows of the Royalty Business remaining with Theravance. In addition, after the spin-off, we may need certain transition services from Theravance to be able to operate our business and we will be required to deliver a significant number of services to Theravance.

Concerns about our prospects as a stand-alone company and employee compensation and benefits after the spin-off or otherwise, could affect our ability to retain employees.

        The spin-off represents a significant organizational change and our employees may have concerns about our prospects as a stand-alone company, including our ability to successfully operate the new entity over the long-term, and our ability maintain our independence after the spin-off. If we are not successful in assuring our employees of our prospects as an independent company, our employees may seek other employment, which could materially adversely affect our business.

        After the spin-off, all of our employees will hold stock options, restricted stock and/or restricted stock units for shares of Theravance common stock and will continue to vest in such Theravance equity interests based on service to us. We believe that the continued vesting of Theravance equity awards will help us retain our employees as we transition to a stand-alone company. However, after the spin-off, we will not be able to grant our employees further equity awards for Theravance common stock or effect amendments of Theravance's equity incentive plans (and similar programs) or equity awards previously granted by Theravance. Furthermore, in the event Theravance is acquired and the vesting of Theravance equity awards are accelerated in such an acquisition, we may have difficulty retaining our employees and may have to incur additional costs to retain them.

        If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our development and commercialization activities, which may cause the price of our securities to fall.

We will be required to satisfy certain indemnification obligations to Theravance or may not be able to collect on indemnification rights from Theravance.

        Under the terms of the Separation and Distribution Agreement, we will indemnify Theravance from and after the spin-off with respect to (i) all debts, liabilities and obligations transferred to us in connection with the spin-off (including our failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the spin-off), (ii) any misstatement or omission of a material fact in this Information Statement resulting in a misleading statement and (iii) any breach by us of the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Tax Matters Agreement, and the Sublease Agreement. We are not aware of any existing indemnification obligations at this time, but any such indemnification obligations that may arise could be significant. Under the terms of the Separation and Distribution Agreement, Theravance will indemnify us from and after the spin-off with respect to (i) all debts, liabilities and obligations retained by Theravance after the spin-off (including its failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the spin-off) and (ii) any breach by Theravance of the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Tax Matters Agreement, and the Sublease Agreement. Our and Theravance's ability to satisfy these indemnities, if called upon to do so, will depend upon our and Theravance's future financial strength. If we are required to indemnify Theravance, or if we are not able to collect on indemnification rights from Theravance, our business prospects and financial condition may be harmed. We cannot determine whether we will have to indemnify Theravance, or if Theravance will have to indemnify us, for any substantial obligations after the distribution.

18

Table of Contents

We may have received better terms from unaffiliated third parties than the terms we receive in our agreements with Theravance.

        The agreements we will enter into with Theravance in connection with the spin-off were determined by management and the Theravance board of directors in the context of the spin-off while we were still part of Theravance and, accordingly, may not reflect terms that would have resulted from arm's-length negotiations between unaffiliated third parties. The terms of the agreements relate to, among other things, the licensing of intellectual property and the provision of certain employment and transition services. We may have received better terms from third parties because, among other things, third parties may have competed with each other to win our business. See "Our Relationship with Theravance, Inc. after the Spin-Off."

After the spin-off, certain of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in Theravance, and our Chairman and Chief Executive Officer may have actual or potential conflicts of interest because he will also serve as Chairman and Chief Executive Officer for Theravance, which actual or potential conflicts may harm our business, prospects and financial condition and result in the diversion of corporate opportunities to Theravance.

        Following the distribution, Rick E Winningham will serve as our Chairman and Chief Executive Officer and will hold the same positions for Theravance. In addition, following the spin-off, certain of our directors and executive officers will own shares of Theravance's common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. This service to both companies and ownership of Theravance common stock may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for Theravance and us. For example, potential or actual conflicts could arise relating to: the terms and conditions of the spin-off; the relationship between Theravance and us after the spin-off, including Theravance's and our respective rights and obligations under agreements entered into in connection with the spin-off; the management of TRC by Theravance after the spin-off, particularly given that we and Theravance have different economic interests in TRC; the compensation of individuals who serve as officers of both companies; and corporate opportunities that may be available to both companies in the future. Although we and Theravance plan to implement policies and procedures to identify and properly address such potential and actual conflicts of interest, there can be no assurance that such conflicts of interest will not harm our business, prospects and financial condition and result in the diversion of corporate opportunities to Theravance.

The amount of Theravance's net operating losses that will be used as a result of pre spin-off restructuring is uncertain.

        As part of the overall spin-off transaction, it is anticipated that certain assets that are transferred by Theravance to us will result in taxable transfers pursuant to Section 367 of the Internal Revenue Code of 1986, as amended (the "Code"), or other applicable provisions of the Code and Treasury Regulations. The taxable gain recognized by Theravance attributable to the transfer of certain assets to us will equal the excess of the fair market value of each asset transferred over Theravance's adjusted tax basis in such asset. While Theravance's basis in the cash it transfers to us will be equal to the amount of such cash (and, therefore, no gain will be recognized on the transfer of such cash), Theravance's basis in other assets (other than cash) transferred to us may be significantly less than their respective fair market values, which could result in substantial taxable gain to Theravance. The determination of the fair market value of non-publicly traded assets is subjective and could be subject to adjustments or future challenge by the IRS, which could result in an increase in the amount of gain, and thus U.S. federal income tax, realized by Theravance as a result of the transfer. Theravance's U.S. federal income tax resulting from any gain recognized upon the transfer of its assets to us (including any increased U.S. federal income tax that may result from a subsequent determination of higher fair

19

Table of Contents

market values for the transferred assets), may be reduced by Theravance's net operating loss carryforward. While federal and state tax laws impose restrictions on the utilization of net operating losses in the event of an ownership change, as defined in Section 382 of the Code, Theravance conducted an analysis to determine whether an ownership change had occurred since its inception through December 31, 2013, and has concluded that Theravance had undergone two ownership changes in prior years. Theravance had approximately $1.4 billion of net operating loss as of December 31, 2013. Theravance expects its net operating loss carryforward and current projected losses will generally fully offset the U.S. federal income tax resulting from the gains it will realize in connection with the pre spin-off restructuring, although there is expected to be approximately 2 percent alternative minimum tax federal tax liability to the extent such gains are offset with net operating loss carryforwards from prior years. However, the amount of Theravance's net operating loss carryforward that will be used is uncertain as Theravance is not seeking a pre-spin-off appraisal of the fair market values of our transferred assets, but instead will be determining fair market values after the spin-off based in significant part on the trading prices of our shares following the spin-off.

Our shareholders could incur significant U.S. federal income tax liabilities.

        Because of uncertain issues relating to the taxable status of the distribution, Theravance sought a private letter ruling from the IRS regarding the U.S. federal income tax consequences of the distribution of our ordinary shares to the Theravance stockholders substantially to the effect that the distribution, except for cash received in lieu of a fractional share of our ordinary shares, would qualify as tax-free under Sections 368(a)(1)(D) and 355 of the Code and, that, for U.S. federal income tax purposes, no gain or loss would be recognized by a holder of Theravance common stock upon the receipt of our ordinary shares pursuant to the distribution. The IRS declined to issue such ruling and has informed us that in the view of the IRS, the distribution will fail to satisfy the requirements of Section 355 of the Code. Specifically, the IRS informed us that, in its view, Theravance will not be engaged in an "active trade or business" immediately following the distribution, as required by Section 355 of the Code, and that the IRS intends to treat the distribution as a taxable transaction. Accordingly, all or a portion of the Theravance Biopharma ordinary shares you receive is expected be taxable to you as a dividend. If the spin-off is taxable, an amount equal to the fair market value of our ordinary shares received by you (including any fractional shares deemed to be received) on the distribution date will be treated as a taxable dividend to the extent of your ratable share of any current and accumulated earnings and profits of Theravance, measured as of the end of the year in which the distribution occurs, with the excess treated as a non-taxable return of capital to the extent of your tax basis in Theravance common stock and any remaining excess treated as a capital gain. You could incur significant U.S. federal income tax liabilities as a result of the distribution.

Theravance Biopharma may be treated as a U.S. corporation for U.S. federal income tax purposes.

        For U.S. federal income tax purposes, a corporation generally is considered tax resident in the place of its incorporation. Because Theravance Biopharma is incorporated under Cayman Islands law, it should be deemed a Cayman Islands corporation under this general rule. Section 7874 of the Code, however, contains rules that could result in a foreign corporation being taxed as a U.S. corporation for U.S. federal income tax purposes. The application of these rules is complex and there is little guidance regarding their application.

        Under Section 7874 of the Code, a corporation created or organized outside the U.S. will be treated as a U.S. corporation for U.S. federal tax purposes, when (i) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation, (ii) the former shareholders of the acquired U.S. corporation hold at least 80% of the vote or value of the shares of the foreign acquiring corporation by reason of holding stock in the U.S. acquired corporation, and (iii) the foreign corporation's "expanded affiliated group" does not have "substantial business

20

Table of Contents

activities" in the foreign corporation's country of incorporation relative to its expanded affiliated group's worldwide activities. For this purpose, "expanded affiliated group" generally means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the stock by vote and value, and "substantial business activities" generally means at least 25% of employees (by number and compensation), assets and gross income of our expanded affiliated group are based, located and derived, respectively, in the Cayman Islands.

        We do not expect to be treated as a U.S. corporation under Section 7874 of the Code, because the assets contributed to us by Theravance are not expected to constitute "substantially all" of the assets of Theravance (as determined on both a gross and net fair market value basis). However, the IRS may disagree with our conclusion on this point and assert that, in its view, the assets contributed to us by Theravance do constitute "substantially all" of the assets of Theravance. In addition, there have been legislative proposals to expand the scope of U.S. corporate tax residence and there could be changes to Section 7874 of the Code or the Treasury Regulations promulgated thereunder that could result in Theravance Biopharma being treated as a U.S. corporation.

        If it were determined that we should be taxed as a U.S. corporation for U.S. federal income tax purposes, we could be liable for substantial additional U.S. federal income tax. In addition, payments of dividends to non-U.S. holders may be subject to U.S. withholding tax.

Theravance Biopharma is likely to be classified as a passive foreign investment company, or "PFIC," which may have adverse U.S. federal income tax consequences to U.S. holders.

        For U.S. federal income tax purposes, Theravance Biopharma generally would be classified as a PFIC for any taxable year if either (i) 75% or more of its gross income (including gross income of certain 25%-or-more-owned corporate subsidiaries) is "passive income" (as defined for such purposes) or (ii) the average percentage of its assets (including the assets of certain 25%-or-more-owned corporate subsidiaries) that produce passive income or that are held for the production of passive income is at least 50%.

        We believe that Theravance Biopharma will be a PFIC immediately following the spin-off and distribution and may be a PFIC in subsequent years. If we were to be treated as a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder, then the U.S. holder would generally be subject to additional U.S. federal income taxes plus an interest charge with respect to distributions from Theravance Biopharma. U.S. holders of our common stock may wish to file elections to be treated as owning an interest in a "qualified electing fund" ("QEF") or to "mark-to-market" their ordinary shares to avoid the interest charge consequences of the default PFIC treatment. This paragraph is qualified in its entirety by the discussion below under "The Spin-Off—U.S. Federal Income Tax Consequences." U.S. holders should consult their tax advisers regarding the potential PFIC, QEF and Mark-to-Market treatment of their interests in our ordinary shares.

No vote of the Theravance stockholders is required in connection with the distribution. As a result, if you do not want to receive our ordinary shares in the distribution, your sole recourse will be to divest yourself of your Theravance common stock prior to or on the distribution date.

        No vote of the Theravance stockholders is required in connection with the distribution. Accordingly, if you do not want to receive our ordinary shares in the distribution, your only recourse will be to divest yourself of your Theravance common stock prior to or on the distribution date.

21

Table of Contents

RISKS RELATING TO THE COMPANY

We anticipate that we will incur losses for the foreseeable future. We may never achieve or sustain profitability.

        During the years ended December 31, 2011, 2012 and 2013, we recognized losses of $109.3, $9.6 and $156.3 million, respectively. During the three years ended December 31, 2011, 2012 and 2013, we recognized a cumulative loss of $275.2 million, which is reflected in the Parent Company Deficit on Theravance Biopharma's combined balance sheets. After the spin-off, we will reflect cumulative net loss incurred and retained after the effective date of the spin-off as accumulated deficit on Theravance Biopharma's consolidated balance sheets. We expect to continue to incur net losses over the next several years as we continue our drug discovery and development activities and incur significant preclinical and clinical development costs and commercialization costs relating to VIBATIV®. We expect to incur substantial expenses as we continue our drug discovery and development efforts, particularly to the extent we advance our product candidates into and through clinical studies, which are very expensive. For example, TD-9855 in our MARIN program is in an ongoing Phase 2 study for fibromyalgia and in September 2013 Theravance reported positive top-line data from a Phase 2b study with TD-4208 our LAMA compound. Also, in July 2012, Theravance announced positive results from the key study in our Phase 2b program with TD-1211 in our Peripheral Mu Opioid Receptor Antagonist program for opioid-induced constipation. Though we are seeking to partner these programs, we may choose to progress one or more of these programs into later stage clinical studies by ourselves, which could increase our anticipated operating expenses substantially. Furthermore, if we do not identify a suitable commercialization partner for VIBATIV® in the U.S. we will not be able to leverage a commercialization partner's capabilities and infrastructure and we will incur all of the costs and expenses associated with our reintroduction of VIBATIV® in the U.S., including the creation of an independent sales and marketing organization with appropriate technical expertise, supporting infrastructure and distribution capabilities, expansion of medical affairs presence, manufacturing and third party vendor logistics and consultant support. Our commitment of resources to the further discovery and continued development of our product candidates will require significant additional funding. Our operating expenses also will increase if:

•
our earlier stage potential products move into later stage clinical development, which is generally a more expensive stage of development;

•
additional preclinical product candidates are selected for clinical development;

•
we pursue clinical development of our potential products in new indications;

•
we increase the number of patents we are prosecuting or otherwise expend additional resources on patent prosecution or defense; and

•
we acquire additional technologies, product candidates, products or businesses.

        Other than potential revenues from VIBATIV®, our only approved drug, and potential contingent payments under collaboration agreements, we do not expect to generate revenues from our drug programs for the foreseeable future. Since we or our collaborators or licensees may not successfully develop additional products, obtain required regulatory approvals, manufacture products at an acceptable cost or with appropriate quality, or successfully market such products with desired margins, our expenses may continue to exceed any revenues we may receive.

        In the absence of substantial licensing, contingent payments or other revenues from third-party collaborators, royalties on sales of products licensed under our intellectual property rights, future revenues from our products in development or other sources of revenues, we will continue to incur operating losses and may require additional capital to fully execute our business strategy. The likelihood of reaching, and time required to reach, sustained profitability are highly uncertain. As a result, we expect to continue to incur substantial losses for the foreseeable future. We are uncertain

22

Table of Contents

when or if we will ever be able to achieve or sustain profitability. Failure to become and remain profitable would adversely affect the price of our securities and our ability to raise capital and continue operations.

If additional capital is not available, we may have to curtail or cease operations or we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us.

        Based on our current operating plans and financial forecasts, we believe that our cash and cash equivalents and marketable securities will be sufficient to meet our anticipated operating needs for the next two to three years. If our current operating plans or financial forecasts change, we may require additional funding sooner in the form of public or private equity offerings, debt financings or additional collaborations and licensing arrangements. For example, if we chose to conduct Phase 3 studies with TD-1211 in our Peripheral Mu Opioid Receptor Antagonist program for opioid-induced constipation, or progress TD-4208 in our LAMA program or TD-9855 in our MARIN program into later stage development and we choose to progress any of these programs on our own, our capital needs would increase substantially.

        Although we expect that we will have sufficient cash to fund our operations and working capital requirements for approximately the next two to three years after the spin-off based on current operating plans and financial forecasts, we may need to raise additional capital in the future to, among other things:

•
fund our discovery efforts and research and development programs;

•
progress mid-to-late stage product candidates into Phase 3 development, if warranted;

•
bear the full cost of developing our own sales, marketing and distribution capabilities to commercialize VIBATIV® in the U.S. with appropriate technical expertise and supporting infrastructure, if we cannot identify a suitable commercialization partner;

•
respond to competitive pressures; and

•
acquire complementary businesses or technologies.

        Our future capital needs depend on many factors, including:

•
the scope, duration and expenditures associated with our discovery efforts and research and development programs;

•
continued scientific progress in these programs;

•
the extent to which we encounter technical obstacles in our research and development programs;

•
the outcome of potential licensing transactions, if any;

•
competing technological developments;

•
the extent of our proprietary patent position in our product candidates;

•
our facilities expenses, which will vary depending on the time and terms of any facility lease or sublease we may enter into;

•
potential litigation and other contingencies; and

•
the regulatory approval process for our product candidates.

        We may seek to raise necessary funds through public or private equity offerings, debt financings or additional collaborations and licensing arrangements. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it very difficult for us to seek

23

Table of Contents

financing from the capital markets. We may be required to relinquish rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us, in order to raise additional funds through collaborations or licensing arrangements. If adequate funds are not available, we may have to sequence preclinical and clinical studies as opposed to conducting them concomitantly in order to conserve resources, or delay, reduce or eliminate one or more of our research or development programs and reduce overall overhead expenses. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to make reductions in our workforce and may be prevented from continuing our discovery and development efforts and exploiting other corporate opportunities. This would likely harm our business, prospects and financial condition and cause the price of our securities to fall.

We may obtain future financing through the issuance of debt or equity, which may have an adverse effect on our shareholders or may otherwise adversely affect our business.

        If we raise funds through the issuance of debt or equity, any debt securities or preferred shares issued will have rights, preferences and privileges senior to those of holders of our ordinary shares in the event of liquidation. In such event, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of ordinary shares. In addition, if we raise funds through the issuance of additional equity, whether through private placements or public offerings, such an issuance would dilute ownership of current shareholders in us.

        The terms of debt securities may also impose restrictions on our operations, which may include limiting our ability to incur additional indebtedness, to pay dividends on or repurchase our share capital, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control.

If the MABA program for the treatment of chronic obstructive pulmonary disease ("COPD") encounters further delays, does not demonstrate safety and efficacy or is terminated, our business will be harmed, and the price of our securities could fall.

        The lead compound, GSK961081 ('081), in the MABA program that Theravance partnered with GSK and to which we have certain economic rights, has completed a Phase 2b study, a Phase 1 study in combination with the inhaled corticosteroid, fluticasone propionate ("FP"), and a number of Phase 3-enabling non-clinical studies. '081 is now being progressed as a combination with FF delivered once-daily in the ELLIPTA inhaler which requires additional work on non-clinical studies, manufacturing and a Phase 1 bioequivalence study. As a result, it is unlikely that a Phase 3 study with '081 will commence in 2014. Any further delays or adverse developments or results or perceived adverse developments or results with respect to the MABA program will harm our business and could cause the price of our securities to fall. Examples of such adverse developments include, but are not limited to:

•
GSK deciding to further delay or halt development of '081 or '081/FF;

•
the U.S. Food and Drug Administration ("FDA") and/or other regulatory authorities determining that any of these studies do not demonstrate adequate safety or efficacy, or that additional non-clinical or clinical studies are required with respect to the MABA program;

•
safety, efficacy or other concerns arising from clinical or non-clinical studies in this program; or

•
any change in FDA policy or guidance regarding the use of MABAs to treat COPD.

Furthermore, we have little, if any, ability to influence the progress of the MABA program, because our interest in this program is only through our economic interest in TRC, which is controlled by Theravance.

24

Table of Contents

If we cannot identify a suitable commercialization partner for VIBATIV® in the U.S. we will bear the full cost of developing the capability to market, sell and distribute the product.

        Our general strategy is to engage pharmaceutical or other healthcare companies with an existing sales and marketing organization and distribution system to market, sell and distribute our products. We may not be able to establish these sales and distribution relationships on acceptable terms, or at all. For any of our product candidates that receive regulatory approval in the future and are not covered by our current collaboration agreements, we will need a partner in order to commercialize such products unless we establish independent sales, marketing and distribution capabilities with appropriate technical expertise and supporting infrastructure. VIBATIV® was returned to Theravance by Astellas Pharma Inc. ("Astellas"), Theravance's former VIBATIV® collaboration partner, in January 2012. Astellas had the right to terminate the agreement if a VIBATIV® new drug application was not approved by the FDA within two years of submission, or if VIBATIV® was not approved by the FDA for both complicated skin and skin structure infections and hospital-acquired pneumonia by December 31, 2008. Both of these conditions giving rise to Astellas' termination rights existed in January 2012 when Astellas exercised its right to terminate the agreement. On August 14, 2013 Theravance announced the reintroduction of VIBATIV® to the U.S. market with the commencement of shipments into the wholesaler channel. While Theravance has contracted a small sales force and is expanding its medical affairs presence, other commercialization alternatives for the U.S. market are being evaluated. The risks of commercializing VIBATIV® in the U.S. without a partner include:

•
costs and expenses associated with creating an independent sales and marketing organization with appropriate technical expertise and supporting infrastructure and distribution capability, which costs and expenses could, depending on the scope and method of the marketing effort, exceed any product revenue from VIBATIV® for several years;

•
our unproven ability to recruit and retain adequate numbers of effective sales and marketing personnel;

•
the unproven ability of sales personnel to obtain access to or educate adequate numbers of physicians about prescribing VIBATIV® in appropriate clinical situations; and

•
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines.

        If we are not able to partner VIBATIV® in the U.S. with a third party with marketing, sales and distribution capabilities and if we are not successful in recruiting sales and marketing personnel or in building an internal sales and marketing organization with appropriate technical expertise and supporting infrastructure and distribution capability, we will have difficulty commercializing VIBATIV® in the U.S., which would adversely affect our business and financial condition and which could cause the price of our securities to fall.

With regard to all of our programs, any delay in commencing or completing clinical studies for product candidates and any adverse results from clinical or non-clinical studies or regulatory obstacles product candidates may face, would harm our business and could cause the price of our securities to fall.

        Each of our product candidates must undergo extensive non-clinical and clinical studies as a condition to regulatory approval. Non-clinical and clinical studies are expensive, take many years to complete and study results may lead to delays in further studies or decisions to terminate programs. The commencement and completion of clinical studies for our product candidates may be delayed and programs may be terminated due to many factors, including, but not limited to:

•
lack of effectiveness of product candidates during clinical studies (for example, as Theravance experienced when TD-9855 did not meet the primary efficacy endpoints in the Phase 2 study in adult patients with Attention-Deficit/Hyperactivity Disorder);

25

Table of Contents

•
adverse events, safety issues or side effects relating to the product candidates or their formulation into medicines;

•
inability to raise additional capital in sufficient amounts to continue our development programs, which are very expensive;

•
the need to sequence clinical studies as opposed to conducting them concomitantly in order to conserve resources;

•
our inability to enter into partnering arrangements relating to the development and commercialization of our programs and product candidates;

•
our inability or the inability of our collaborators or licensees to manufacture or obtain from third parties materials sufficient for use in non-clinical and clinical studies;

•
governmental or regulatory delays and changes in regulatory requirements, policy and guidelines;

•
failure of our partners to advance our product candidates through clinical development;

•
delays in patient enrollment and variability in the number and types of patients available for clinical studies;

•
difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

•
varying regulatory requirements or interpretations of data among the FDA and foreign regulatory authorities; and

•
a regional disturbance where we or our collaborative partners are enrolling patients in clinical trials, such as a pandemic, terrorist activities or war, political unrest or a natural disaster.

If our product candidates that we develop on our own or with collaborative partners are not approved by regulatory authorities, including the FDA, we will be unable to commercialize them.

        The FDA must approve any new medicine before it can be marketed and sold in the U.S. We must provide the FDA and similar foreign regulatory authorities with data from preclinical and clinical studies that demonstrate that our product candidates are safe and effective for a defined indication before they can be approved for commercial distribution. We will not obtain this approval for a product candidate unless and until the FDA approves a new drug application, or NDA. The processes by which regulatory approvals are obtained from the FDA to market and sell a new product are complex, require a number of years and involve the expenditure of substantial resources. In order to market our medicines in foreign jurisdictions, we must obtain separate regulatory approvals in each country. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Conversely, failure to obtain approval in one or more jurisdictions may make approval in other jurisdictions more difficult.

        Clinical studies involving our product candidates may reveal that those candidates are ineffective, inferior to existing approved medicines, unacceptably toxic, or that they have other unacceptable side effects. In addition, the results of preclinical studies do not necessarily predict clinical success, and larger and later-stage clinical studies may not produce the same results as earlier-stage clinical studies.

        Frequently, product candidates that have shown promising results in early preclinical or clinical studies have subsequently suffered significant setbacks or failed in later clinical or non-clinical studies. In addition, clinical and non-clinical studies of potential products often reveal that it is not possible or practical to continue development efforts for these product candidates. If these studies are substantially

26

Table of Contents

delayed or fail to prove the safety and effectiveness of our product candidates in development, we may not receive regulatory approval of any of these product candidates. Further, the implementation of new laws and regulations, and revisions to FDA clinical trial design guidance, have increased uncertainty regarding the approvability of a new drug. In addition, over the past decade, the FDA has implemented additional requirements for approval of new drugs, including advisory committee meetings for new chemical entities, and formal risk evaluation and mitigation strategy at the FDA's discretion. These laws, regulations, additional requirements and changes in interpretation could cause non-approval or further delays in the FDA's review and approval of our and our collaborative partner's product candidates, which would materially harm our business and financial condition and could cause the price of our securities to fall.

We rely on a single manufacturer for the Active Pharmaceutical Ingredient ("API") for telavancin and a separate, single manufacturer for VIBATIV® drug product supply. Our business will be harmed if either of these single-source manufacturers are not able to satisfy demand and alternative sources are not available.

        We have a single source of supply of API for telavancin and another, separate single source of supply of VIBATIV® drug product. If, for any reason, either single-source third party manufacturer of telavancin API or of VIBATIV® drug product is unable or unwilling to perform, or if its performance does not meet regulatory requirements, including maintaining current Good Manufacturing Practice ("cGMP") compliance, we may not be able to locate alternative manufacturers, enter into acceptable agreements with them or obtain sufficient quantities of API or finished drug product in a timely manner. Any inability to acquire sufficient quantities of API or finished drug product in a timely manner from current or future sources would adversely affect the commercialization of VIBATIV® and our obligations to our partners and could cause the price of our securities to fall.

        Theravance's previous VIBATIV® commercialization partner failed to maintain a reliable source of drug product supply which resulted in critical product shortages and, eventually, suspension of commercialization. In May 2012, Theravance entered into an agreement with Hospira Worldwide, Inc. ("Hospira") to supply VIBATIV® drug product. In June 2013, the FDA approved Hospira as a VIBATIV® drug product manufacturer, and this agreement with Hospira will be assigned to Theravance Biopharma. Although we believe that Hospira will be a reliable supplier of VIBATIV® drug product, if it cannot perform or if its performance does not meet regulatory requirements, including maintaining cGMP compliance, and if commercial manufacture of VIBATIV® drug product cannot be arranged elsewhere on a timely basis, the commercialization of VIBATIV® in the U.S. will continue to be adversely affected and the commercial introduction of VIBATIV® in the European Union and Canada will be further delayed.

We rely on a single source of supply for a number of our product candidates, and our business will be harmed if any of these single-source manufacturers are not able to satisfy demand and alternative sources are not available.

        We have limited in-house production capabilities for preclinical and clinical study purposes, and depend primarily on a number of third-party API and drug product manufacturers. We may not have long-term agreements with these third parties and our agreements with these parties may be terminable at will by either party at any time. If, for any reason, these third parties are unable or unwilling to perform, or if their performance does not meet regulatory requirements, we may not be able to locate alternative manufacturers or enter into acceptable agreements with them. Any inability to acquire sufficient quantities of API and drug product in a timely manner from these third parties could delay preclinical and clinical studies, prevent us from developing our product candidates in a cost-effective manner or on a timely basis. In addition, manufacturers of our API and drug product are subject to the FDA's cGMP regulations and similar foreign standards and we do not have control over compliance with these regulations by our manufacturers.

27

Table of Contents

        Our manufacturing strategy presents the following additional risks:

•
because of the complex nature of many of our compounds, our manufacturers may not be able to successfully manufacture our APIs and/or drug products in a cost effective and/or timely manner and changing manufacturers for our APIs or drug products could involve lengthy technology transfer, validation and regulatory qualification activities for the new manufacturer;

•
the processes required to manufacture certain of our APIs and drug products are specialized and available only from a limited number of third-party manufacturers;

•
some of the manufacturing processes for our APIs and drug products have not been scaled to quantities needed for continued clinical studies or commercial sales, and delays in scale-up to commercial quantities could delay clinical studies, regulatory submissions and commercialization of our product candidates; and

•
because some of the third-party manufacturers are located outside of the U.S., there may be difficulties in importing our APIs and drug products or their components into the U.S. as a result of, among other things, FDA import inspections, incomplete or inaccurate import documentation or defective packaging.

Even if our product candidates receive regulatory approval, as VIBATIV® has, commercialization of such products may be adversely affected by regulatory actions and oversight.

        Even if we receive regulatory approval for our product candidates, this approval may include limitations on the indicated uses for which we can market our medicines or the patient population that may utilize our medicines, which may limit the market for our medicines or put us at a competitive disadvantage relative to alternative therapies. For example, the U.S. labeling for VIBATIV® contains a number of boxed warnings. Products with boxed warnings are subject to more restrictive advertising regulations than products without such warnings. In addition, the VIBATIV® labeling for hospital-acquired and ventilator associated pneumonia ("HABP/VABP") in the U.S. and the European Union specifies that VIBATIV® should be reserved for use when alternative treatments are not suitable. These restrictions make it more difficult to market VIBATIV®. With VIBATIV® approved in certain countries, we are subject to continuing regulatory obligations, such as safety reporting requirements and additional post-marketing obligations, including regulatory oversight of promotion and marketing.

        In addition, the manufacturing, labeling, packaging, adverse event reporting, advertising, promotion and recordkeeping for the approved product remain subject to extensive and ongoing regulatory requirements. If we become aware of previously unknown problems with an approved product in the U.S. or overseas or at contract manufacturers' facilities, a regulatory authority may impose restrictions on the product, the contract manufacturers or on us, including requiring us to reformulate the product, conduct additional clinical studies, change the labeling of the product, withdraw the product from the market or require the contract manufacturer to implement changes to its facilities. For example, during the fourth quarter of 2011, the third party manufacturer of VIBATIV® drug product utilized by Theravance's former commercialization partner notified the FDA of an ongoing investigation related to its production equipment and processes. In response to this notice, Theravance's former VIBATIV® commercialization partner placed a voluntary hold on distribution of VIBATIV® to wholesalers and cancelled pending orders for VIBATIV® with this manufacturer. In April 2013, we were advised by the FDA that its consent decree with the manufacturer prohibited the distribution of the VIBATIV® drug product lots previously manufactured but unreleased by this manufacturer. As a result of this supply termination, commercialization of VIBATIV® ceased for well over a year.

        We are also subject to regulation by regional, national, state and local agencies, including the Department of Justice, the Federal Trade Commission, the Office of Inspector General of the U.S. Department of Health and Human Services and other regulatory bodies with respect to VIBATIV®, as

28

Table of Contents

well as governmental authorities in those foreign countries in which any of our product candidates are approved for commercialization. The Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal and state statutes and regulations govern to varying degrees the research, development, manufacturing and commercial activities relating to prescription pharmaceutical products, including non-clinical and clinical testing, approval, production, labeling, sale, distribution, import, export, post-market surveillance, advertising, dissemination of information and promotion. If we or any third parties that provide these services for us are unable to comply, we may be subject to regulatory or civil actions or penalties that could significantly and adversely affect our business. Any failure to maintain regulatory approval will limit our ability to commercialize our product candidates, which would materially and adversely affect our business and financial condition, which may cause the price of our securities to fall.

        The risks identified in this risk factor relating to regulatory actions and oversight by agencies in the U.S. and throughout the world also apply to the commercialization of partnered products by our collaboration partners, and such regulatory actions and oversight may limit our collaboration partners' ability to commercialize such products, which could materially and adversely affect our business and financial condition, which may cause the price of our securities to fall.

VIBATIV® may not be accepted by physicians, patients, third party payors, or the medical community in general.

        The commercial success of VIBATIV® depends upon its acceptance by physicians, patients, third party payors and the medical community in general. We cannot be sure that VIBATIV® will be accepted by these parties. VIBATIV® competes with vancomycin, a relatively inexpensive generic drug that is manufactured by a variety of companies, and a number of existing antibacterials manufactured and marketed by major pharmaceutical companies and others, and may compete against new antibacterials that are not yet on the market. If we are unable to demonstrate to physicians that, based on experience, clinical data, side-effect profiles and other factors, VIBATIV® for the treatment of complicated skin and skin structure infections ("cSSSI") and HABP/VABP caused by susceptible Gram-positive bacteria in adult patients is a suitable alternative to vancomycin and other antibacterial drugs in certain clinical situations, we may never generate meaningful revenue from VIBATIV® which could cause the price of our securities to fall. The degree of market acceptance of VIBATIV® depends on a number of factors, including, but not limited to:

•
the demonstration of the clinical efficacy and safety of VIBATIV®;

•
the experiences of physicians, patients and payors with the use of VIBATIV® in the U.S.;

•
potential negative perceptions of physicians related to product shortages and regional supply outages that halted commercialization of VIBATIV®, stemming from the manufacturing issues at the previous drug product supplier;

•
potential negative perceptions of physicians related to the European Commission's previous suspension of marketing authorization for VIBATIV® (which suspension has recently been lifted) because the prior VIBATIV® commercialization partner's single-source VIBATIV® drug product supplier did not meet the cGMP requirements for the manufacture of VIBATIV®;

•
the advantages and disadvantages of VIBATIV® compared to alternative therapies;

•
our ability to educate the medical community about the appropriate circumstances for use of VIBATIV®;

•
the reimbursement policies of government and third party payors; and

•
the market price of VIBATIV® relative to competing therapies.

29

Table of Contents

If our partners do not satisfy their obligations under our agreements with them, or if they terminate our partnerships with them, we may not be able to develop or commercialize our partnered product candidates as planned.

        In October 2012, Theravance entered into an exclusive development and commercialization agreement with Alfa Wassermann società per azioni (S.p.A.) ("Alfa Wassermann") for velusetrag, our lead compound in the 5-HT4 program, covering the European Union, Russia, China, Mexico and certain other countries, and Theravance entered into a research collaboration and license agreement with Merck to discover, develop and commercialize novel small molecule therapeutics for the treatment of cardiovascular disease on an exclusive, worldwide basis. In March 2013, Theravance entered into a commercialization agreement with Clinigen Group plc ("Clinigen") for VIBATIV® in the European Union and certain other European countries (including Switzerland and Norway). In connection with these agreements, Theravance granted to these parties certain rights regarding the use of its patents and technology with respect to the compounds in our development programs, including development and marketing rights. In September 2013, Merck terminated its research collaboration and license agreement with Theravance. The Alfa Wassermann agreement provides research and development funding for the program under license, and if it decides not to progress the licensed program, we may not be able to develop or commercialize the program on our own. The Alfa Wassermann and Clinigen agreements will be assigned to us in the spin-off.

        Our partners might not fulfill all of their obligations under these agreements, and, in certain circumstances, they may terminate our partnership with them as Astellas did to Theravance in January 2012 with its VIBATIV® agreement and as Merck did to Theravance in September 2013 with the cardiovascular disease collaboration. In either event, we may be unable to assume the development and commercialization of the product candidates covered by the agreements or enter into alternative arrangements with a third party to develop and commercialize such product candidates. If a partner elected to promote its own products and product candidates in preference to those licensed from us, the development and commercialization of product candidates covered by the agreements could be delayed or terminated, and future payments to us could be delayed, reduced or eliminated and our business and financial condition could be materially and adversely affected. Accordingly, our ability to receive any revenue from the product candidates covered by these agreements is dependent on the efforts of our partners. If a partner terminates or breaches its agreements with us, otherwise fails to complete its obligations in a timely manner or alleges that we have breached our contractual obligations under these agreements, the chances of successfully developing or commercializing product candidates under the collaboration could be materially and adversely affected. We could also become involved in disputes with a partner, which could lead to delays in or termination of our development and commercialization programs and time-consuming and expensive litigation or arbitration.

Because GSK is a strategic partner of Theravance and will be a strategic partner of TRC upon the spin-off as well as a significant shareholder of us, it may take actions that in certain cases are materially harmful to both our business or to our other shareholders.

        Although GSK will beneficially own approximately 27.0% of our outstanding capital stock immediately following the distribution (based on GSK's beneficial ownership of Theravance common stock as of February 14, 2014), GSK is also a strategic partner with rights and obligations under its collaboration and strategic alliance agreements with Theravance and, following the assignments contemplated in connection with the spin-off, with TRC, that may cause GSK's interests to differ from the interests of us and our other shareholders. In particular, upon the regulatory approval of UMEC/VI/FF or a MABA/ICS in either the U.S. or the European Union, GSK's diligent efforts obligations under the collaboration agreement and strategic alliance agreement with regard to commercialization matters will have the objective of focusing on the best interests of patients and maximizing the net value of the overall portfolio of products under the collaboration agreement and strategic alliance

30

Table of Contents

agreement. Following such regulatory approval, GSK's commercialization efforts will be guided by a portfolio approach across products in which we have an indirect interest through TRC and products in which we have no interests. Accordingly, GSK's commercialization efforts may have the effect of reducing the value of our interests in TRC. Furthermore, GSK has a substantial respiratory product portfolio in addition to its products covered by the GSK agreements. GSK may make respiratory product portfolio decisions or statements about its portfolio which may be, or may be perceived to be, harmful to the respiratory products partnered with Theravance and TRC. For example, GSK could promote its own respiratory products and/or delay or terminate the development or commercialization of the respiratory programs covered by the GSK agreements. Also, given the potential future royalty payments GSK may be obligated to pay under the GSK agreements, GSK may seek to acquire us or acquire our interests in TRC in order to effectively reduce those payment obligations, though the actions GSK may take to acquire us will be limited under our Governance Agreement with GSK which agreement will become effective if the spin-off is effected prior to June 30, 2014 and will expire on December 31, 2017. The timing of when GSK may seek to acquire us could potentially be when it possesses information regarding the status of drug programs covered by the GSK agreements that has not been publicly disclosed and is not otherwise known to us. As a result of these differing interests, GSK may take actions that it believes are in its best interest but which might not be in the best interests of either us or our other shareholders. In addition, GSK could also seek to challenge our post-spin-off operations as violating or allowing it to terminate the GSK agreements, including by violating the confidentiality provisions of those agreements or the master agreement between GSK, Theravance and us entered into in connection with the spin-off, or otherwise violating its legal rights. While we believe our planned operations fully comply with the GSK agreements, the master agreement and applicable law, there can be no assurance that we or Theravance will prevail against any such claims by GSK. Moreover, regardless of the merit of any claims by GSK, we may incur significant cost and diversion of resources in defending them. In addition, any uncertainty about the respiratory programs partnered with GSK or the enforceability of the GSK agreements could result in significant reduction in the market price of our securities and other material harm to our business.

Agreements entered into with or for the benefit of GSK in connection with the Spin-Off may significantly restrict our business and affairs.

        On March 3, 2014, in connection with the spin-off, we, Theravance and GSK entered into a number of agreements that may significantly restrict our business and affairs. In particular, we, Theravance and GSK entered into a three-way master agreement that, among other things, requires GSK's consent to make any changes to (A) the Separation and Distribution Agreement, Transition Services Agreement, Employee Matters Agreement and Tax Matters Agreement that would, individually or in the aggregate, reasonably be expected to adversely affect GSK in any material respect or (B) to the TRC Limited Liability Company Agreement, which consent is not to be unreasonably withheld, conditioned or delayed, provided that GSK may withhold, condition or delay such consent in its sole discretion with respect to certain sections of the TRC Limited Liability Company Agreement and any changes to the governance structure of TRC, the confidentiality restrictions, the consent rights, and the transfer restrictions in the TRC Limited Liability Company Agreement. The Master Agreement also limits Mr. Winningham's ability to act as Chief Executive Officer of both us and Theravance to a period of nine months following the spin-off and also limits the periods of time that Theravance employees may provide services to us pursuant to the transition services agreement between Theravance and us. We and GSK also entered into a (i) governance agreement that, among other things, provides share purchase rights to GSK and exempts GSK from triggering our Rights Agreement until December 31, 2017, (ii) registration rights agreement that gives GSK certain registration rights with respect to our ordinary shares held by GSK and (iii) extension agreement that extends to us certain restrictive covenants similar to those applicable to Theravance under the collaboration and strategic alliance agreement with GSK . There can be no assurance that these restrictions will not

31

Table of Contents

materially harm our business, particularly given that GSK's interests may not be aligned with the interests of our business or our other shareholders. See "Because GSK is a strategic partner of Theravance and will be a strategic partner of TRC upon the spin-off as well as a significant shareholder of us, it may take actions that in certain cases are materially harmful to both our business or to our other shareholders."

We will not control TRC and, in particular, will have no control over or access to non-public information about the GSK-partnered respiratory programs assigned to TRC in which we have a substantial economic interest.

        Before the spin-off, Theravance will form TRC and assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. Our equity interest in TRC will entitle us to an 85% economic interest in any future payments made by GSK under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. These other drug programs include 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. Our economic interest will not include any payments by GSK associated with RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ or vilanterol monotherapy. Theravance will control TRC and, except for certain limited consent rights, we will have no right to participate in the business and affairs of TRC. Theravance will have the exclusive right to appoint TRC's manager who, among other things, will be responsible for the day-to-day management of the drug programs assigned to TRC and will exercise the rights relating to the drug programs under the GSK agreements assigned to TRC by Theravance. As a result, we will have no rights to participate in or access to non-public information about the development and commercialization of the drug programs and no right to enforce rights under the GSK agreements assigned to TRC. Moreover, we will have many of the same risks with respect to our dependence on GSK as we have with respect to our dependence on our own partners. See "The Spin-Off—Formation of Theravance Respiratory Company LLC" and "—If our partners do not satisfy their obligations under our agreements with them or if they terminate our partnership with them we may not be able to develop and commercialize our partner product candidates as planned."

If we are unable to enter into future collaboration arrangements or if any such collaborations with third parties are unsuccessful, we will be unable to fully develop and commercialize our product candidates and our business will be adversely affected.

        Theravance has active collaborations with Alfa Wassermann for velusetrag, with Clinigen for VIBATIV® for the European Union, and with other companies for regional development and commercialization of VIBATIV®. In connection with the spin-off, these partnership agreements will be assigned to us by Theravance. Also, through our interest in TRC we may participate economically in Theravance's collaborations with GSK with respect to certain GSK-partnered respiratory programs. Additional collaborations will be needed to fund later-stage development of our product candidates that have not been licensed to a collaborator or for territory that is not covered by existing collaborations, and to commercialize these product candidates if approved by the necessary regulatory authorities. Velusetrag, our lead compound in the 5-HT4 program, and TD-1792, our investigational antibiotic have successfully completed a Phase 2 proof-of-concept study. In July 2012 Theravance reported positive results from a Phase 2b study with TD-1211, the lead compound in our Peripheral Mu Opioid Receptor Antagonist program for opioid-induced constipation and in September 2013 Theravance reported positive top-line results from a Phase 2b study with TD-4208 LAMA compound. In addition, in connection with the expansion of the MABA program under the strategic alliance with GSK in October 2011, GSK relinquished its right to option our MARIN program with TD-9855 and

32

Table of Contents

our ARNI program. We currently intend to seek additional third parties with which to pursue collaboration arrangements for the development and commercialization of our development programs and for the future commercialization of VIBATIV® in regions where it is not currently partnered. Collaborations with third parties regarding these programs or our other programs may require us to relinquish material rights, including revenue from commercialization of our medicines, on terms that are less attractive than the arrangements Theravance negotiated and will assign to us, or to assume material ongoing development obligations that we would have to fund. These collaboration arrangements are complex and time-consuming to negotiate, and if we are unable to reach agreements with third-party collaborators, we may fail to meet our business objectives and our financial condition may be adversely affected. We face significant competition in seeking third-party collaborators. We may be unable to find third parties to pursue product collaborations on a timely basis or on acceptable terms. Furthermore, for any collaboration, we may not be able to control the amount of time and resources that our partners devote to our product candidates and our partners may choose to prioritize alternative programs. Our inability to successfully collaborate with third parties would increase our development costs and would limit the likelihood of successful commercialization of our product candidates which may cause the price of our securities to fall.

We depend on third parties in the conduct of our clinical studies for our product candidates.

        We depend on independent clinical investigators, contract research organizations and other third-party service providers in the conduct of our non-clinical and clinical studies for our product candidates. We rely heavily on these parties for execution of our non-clinical and clinical studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that our clinical studies are conducted in accordance with good clinical practices ("GCPs") and other regulations as required by the FDA and foreign regulatory authorities, and the applicable protocol. Failure by these parties to comply with applicable regulations, GCPs and protocols in conducting studies of our product candidates can result in a delay in our development programs or non-approval of our product candidates by regulatory authorities.

        The FDA enforces GCPs and other regulations through periodic inspections of trial sponsors, clinical research organizations ("CROs"), principal investigators and trial sites. If we or any of the third parties on which we have relied to conduct our clinical studies are determined to have failed to comply with GCPs, the study protocol or applicable regulations, the clinical data generated in our studies may be deemed unreliable. This could result in non-approval of our product candidates by the FDA, or we or the FDA may decide to conduct additional audits or require additional clinical studies, which would delay our development programs, could result in significant additional costs and could cause the price of our securities to fall.

We face substantial competition from companies with more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than we do.

        Our ability to succeed in the future depends on our ability to demonstrate and maintain a competitive advantage with respect to our approach to the discovery and development of medicines. Our objective is to discover, develop and commercialize new small molecule medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. We expect that any medicines that we commercialize with our collaborative partners will compete with existing or future market-leading medicines.

        Many of our potential competitors have substantially greater financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial

33

Table of Contents

infrastructures than we have. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery and development to:

•
discover and develop medicines that are superior to other products in the market;

•
attract and retain qualified personnel;

•
obtain patent and/or other proprietary protection for our medicines and technologies;

•
obtain required regulatory approvals; and

•
successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicines.

        Established pharmaceutical companies, including companies with which we collaborate, may invest heavily to quickly discover and develop or in-license novel compounds that could make our product candidates obsolete. Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or discovering, developing and commercializing medicines before we do. Other companies are engaged in the discovery of medicines that would compete with the product candidates that we are developing.

        Any new medicine that competes with a generic or proprietary market leading medicine must demonstrate compelling advantages in efficacy, convenience, tolerability and/or safety in order to overcome severe price competition and be commercially successful. VIBATIV® must demonstrate these advantages in certain circumstances, as it competes with vancomycin, a relatively inexpensive generic drug that is manufactured by a number of companies, and a number of existing antibacterial drugs marketed by major and other pharmaceutical companies. If we are not able to compete effectively against our current and future competitors, our business will not grow, our financial condition and operations will suffer and the price of our securities could fall.

        As the principles of multivalency become more widely known, we expect to face increasing competition from companies and other organizations that pursue the same or similar approaches. Novel therapies, such as gene therapy or effective vaccines for infectious diseases, may emerge that will make both conventional and multivalent medicine discovery efforts obsolete or less competitive.

Our Chief Executive Officer is expected to work only part-time for us while continuing to work part-time for Theravance during a transition period following the spin-off. Our business may suffer due to lack of time or attention from him or potential conflicts of interest.

        After the spin-off, our Chief Executive Officer is expected to work part-time for us and part-time for Theravance and this arrangement is expected to last until the earlier of the recruitment and transition of a new chief executive officer of Theravance or, pursuant to the terms of our master agreement with Theravance and GSK, up to nine months following the spin-off. While we will benefit from his deep knowledge of our current programs, partners and personnel, as well as his familiarity with our systems, policies, procedures and mode of operation, the lack of his full time focus on our business may dilute his effectiveness on our behalf and therefore hurt our business.

34

Table of Contents

If we lose key management or scientific personnel, or if we fail to retain our key employees, our ability to discover and develop our product candidates will be impaired.

        We are highly dependent on principal members of our management team and scientific staff, and in particular, our Chief Executive Officer, Rick E Winningham, to operate our business. Mr. Winningham has significant pharmaceutical industry experience. The loss of Mr. Winningham's services could impair our ability to discover, develop and market new medicines.

        Our U.S. operating subsidiary's facility and most of its and our employees will be located in northern California, which is headquarters to many other biotechnology and biopharmaceutical companies and many academic and research institutions. As a result, competition for certain skilled personnel in our market is intense. None of our employees have employment commitments for any fixed period of time and they all may leave our employment at will. If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our development and commercialization activities, which may cause the price of our securities to fall.

Our business and operations would suffer in the event of system failures.

        Although we have security measures in place, our internal computer systems and those of our CROs and other service providers are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Any material system failure, accident or security breach could result in a material disruption to our business. For example, the loss of clinical trial data from completed or ongoing clinical trials of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. If a disruption or security breach results in a loss of or damage to our data or regulatory applications, or inadvertent disclosure of confidential or proprietary information, we could incur liability, the further development of our product candidates could be delayed and the price of our securities could fall.

Our U.S. operating subsidiary's facility will be located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.

        Our U.S. operating subsidiary's facility will be located in the San Francisco Bay Area near known earthquake fault zones and therefore will be vulnerable to damage from earthquakes. In October 1989, a major earthquake struck this area and caused significant property damage and a number of fatalities. We will also be vulnerable to damage from other types of disasters, including power loss, attacks from extremist organizations, fire, floods, communications failures and similar events. If any disaster were to occur, our ability to operate our business could be seriously impaired. In addition, the unique nature of our research activities and of much of our equipment could make it difficult for us to recover from this type of disaster. We may not have adequate insurance to cover our losses resulting from disasters or other similar significant business interruptions and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition, which could cause the price of our securities to fall.

We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.

        We are an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We plan to avail ourselves of this exemption from new or revised accounting standards and, therefore, we may not be subject to the same

35

Table of Contents

new or revised accounting standards as other public companies that are not emerging growth companies.

        For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory shareholder vote on executive compensation and any golden parachute payments not previously approved, exemption from the requirement of auditor attestation in the assessment of our internal control over financial reporting and exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis). If we do, the information that we provide shareholders may be different than what is available with respect to other public companies. We cannot predict if investors will find our ordinary shares less attractive because we will rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

        We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter, (ii) the end of the fiscal year in which we have total annual gross revenues of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) the end of the fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to an effective registration statement filed under the Securities Act.

RISKS RELATED TO LEGAL AND REGULATORY UNCERTAINTY

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

        We rely upon a combination of patents, patent applications, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies. Any involuntary disclosure to or misappropriation by third parties of this proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. The status of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and is very uncertain. As of December 31, 2013, Theravance owned 379 issued United States patents and 1,364 granted foreign patents, as well as additional pending United States and foreign patent applications. We anticipate that all or substantially all of the patents and patent applications related to our business will be assigned by Theravance to us or one of our wholly-owned subsidiaries in the spin-off. Our patent applications may be challenged or fail to result in issued patents and our existing or future patents may be invalidated or be too narrow to prevent third parties from developing or designing around these patents. If the sufficiency of the breadth or strength of protection provided by our patents with respect to a product candidate is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, the product candidate. Further, if we encounter delays in our clinical trials or in obtaining regulatory approval of our product candidates, the patent lives of the related product candidates would be reduced.

        In addition, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, for processes for which patents are difficult to enforce and for any other elements of our drug discovery and development processes that involve proprietary know-how, information and technology that is not covered by patent applications. Although we require

36

Table of Contents

our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or, if established, maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition and results of operations, which could cause the price of our securities to fall.

Litigation or third-party claims of intellectual property infringement would require us to divert resources and may prevent or delay our drug discovery and development efforts.

        Our commercial success depends in part on us and our partners not infringing the patents and proprietary rights of third parties. Third parties may assert that we or our partners are using their proprietary rights without authorization. There are third party patents that may cover materials or methods for treatment related to our product candidates. At present, we are not aware of any patent claims with merit that would adversely and materially affect our ability to develop our product candidates, but nevertheless the possibility of third party allegations cannot be ruled out. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Furthermore, parties making claims against us or our partners may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

        In the event of a successful claim of infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties or pay royalties. In addition, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. In addition, in the future we could be required to initiate litigation to enforce our proprietary rights against infringement by third parties. Prosecution of these claims to enforce our rights against others would involve substantial litigation expenses and divert substantial employee resources from our business. If we fail to effectively enforce our proprietary rights against others, our business will be harmed, which may cause the price of our securities to fall.

If the efforts of our partners to protect the proprietary nature of the intellectual property related to collaboration assets are not adequate, the future commercialization of any medicines resulting from collaborations could be delayed or prevented, which would materially harm our business and could cause the price of our securities to fall.

        The risks identified in the two preceding risk factors also apply to the intellectual property protection efforts of our partners and to GSK with respect to the GSK-partnered respiratory programs in which we hold an economic interest. To the extent the intellectual property protection of any partnered assets are successfully challenged or encounter problems with the United States Patent and Trademark Office or other comparable agencies throughout the world, the future commercialization of these potential medicines could be delayed or prevented. Any challenge to the intellectual property protection of a late-stage development asset, particularly those of the GSK-partnered respiratory

37

Table of Contents

programs in which we hold an economic interest, could harm our business and cause the price of our securities to fall.

Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our medicines.

        The risk that we may be sued on product liability claims is inherent in the development and commercialization of pharmaceutical products and have likely increased with the reintroduction of VIBATIV® to the U.S. market. Side effects of, or manufacturing defects in, products that we or our partners develop or commercialize could result in the deterioration of a patient's condition, injury or even death. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits tends to increase. Claims may be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class. Also, changes in laws outside the U.S. are expanding our potential liability for injuries that occur during clinical trials. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of the applicable products.

        Although we maintain general liability and product liability insurance, this insurance may not fully cover potential liabilities and we cannot be sure that our insurer will not disclaim coverage as to a future claim. In addition, inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercial production and sale of our products, which could adversely affect our business. The cost of defending any product liability litigation or other proceeding, even if resolved in our favor, could be substantial and uncertainties resulting from the initiation and continuation of product liability litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Product liability claims could also harm our reputation, which may adversely affect our and our partners' ability to commercialize our products successfully, which could cause the price of our securities to fall.

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues.

        The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care may adversely affect one or more of the following:

•
our or our collaborators' ability to set a price we believe is fair for our products, if approved;

•
our ability to generate revenues and achieve profitability; and

•
the availability of capital.

        The Patient Protection and Affordable Care Act and other potential legislative or regulatory action regarding healthcare and insurance matters, along with the trend toward managed healthcare in the United States, could influence the purchase of healthcare products and reduce demand and prices for our products, if approved. This could harm our or our collaborators' ability to market our potential medicines and generate revenues. Cost containment measures that health care payors and providers are instituting and the effect of the Patient Protection and Affordable Care Act and further agency regulations that are likely to emerge in connection with the passage of this act could significantly reduce potential revenues from the sale of any product candidates approved in the future. In addition, in certain foreign markets, the pricing of prescription drugs is subject to government control and reimbursement may in some cases be unavailable. We believe that pricing pressures at the state and federal level, as well as internationally, will continue and may increase, which may make it difficult for

38

Table of Contents

us to sell our potential medicines that may be approved in the future at a price acceptable to us or our collaborators, which may cause the price of our securities to fall.

If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.

        Our research and development activities involve the controlled use of potentially hazardous substances, including chemical, biological and radioactive materials. In addition, our operations produce hazardous waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. We may incur significant additional costs to comply with these and other applicable laws in the future. Also, even if we are in compliance with applicable laws, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials and we may incur liability as a result of any such contamination or injury. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, which could cause the price of our securities to fall.

RISKS RELATING TO OUR ORDINARY SHARES

There is no existing market for our ordinary shares and a trading market that will provide you with adequate liquidity may not develop for our ordinary shares. In addition, once our ordinary shares begin trading, the market price for our shares may fluctuate widely.

        There is currently no public market for our ordinary shares. It is anticipated that on or about the record date for the distribution, trading of our ordinary shares will begin on a "when-issued" basis and will continue up to either the distribution date or the first trading date after the distribution date, after which "regular way" trading of our ordinary shares will begin. However, there can be no assurance that an active trading market for our ordinary shares will develop as a result of the distribution or be sustained in the future.

        To date, no securities analysts have written reports regarding our company as a stand-alone entity and there can be no assurance that any will. Lack of securities analyst coverage or limited securities analyst coverage of our company and stock is likely to reduce demand for our stock from potential investors, which likely will reduce the market price for our shares.

        Market prices for securities of biotechnology companies have been highly volatile, and we expect such volatility to continue for the foreseeable future, so that investment in our securities involves substantial risk. By separating from Theravance, there is a risk that our company may be more susceptible to market fluctuations and other adverse events than we would have been were we still a part of the current Theravance. Additionally, the stock market from time to time has experienced significant price and volume fluctuations unrelated to the operating performance of particular companies. Also, the trading price of shares of newly public companies distributed in spin-off transactions, as our shares will be distributed, can often be very volatile and subject to sharp declines, particularly shortly following the spin-off. The following are some of the factors that may have a significant effect on the market price of our ordinary shares:

•
any adverse developments or results or perceived adverse developments or results with respect to the MABA program with GSK, including, without limitation, any further delays encountered in progressing '081 and/or '081/FF, any difficulties or delays encountered with regard to the regulatory path for '081, either alone or in combination with other therapeutically active ingredients, or any indication from non-clinical studies of '081 that the compound is not safe or efficacious;

39

Table of Contents

•
any further adverse developments or perceived adverse developments with respect to the commercialization of VIBATIV®;

•
any announcements of developments with, or comments by, the FDA or other regulatory authorities with respect to products we or our partners have under development or have commercialized;

•
the extent to which GSK advances (or does not advance) UMEC/VI/FF through development into commercialization in all indications in all major markets;

•
any adverse developments or agreements or perceived adverse developments or agreements with respect to the relationship of Theravance or TRC, on the one hand, and GSK, on the other hand, including any such developments or agreements resulting from or relating to the spin-off;

•
any adverse developments or perceived adverse developments with respect to our relationship with any of our research, development or commercialization partners, including, without limitation, disagreements that may arise between us and any of those partners, including any such developments resulting from or relating to the spin-off;

•
any adverse developments or perceived adverse developments with respect to the partnering efforts with VIBATIV®, velusetrag, TD-1211, TD-9855, TD-4208, TD-1792, TD-8954 or our ARNI program;

•
announcements of patent issuances or denials, technological innovations or new commercial products by us or our competitors;

•
publicity regarding actual or potential study results or the outcome of regulatory review relating to products under development by us, our partners or our competitors;

•
regulatory developments in the United States and foreign countries;

•
economic and other external factors beyond our control;

•
loss of key personnel;

•
relative illiquidity in the public market for our ordinary shares related to the concentration of ownership;

•
developments or disputes as to patent or other proprietary rights;

•
approval or introduction of competing products and technologies;

•
results of clinical trials;

•
failures or unexpected delays in timelines for our potential products in development, including the obtaining of regulatory approvals;

•
delays in manufacturing or clinical trial plans;

•
fluctuations in our operating results;

•
market reaction to announcements by other biotechnology or pharmaceutical companies;

•
initiation, termination or modification of agreements with our collaborators or disputes or disagreements with collaborators;

•
litigation or the threat of litigation;

•
public concern as to the safety of drugs developed by us; and

•
comments and expectations of results made by securities analysts or investors.

40

Table of Contents

        If any of these factors causes us to fail to meet the expectations of securities analysts or investors, or if adverse conditions prevail or are perceived to prevail with respect to our business, the price of the ordinary shares would likely drop significantly. A significant drop in the price of a company's ordinary shares often leads to the filing of securities class action litigation against the company. This type of litigation against us could result in substantial costs and a diversion of management's attention and resources.

Substantial sales of ordinary shares may occur in connection with this distribution, which could cause our share price to decline.

        Our ordinary shares that Theravance intends to distribute to its stockholders generally may be sold immediately in the public market. It is possible that some Theravance stockholders, including possibly some of Theravance's large stockholders, will sell some or all of our ordinary shares received in the distribution for many reasons, such as that our business profile or market capitalization as an independent company does not fit their investment objectives. The sales of significant amounts of our ordinary shares or the perception in the market that this will occur is likely to result in lowering the market price of our ordinary shares.

Concentration of ownership will limit your ability to influence corporate matters.

        Theravance Biopharma's ownership at the time of the spin-off will reflect the ownership composition of Theravance. As of February 14, 2014, GSK beneficially owned approximately 27.0% of Theravance's outstanding capital stock. Based on our review of publicly available filings as of February 14, 2014, Theravance's three largest stockholders other than GSK collectively owned approximately 36.8% of its outstanding capital stock. These shareholders could control the outcome of actions taken by us that require shareholder approval, including a transaction in which shareholders might receive a premium over the prevailing market price for their shares.

Your percentage ownership in Theravance Biopharma will be diluted in the future.

        Your percentage ownership in Theravance Biopharma will be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees following the spin-off as well as other equity instruments such as debt and equity financing. We have adopted an equity incentive plan that provides for the grant of equity-based awards, including restricted shares, restricted share units, options, share appreciation rights and other equity-based awards, to our directors, officers and other employees and advisors.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit your opportunity to sell shares at a premium.

        Our constitutional documents include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions, including, among other things, provisions that:

•
require supermajority shareholder voting to effect certain amendments to our amended and restated memorandum and articles of association;

•
establish a classified board of directors;

•
restrict our shareholders from calling meetings or acting by written consent in lieu of a meeting;

•
limit the ability of our shareholders to propose actions at duly convened meetings; and

•
authorize our board of directors, without action by our shareholders, to issue preferred shares and additional ordinary shares.

41

Table of Contents

        These provisions could have the effect of depriving you of an opportunity to sell your ordinary shares at a premium over prevailing market prices by discouraging third parties from seeking to acquire control of us in a tender offer or similar transaction.

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

        Our corporate affairs will be governed by our amended and restated memorandum and articles of association to be effective following the spin-off, by the Companies Law (2012 Revision) (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are different from those under statutes or judicial precedent in existence in jurisdictions in the U.S. Therefore, you may have more difficulty in protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the U.S., due to the different nature of Cayman Islands law in this area.

        While Cayman Islands law allows a dissenting shareholder to express the shareholder's view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder's shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights on a merger or consolidation of a company. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the offeror give you additional consideration if you believe the consideration offered is insufficient.

        Shareholders of Cayman Islands exempted companies such as our company have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

        Our Cayman Islands counsel, Maples and Calder, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) the company's officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

•
a company is acting, or proposing to act, illegally or beyond the scope of its authority;

•
the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or

•
those who control the company are perpetrating a "fraud on the minority."

A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.

There is uncertainty as to shareholders' ability to enforce certain foreign civil liabilities in the Cayman Islands.

        We are incorporated as an exempted company limited by shares with limited liability under the laws of the Cayman Islands. A material portion of our assets are located outside of the United States. As a result, it may be difficult for our shareholders to enforce judgments against us or judgments

42

Table of Contents

obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States.

        We have been advised by our Cayman Islands legal counsel, Maples and Calder, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against Theravance Biopharma judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Theravance Biopharma predicated upon the civil liability provisions of the securities laws of the United States or any State, on the grounds that such provisions are penal in nature. However, in the case of laws that are not penal in nature, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands' judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands' court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere. There is also recent English authority which suggests that due to the universal nature of bankruptcy/insolvency proceedings, foreign judgments obtained in foreign bankruptcy/insolvency proceedings may be enforced by the English courts automatically without applying the principles outlined above. This decision would be persuasive in the Cayman Islands but not binding. To date it has not been considered by the Cayman Islands courts. This decision has also been appealed to the Supreme Court in England and judgment is pending. The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere, which would delay proceedings and make it more difficult for our shareholders to bring action against us.

43

Table of Contents
The Spin-Off

Reasons for the Spin-Off

        Since its incorporation in November 1996, Theravance, Inc. ("Theravance") has focused primarily on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including bacterial infections, central nervous system ("CNS")/pain, respiratory disease, and gastrointestinal ("GI") motility dysfunction. Theravance's key programs include RELVAR® ELLIPTA®/BREO® ELLIPTA® (fluticasone furoate/vilanterol), ANORO™ ELLIPTA™ (umeclidinium bromide/vilanterol) and vilanterol monotherapy, each partnered with GSK, and Theravance will retain full interests in these programs following the spin-off. BREO® ELLIPTA® has been approved for marketing in the United States and Canada, RELVAR® ELLIPTA® has been granted marketing authorization in the European Union and is licensed across 31 European countries, and ANORO™ ELLIPTA™ has been approved for marketing in the United States. Theravance also has other drug programs it is working on internally or that have been partnered with GSK or other collaborative partners that are not as far along in development and do not offer the potential to generate significant near-term royalty streams.

        Prior to announcing the spin-off in April 2013, the Theravance board of directors worked with its financial and legal advisors to explore potential strategic alternatives to enhance stockholder value. These alternatives included selling the company, a merger or consolidation with another company, a royalty monetization transaction and separating the company into two businesses, one (the "Royalty Business") focused primarily on certain late stage respiratory drug programs and the other (the "Drug Discovery and Development Business") focused primarily on the core drug discovery and development business and the remaining drug development programs. In considering the separation of the two businesses, the Theravance board of directors considered, among other factors, that (i) they have different business models, distinct cost structures and can be operated independently with limited overlap, (ii) investors often appeared to be focused on one of the two businesses, but not both of them, and (iii) potential acquirers who may be interested in either one of the businesses may not necessarily be interested in the other.

        Following its evaluation process, on April 25, 2013 the Theravance board of directors approved plans to separate its business into two independent publicly traded companies through a spin-off of the Drug Discovery and Development Business to Theravance Biopharma. Following the spin-off, Theravance will retain its full interests in the RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy programs, each partnered with GSK (collectively, the "Retained GSK Respiratory Drug Programs"). As part of the separation, the Theravance board of directors also approved assigning to a Delaware limited liability company, Theravance Respiratory Company LLC ("TRC"), that will be controlled by Theravance and jointly owned by Theravance and us, Theravance's strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. See "The Spin-Off—Formation of Theravance Respiratory Company LLC."

        Upon completion of the spin-off, we will focus primarily on the discovery, development and commercialization of small-molecule medicines in areas of significant unmet medical need. Key components of our business will consist of:

•
Theravance's core drug discovery and development business;

•
VIBATIV® and all of Theravance's drug programs that are not partnered with GSK;

•
through our equity interest in TRC, an 85% economic interest in any future payments made by GSK under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. These drug programs include UMEC/VI/FF

44

Table of Contents

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; and•
approximately $300 million in cash and cash equivalents in the aggregate.

        Theravance will focus on managing the Retained GSK Respiratory Drug Programs. The key components of its business will consist of:

•
the on-going collaboration activities and responsibilities of Theravance under the GSK agreements;

•
all future payments made by GSK under the GSK agreements relating to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™; and vilanterol monotherapy programs; and

•
through its equity interest in TRC, a 15% economic interest in any future payments made by GSK under the GSK agreements relating to GSK-partnered respiratory programs assigned to TRC (collectively, the "TRC Drug Programs").

        At the closing of the spin-off, Theravance will make a one-time contribution to us of approximately $300 million in cash and cash equivalents. In addition, Theravance will assign to us substantially all liabilities and obligations other than those related to the Royalty Business and its existing convertible debt.

        We also anticipate hiring substantially all of Theravance's current employees, other than the six most senior officers of Theravance after its chief executive officer and a limited number of other employees relating to the Royalty Business, and our Chief Executive Officer will work part-time for us and part-time for Theravance following the spin-off. We expect that our Chief Executive Officer will end his part-time service to Theravance and become one of our full-time employees and that some or all of the other senior officers remaining at Theravance may become our officers following the spin-off as Theravance recruits and integrates new officers for its Royalty Business. Some of these transitions may occur quickly after the spin-off depending in part on Theravance's success in recruiting and integrating new officers into its management. Under our master agreement with Theravance and GSK, we have agreed that Mr. Winningham may remain the Chief Executive Officer of both us and Theravance for up to nine months following the spin-off. We also expect that our wholly-owned U.S. operating subsidiary, which will employ our employees, will be headquartered in Theravance's existing facilities.

        Theravance and we believe that the spin-off of the Drug Discovery and Development Business to us will provide several opportunities and benefits, including the following:

•
Market Recognition:  The investment community, including analysts, stockholders and prospective investors in each company, will be better able to realize the value of each company fully and independently and enhance the market recognition of each company;

•
Business Focus:  Each company will be better able to focus its efforts on and allocate it resources towards its own business opportunities and challenges, with the management of Theravance Biopharma focusing on the discovery, development and commercialization of small molecule medicines in areas of significant unmet medical need and the management of Theravance focusing on maximizing the commercial value of the potential royalty streams from the Royalty Business;

•
Facilitate Return of Capital to Stockholders:  Following the spin-off, Theravance will have minimal staffing to support its operations and will be structured with the goal of distributing a significant portion of any future royalty revenues from the Retained GSK Respiratory Drug Programs, net of operating expenses, debt service and income taxes, to its stockholders.

45

Table of Contents

•
Improved Capital Flexibility:  Each company will be better able to deploy capital and access additional financing, if appropriate, in accordance with its unique needs and business model. In particular, Theravance will be positioned to return capital to its stockholders, because the benefit of future revenues of the Retained GSK Respiratory Drug Programs will accrue to Theravance; and

•
Employee Incentives:  Each company will be better able to attract, retain and motivate employees by providing equity compensation tied more directly to its performance and, in particular in the case of Theravance Biopharma, to our research and development programs.

        The Theravance board of directors also considered the risks and challenges of the separation, including the following:

•
Recurring Losses:  Theravance Biopharma expects to incur losses over the next several years and may never achieve or sustain profitability and Theravance Biopharma may not be able to obtain additional financing on favorable terms, if at all;

•
Heightened Risks:  The heightened risks of Theravance Biopharma operating as a standalone independent public company;

•
Uncertain Trading Values:  Uncertainty as to the trading value of Theravance after the spin-off because of the unique nature of the remaining Royalty Business and the lack of similarly situated publicly traded entities, which could serve as models and the uncertainty of the trading value of Theravance Biopharma as a new publicly traded company;

•
Potential Tax Inefficiencies:  The losses of the Drug Discovery and Development Business would no longer reduce the taxable income, if any, from the Royalty Business of Theravance, the expected tax impact of the separation on Theravance and its stockholders, and the taxable nature of the spin-off;

•
Duplicative Costs:  There will also be duplicative costs for operating two separate independent public companies;

•
Transaction Costs:  Significant costs and expenses will be incurred to effect the spin-off;

•
Risk of Distraction:  The process of preparing for and effecting the spin-off risks distracting management from managing the ongoing business of both entities; and

•
Dual Officer:  The fact that our Chief Executive Officer will only work for us part-time and for Theravance part-time, and that this arrangement is expected to last until the earlier of Theravance recruiting a new chief executive officer or up to nine months following the spin-off.

        After further determination regarding the terms of the separation, Theravance and we continue to believe that maximizing value to stockholders may best be achieved by the separation and independent operation of the Drug Discovery and Development Business and the Royalty Business.

Manner of Effecting the Spin-Off

        The general terms and conditions of the spin-off will be set forth in the Separation and Distribution Agreement to be entered into by Theravance and us. For a description of the expected terms of that agreement, see "Our Relationship with Theravance, Inc. after the Spin-Off—Separation and Distribution Agreement."

        Overview.    Under the Separation and Distribution Agreement, Theravance will contribute to Theravance Biopharma its Drug Discovery and Development Business, including certain intellectual property, and distribute to its stockholders of record on the record date all of the outstanding Theravance Biopharma ordinary shares. In addition, prior to the distribution, Theravance will assign certain contract rights under the GSK agreements to TRC in which Theravance Biopharma will have

46

Table of Contents

economic interests as set forth in TRC's limited liability company agreement. See "Business—The TRC Structure".

        As discussed under "The Spin-Off—Trading of Theravance Common Stock After the Record Date and Prior to or on the Distribution Date," if a holder of record of Theravance common stock sells those shares in the "regular way" market prior to or on the distribution date, that stockholder also will be selling the right to receive Theravance Biopharma ordinary shares in the distribution. Unless requested otherwise, the distribution will be made in book-entry form on the basis of one Theravance Biopharma ordinary share for every        shares of Theravance common stock held on the record date of                    , 2014. We will instruct Computershare Shareowner Services, as distribution agent, to record the distribution on the distribution date to the holders of Theravance common stock at the close of business on the record date (or their designated transferees) unless the shares of Theravance common stock had been sold prior to or on the distribution date. Each Theravance Biopharma ordinary share that Theravance distributes will be validly issued, fully paid and nonassessable and free of preemptive rights.

        Fractional Shares.    Theravance will not distribute any fractional Theravance Biopharma ordinary shares to its stockholders. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by Theravance or us, will determine when, how, through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either Theravance or us. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. If you physically hold Theravance common stock certificates and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the aggregate net cash proceeds of the sales. We estimate that it will take approximately four to six weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your Theravance common stock through a bank or brokerage firm, your bank or brokerage firm will receive on your behalf your pro rata share of the aggregate net cash proceeds of the sales, which should electronically credit your account for your share of such proceeds.

        Book Entry Statements and Physical Certificates.    A book-entry account statement or, if requested, physical certificate reflecting your ownership of Theravance Biopharma ordinary shares will be mailed to you, or your brokerage account should be credited for the shares, on or about                    , 2014.

        Future Cash Payments.    In addition to its one-time cash payment to us of approximately $300 million in cash and cash equivalents at the closing of the spin-off, Theravance will remain responsible for all operating expenses and related liabilities that were incurred prior to the spin-off under the Separation and Distribution Agreement. However, for ease of administration and in connection with the assignment of certain rights and obligations from Theravance to Theravance Biopharma under the Separation and Distribution Agreement, Theravance Biopharma will assume the obligation to pay for certain of such liabilities following the spin-off. Theravance and Theravance Biopharma will determine the amount of such current liabilities in accordance with the Separation and Distribution Agreement within    business days after the date of the spin-off, and Theravance will deliver to Theravance Biopharma a payment to reimburse Theravance Biopharma for assuming the obligation to pay such liabilities.

47

Table of Contents

Formation of Theravance Respiratory Company LLC

        Prior to the spin-off, Theravance will assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. Theravance will guarantee the performance by TRC of the strategic alliance agreement and all obligations under the collaboration agreement assigned to TRC.

        Theravance will own limited liability company units in TRC entitling it to 15% of the economic interest in any future payments made by GSK under the GSK agreements relating to the TRC Drug Programs. We will own limited liability company units entitling us to receive 85% of the economic interest in any future payments made by GSK under the GSK agreements relating to the TRC Drug Programs. These TRC Drug Programs include 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. Theravance's assignment to TRC of the strategic alliance agreement with GSK and portions of the collaboration agreement with GSK and the allocation of economic interests in TRC between us and Theravance was consented to by GSK (subject to certain conditions and so long as the spin-off occurs prior to June 30, 2014) and was structured to grant us an economic interest in certain of the GSK-partnered drug programs in a manner that would comply with Theravance's existing contractual and legal obligations, including its obligations under the GSK agreements and its indenture for its convertible subordinated notes due 2023.

        Under TRC's operating agreement, Theravance or one of its affiliates will be the manager of TRC. The business and affairs of TRC shall be managed exclusively by the manager, including (i) day-to-day management of the drug programs in accordance with the 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 the GSK agreements, provided that the manager shall not cause TRC to incur any indebtedness, issue any interests in TRC or take any action that would be prohibited under the GSK agreements. In order to comply with the GSK agreements, TRC will be severely limited in the information rights it can grant us and we have little, if any, ability to participate in the business and affairs of TRC. As a result, we will have no access to any confidential information of GSK relating to the TRC Drug Programs. Our consent is required in certain circumstances including for any actions or ommisions to take any action by the manager of TRC that would be reasonably expected to have a material and adverse effect on the rights, preferences, privileges of or obligations relating to our limited liability company units or the economic interest represented by those units, provided that we will not have any consent rights with respect to development and commercialization matters under the GSK Agreements to the extent that the manager of TRC determines in good faith that GSK is complying with its diligent efforts obligations under the GSK agreements. In addition, we will lose these limited consent rights if we transfer specified portions of our limited liability company units to other than an affiliate or a successor. Since we have no ability to vote for the manager of TRC and only limited consent rights with respect to actions taken by the manager of TRC, we will have little, if any, ability to influence the business and affairs of TRC.

Agreements Entered into with GSK in Connection with the Spin-Off

        On March 3, 2014 we, Theravance and GSK entered into a three-way master agreement providing for GSK's consent to the spin-off provided certain conditions are met. On that date, Theravance and GSK also entered into amendments of their collaboration agreement and strategic alliance agreement (see "Our Business—Program Highlights—Economic Interests In GSK Respiratory Programs Partnered with Theravance") and we and GSK entered into a governance agreement, a registration rights agreement and an extension agreement (see "Description of Share Capital—Governance Agreement,"

48

Table of Contents

"—Registration Rights Agreement" and "Our Business—Program Highlights—Theravance Biopharma Respiratory Program"). The master agreement is currently effective, but will terminate if the spin-off is not effected by June 30, 2014, and the other agreements will only become effective upon the spin-off, provided that the spin-off is effected on or before June 30, 2014. See "Risk Factors—Risks Relating to the Company—Agreements Entered into with or for the benefit of GSK in connection with the Spin-Off may significantly restrict our business and affairs."

        Prior to entering into these agreements, GSK has reviewed the then current versions of the Separation and Distribution Agreement, Transition Services Agreement, Employee Matters Agreement and Tax Matters Agreement (collectively referred to herein as the "Spin-Off Documents") (see "Our Relationship with Theravance after the Spin-Off") and the then current versions of our proposed Amended and Restated Memorandum and Articles of Association (see "Description of Share Capital") and Rights Agreement (see "Description of Share Capital— Rights Agreement"). We have agreed that, prior to the spin-off, without GSK's written consent, we will not make any changes to these documents that would, individually or in the aggregate, reasonably be expected to adversely affect GSK in any material respect. Other than with respect to our Amended and Restated Memorandum and Articles of Association and Rights Agreement, our agreement not to change the foregoing documents in a manner adverse to GSK will also apply after the spin-off. GSK also reviewed the then current version of the TRC Limited Liability Company Agreement (see "The Spin-Off— Formation of Theravance Respiratory Company LLC") prior to entering into the master agreement and we agreed—before and after the spin-off—not to make any changes to that agreement without the consent of GSK, which consent is not to be unreasonably withheld, conditioned or delayed, provided that GSK may withhold, condition or delay such consent in its sole discretion with respect to any changes to certain sections of the TRC Limited Liability Company Agreement, the governance structure of TRC or the confidentiality restrictions, consent rights and transfer restrictions in the TRC Limited Liability Company Agreement.

        Subject to the effectiveness of the agreements described in preceding two paragraphs (other than our Rights Agreement) and changes to such agreements being made in compliance with the preceding paragraph, GSK has consented to the assignments by Theravance to TRC of the strategic alliance agreement and portions of the collaboration agreement other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy, the contribution by Theravance of limited liability company units to us, and the pro rata dividend of our ordinary shares to Theravance stockholders.

Formation of Holding Company Structure Prior to the Spin-Off

        In connection with the spin-off, Theravance incorporated us in July 2013 as a Cayman Islands exempted company limited by shares for the purpose of transferring to us the Drug Discovery and Development Business and completing the spin-off. Theravance Biopharma, in turn, has formed two wholly-owned Cayman Islands subsidiaries to hold certain assets and has formed a wholly-owned Delaware subsidiary to employ the U.S.-based employees of the Drug Discovery and Development Business.

Results of the Spin-Off

        Following the spin-off, we will be an independent, publicly traded company owning and operating what had previously been Theravance's Drug Discovery and Development Business. We expect to have approximately         million of our ordinary shares issued and outstanding immediately following the spin-off based on the distribution ratio described above and the anticipated number of outstanding shares of Theravance common stock on                    , 2014, the record date. The actual number of shares to be distributed will be determined based on the number of shares of Theravance common stock outstanding on the record date and will be reduced to the extent that cash payments are to be made in lieu of the issuance of fractional shares of Theravance Biopharma and to the extent that our

49

Table of Contents

ordinary shares are held back and sold on the market to satisfy backup withholding taxes and non-U.S. holder dividend withholding taxes and brokerage and other costs, and may be increased if Theravance option holders exercise any stock options prior to the record date.

U.S. Federal Income Tax Consequences

The Distribution

        Because of uncertain issues relating to the taxable status of the distribution, Theravance sought a private letter ruling from the IRS regarding the U.S. federal income tax consequences of the distribution of our ordinary shares to the Theravance stockholders substantially to the effect that the distribution, except for cash received in lieu of a fractional share of our ordinary shares, would qualify as tax free under Sections 368(a)(1)(D) and 355 of the Code and, that, for U.S. federal income tax purposes, no gain or loss would be recognized by a holder of Theravance common stock upon the receipt of our ordinary shares pursuant to the distribution. The IRS declined to issue such ruling and has informed us that in the view of the IRS, the distribution will fail to satisfy the requirements of Section 355 of the Code. Specifically, the IRS informed us that, in its view, Theravance will not be engaged in an "active trade or business" immediately following the distribution, as required by Section 355 of the Code, and that the IRS intends to treat the distribution as a taxable transaction.

        Accordingly, each Theravance stockholder who receives Theravance Biopharma ordinary shares in the distribution is expected to generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the Theravance Biopharma ordinary shares received, including any fractional share sold on behalf of the stockholder. Such stockholder will be taxed on the full value of the Theravance Biopharma ordinary shares received in the distribution (without reduction for any portion of such stockholder's tax basis in its Theravance shares) as a dividend for U.S. federal income tax purposes to the extent of such stockholder's pro rata share of any current and accumulated earnings and profits of Theravance, measured as of the end of the year in which the distribution occurs (including Theravance's taxable gain on the contribution and distribution, if any). If the spin-off is taxable, any amount in excess of Theravance's earnings and profits will be treated first as a non-taxable dollar-for-dollar reduction in the stockholder's basis in its Theravance's stock, and thereafter as capital gain from the sale or exchange of such stockholder's Theravance's stock. Subject to certain exceptions, any amount treated as a taxable dividend that is paid to a non-U.S. holder of Theravance stock that is not effectively connected with the non-U.S. holder's conduct of a trade or business within the United States will generally be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty). Additionally, backup withholding (as discussed below) may apply with respect to the amount treated as a taxable dividend.

        Because a definitive calculation of the U.S. federal income tax impact of the distribution will not be possible until after the close of Theravance's 2014 taxable year, Theravance and other applicable withholding agents will withhold an amount equal to 30% of the fair market value of our ordinary shares distributed to a non-U.S. holder (as if the gross amount of such distribution was a taxable dividend) unless a reduced rate of withholding or an exemption from withholding is applicable. In addition, because the distribution is an in-kind distribution, Theravance and other applicable withholding agents will collect the amount required to be withheld (to the extent any cash in lieu of fractional shares is insufficient) by reducing to cash for remittance to the IRS a sufficient portion of the ordinary shares that a non-U.S. holder would otherwise receive and such non-U.S. holder may bear brokerage or other costs for this withholding procedure. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under an applicable treaty or other exemption and the manner of claiming the benefits of such treaty or other exemption. Non-U.S. holders may be eligible to obtain a refund of any excess amounts withheld if (1) all or a portion of the distribution is treated as a tax-free return of capital or capital gain or (2) the non-U.S. holder is eligible for a reduced rate of withholding tax pursuant to an applicable income tax treaty.

50

Table of Contents

        The distribution may, under certain circumstances, be subject to "backup withholding," unless a stockholder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the requirements of the backup withholding rules. Corporations and non-U.S. holders will generally be exempt from backup withholding, but may be required to provide a certification to establish their entitlement to the exemption. Backup withholding does not constitute an additional tax, but is merely an advance payment that may be refunded or credited against a holder's U.S. federal income tax liability if the required information is timely furnished to the IRS.

The U.S. Anti-Inversion Rules

        Although Theravance Biopharma is incorporated in the Cayman Islands, the IRS may assert that Theravance Biopharma should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal tax purposes under Section 7874 of the Code. At the time of enactment of Section 7874 in 2004, a number of publicly-traded U.S. multinational corporations had expatriated to non-U.S. jurisdictions. In most cases, those corporations expatriated to tax haven jurisdictions in which the applicable U.S. multinational corporation had no (or minimal) historic business activities. As a general matter, absent the application of Section 7874, a corporation is considered, for U.S. federal tax purposes, to be a tax resident of the jurisdiction in which it is incorporated.

        Under Section 7874, a corporation created or organized outside the U.S. will be treated as a U.S. corporation for U.S. federal tax purposes, when (i) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation, (ii) the former shareholders of the acquired U.S. corporation hold at least 80% of the vote or value of the shares of the foreign acquiring corporation by reason of holding stock in the U.S. acquired corporation, and (iii) the foreign corporation's "expanded affiliated group" does not have "substantial business activities" in the foreign corporation's country of incorporation relative to its expanded affiliated group's worldwide activities. Solely for purposes of Section 7874, "expanded affiliated group" means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the stock by vote and value. Treasury Regulation Section 1.7874-3 provides that an expanded affiliated group will be treated as having "substantial business activities" in the relevant foreign country when compared to its total business activities if, in general, at least 25% of the expanded affiliated group's employees (by number and compensation), asset value and gross income are based, located and derived, respectively, in the relevant foreign country. Specifically, (i) the number of "group employees" based in the relevant foreign country must be at least 25% of the total number of group employees on the applicable date, which is either the date the transaction is completed or the last day of the month immediately preceding the closing of the transaction (to be applied consistently for purposes of each clause), (ii) the "employee compensation" incurred with respect to group employees based in the relevant foreign country must be at least 25% of the total employee compensation incurred with respect to all group employees during the testing period, which is the one-year period ending on the applicable date (as described in clause (i) above), (iii) the value of the "group assets" (generally, tangible and real property, including certain leases thereof) located in the relevant foreign country must be at least 25% of the total value of all group assets on the applicable date, and (iv) the "group income" (generally, gross income from unrelated customers) derived in the relevant foreign country must be at least 25% of the total group income during the testing period (as described in clause (ii) above).

        In general, we do not expect that the assets contributed to Theravance Biopharma by Theravance in connection with the spin-off constitute, in the aggregate, "substantially all" of the assets held directly or indirectly by Theravance (as determined on both a gross and net fair market value basis). However, the IRS has not explicitly defined what constitutes "substantially all" of the assets of a corporation in the context of Section 7874. It is possible the IRS may challenge this conclusion and find that the assets contributed to Theravance Biopharma constitute substantially all of the assets of Theravance and thus, Theravance Biopharma could be treated as a U.S. corporation for U.S. federal tax purposes.

51

Table of Contents

Furthermore, we caution that there could be adverse changes to the relevant facts and circumstances, which could become known in the future. In addition, there have been legislative proposals to expand the scope of U.S. corporate tax residence and there could be a future change in law under Section 7874 of the Code, the Treasury Regulations promulgated thereunder or otherwise that could result in Theravance Biopharma being treated as a U.S. corporation. If it were determined that Theravance Biopharma should be taxed as a U.S. corporation for U.S. federal income tax purposes, Theravance Biopharma could be liable for substantial additional U.S. federal income tax.

Owning or Disposing of Theravance Biopharma Shares

        The following summary discusses certain U.S. federal income tax consequences of the ownership and disposition by U.S. holders of Theravance Biopharma ordinary shares. This discussion is based upon the Code, Treasury Regulations, published positions of the IRS, judicial decisions and other applicable authorities, all as currently in effect, and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change could affect the accuracy of this discussion.

        The following discussion assumes that Theravance stockholders hold their Theravance common stock, and will hold Theravance Biopharma ordinary shares, as capital assets within the meaning of Section 1221 of the Code. Further, this section does not discuss all tax considerations that may be relevant to holders of Theravance common stock in light of their particular circumstances, nor does it address the consequences to holders of Theravance common stock subject to special treatment under the U.S. federal income tax laws, such as tax-exempt entities, partnerships (including entities treated as partnerships for U.S. federal income tax purposes), persons who acquire such shares of Theravance common stock pursuant to the exercise of employee stock options or otherwise as compensation, financial institutions, insurance companies, dealers or traders in securities, and persons who hold their shares of Theravance common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. This section does not address any U.S. federal estate, gift or other non-income tax consequences or any state, local or foreign tax consequences, or the consequences of the Medicare tax on net investment income.

Holders of Theravance Biopharma ordinary shares should consult their tax advisors as to the particular tax consequences to them of the distribution and ownership of Theravance Biopharma shares.

        For purposes of this section, a U.S. holder is a beneficial owner of Theravance Biopharma ordinary shares that is, for U.S. federal income tax purposes:

•
an individual who is a citizen or a resident of the United States;

•
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state or political subdivision thereof;

•
an estate, the income of which is subject to United States federal income taxation regardless of its source; or

•
a trust, if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) in the case of a trust that was treated as a domestic trust under the law in effect before 1997, a valid election is in place under applicable Treasury Regulations.

52

Table of Contents

        If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds shares of Theravance common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding shares of Theravance common stock should consult its tax advisor regarding the tax consequences of the distribution.

        Distributions or dividends with respect to Theravance Biopharma shares (which for these purposes will include the amount of any non-U.S. taxes withheld therefrom) should generally be includible in the gross income of a U.S. holder as foreign source dividend income to the extent that such distributions are paid out of Theravance Biopharma's current or accumulated earnings and profits as determined under U.S. federal income tax principles.

        To the extent Theravance Biopharma pays dividends in a currency other than the U.S. dollar, the amount of any dividend paid to U.S. holders in such currency will be includible in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether the amount of such dividend is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. holder should not be required to recognize foreign currency exchange gain or loss in respect of the dividend income. A U.S. holder may have foreign currency exchange gain or loss if the dividend is converted into U.S. dollars after the date of receipt. In general, foreign currency exchange gain or loss will be treated as U.S.-source ordinary gain or loss for foreign tax credit purposes.

        Subject to certain limitations, including the PFIC rules discussed below, non-U.S. taxes (if any) withheld from or paid on dividend distributions generally will be eligible for credit against the U.S. holder's U.S. federal income taxes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The foreign tax credit rules are complex, and U.S. holders are urged to consult their tax advisors regarding the availability of foreign tax credits in their particular circumstances.

        A U.S. holder will generally recognize a capital gain or loss for U.S. federal income tax purposes on the sale or disposition of Theravance Biopharma shares in the same manner as on the sale or disposition of any other shares held as capital assets and such capital gain or loss will be long-term capital gain or loss if the U.S. holder's holding period for such Theravance Biopharma shares exceeds one year as of the date of sale or disposition.

Information Reporting with Respect to Foreign Financial Assets

        Certain U.S. holders are required to report information relating to an interest in Theravance Biopharma shares, subject to exceptions (including an exception for ordinary shares held in accounts maintained by certain financial institutions), by attaching a completed IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold an interest in Theravance Biopharma shares. U.S. holders are urged to consult their own tax advisors regarding information reporting requirements relating to their ownership of Theravance Biopharma shares.

Passive Foreign Investment Company Status

        The treatment of U.S. holders of our common stock in some cases could be materially different from that described above if, at any relevant time, Theravance Biopharma was "a passive foreign investment company" or "PFIC" for U.S. federal income tax purposes. We believe it is likely that Theravance Biopharma will be a PFIC for its first year of existence. The following sections will generally describe the U.S. federal income tax consequences to a U.S. holder of the receipt, ownership, and disposition of our ordinary shares, if Theravance Biopharma is considered to be a "passive foreign investment company" under the meaning of Section 1297 of the Code (a "PFIC") at any time during a U.S. holder's holding period.

53

Table of Contents

PFIC Status of Theravance Biopharma

        Theravance Biopharma generally will be a PFIC under Section 1297 of the Code if, for a taxable year, (a) 75% or more of the gross income of Theravance Biopharma for such taxable year is passive income or (b) 50% or more of the assets held by Theravance Biopharma either produce passive income or are held for the production of passive income, based on the fair market value of such assets. "Gross income" generally means all revenues less the cost of goods sold, and "passive income" includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation's commodities are (a) stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business, (b) property used in the trade or business of such foreign corporation that would be subject to the allowance for depreciation under Section 167 of the Code, or (c) supplies of a type regularly used or consumed by such foreign corporation in the ordinary course of its trade or business.

        Under certain attribution rules, if Theravance Biopharma is a PFIC, U.S. holders will be deemed to own their proportionate share of any subsidiary of Theravance Biopharma which is also a PFIC (a "Subsidiary PFIC"), and will be subject to U.S. federal income tax on (i) a distribution on the shares of a Subsidiary PFIC and (ii) a disposition of shares of a Subsidiary PFIC, both as if the holder directly held the shares of such Subsidiary PFIC.

        Theravance Biopharma believes that it will be classified as a PFIC during its first taxable year, and based on current business plans and financial expectations, Theravance Biopharma expects that it will be a PFIC for at least some subsequent taxable years. The determination of whether Theravance Biopharma (or a Subsidiary PFIC) was, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether Theravance Biopharma (or a Subsidiary PFIC) will be a PFIC for any taxable year depends on the assets and income of Theravance Biopharma (and each Subsidiary PFIC) over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this Information Statement. Each U.S. holder should consult its own tax advisor regarding the PFIC status of Theravance Biopharma and each Subsidiary PFIC.

Default PFIC Rules under Section 1291 of the Code

        The U.S. federal income tax consequences to a U.S. holder of the receipt, ownership, and disposition of our ordinary shares will depend on whether such U.S. holder makes an election to treat Theravance Biopharma as a "qualified electing fund" or "QEF" under Section 1295 of the Code (a "QEF Election") or a mark-to-market election under Section 1296 of the Code (a "Mark-to-Market Election"). A U.S. holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a "Non-Electing U.S. Holder."

        A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of our ordinary shares and (b) any excess distribution received on the our ordinary shares. A distribution generally will be an "excess distribution" to the extent that such distribution (together with all other distributions received in the current taxable year) exceeds 125% of the average distributions received during the three preceding taxable years (or during a U.S. holder's holding period for the our ordinary shares, if shorter).

        Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of our ordinary shares, and any "excess distribution" (as defined in Section 1291(b) of the Code) received on our ordinary shares, must be ratably allocated to each day in a Non-Electing U.S. Holder's holding period for the respective shares. The amount of any such gain or excess distribution allocated to prior

54

Table of Contents

years of such Non-Electing U.S. Holder's holding period for the our ordinary shares generally will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year. A Non-Electing U.S. Holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year. Such a Non-Electing U.S. Holder that is not a company must treat any such interest paid as "personal interest," which is not deductible. The amount of any such gain or excess distribution allocated to the current year of such Non-Electing U.S. Holder's holding period for the our ordinary shares will be treated as ordinary income in the current year, and no interest charge will be incurred with respect to the resulting tax liability for the current year.

        For any taxable year during which a Non-Electing U.S. Holder holds our ordinary shares, Theravance Biopharma will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether Theravance Biopharma ceases to be a PFIC in one or more subsequent taxable years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such our ordinary shares were sold on the last day of the last taxable year for which Theravance Biopharma was a PFIC.

QEF Election

        A U.S. holder that makes a QEF Election for the first taxable year in which its holding period of its ordinary shares begins, generally, will not be subject to the rules of Section 1291 of the Code discussed above with respect to our ordinary shares. However, a U.S. holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. holder's pro rata share of (a) the net capital gain of Theravance Biopharma, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the ordinary earnings of Theravance Biopharma, which will be taxed as ordinary income to such U.S. holder. Generally, "net capital gain" is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and "ordinary earnings" are the excess of (a) "earnings and profits" over (b) net capital gain. A U.S. holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each taxable year in which Theravance Biopharma is a PFIC, regardless of whether such amounts are actually distributed to such U.S. holder by Theravance Biopharma. However, a U.S. holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. holder is not a company, any such interest paid will be treated as "personal interest," which is not deductible.

        A U.S. holder that makes a QEF Election generally (a) may receive a tax-free distribution from Theravance Biopharma to the extent that such distribution represents "earnings and profits" of Theravance Biopharma that were previously included in income by the U.S. holder because of such QEF Election and (b) will be required to adjust such U.S. holder's tax basis in our ordinary shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of our ordinary shares.

        The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as "timely" if such QEF Election is made for the first year in the U.S. holder's holding period for our ordinary shares in which Theravance Biopharma was a PFIC. A U.S. holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.

        A QEF Election will apply to the taxable year for which such QEF Election is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to

55

Table of Contents

revocation of such QEF Election. If a U.S. holder makes a QEF Election and, in a subsequent taxable year, Theravance Biopharma ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those taxable years in which Theravance Biopharma is not a PFIC. Accordingly, if Theravance Biopharma ceases to be a PFIC in a particular year and becomes a PFIC again in another subsequent taxable year, the QEF Election will be effective and the U.S. holder will be subject to the QEF rules described above during any subsequent taxable year in which Theravance Biopharma qualifies as a PFIC.

Mark-to-Market Election

        A U.S. holder may make a Mark-to-Market Election only if our ordinary shares are marketable stock. Our ordinary shares generally will be "marketable stock" if our ordinary shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be "regularly traded" for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.

        A U.S. holder that makes a Mark-to-Market Election with respect to our ordinary shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to our ordinary shares. However, if a U.S. holder does not make a Mark-to-Market Election beginning in the first taxable year of such U.S. holder's holding period for our ordinary shares or such U.S. holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, our ordinary shares.

        A U.S. holder that makes a Mark-to-Market Election will include in ordinary income, for each taxable year in which Theravance Biopharma is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of our ordinary shares, as of the close of such taxable year over (b) such U.S. holder's tax basis in such ordinary shares. A U.S. holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. holder's adjusted tax basis in our ordinary shares, over (ii) the fair market value of such ordinary shares (but only to the extent of the net amount of previously included income a result of the Mark-to-Market Election for prior taxable years).

        A U.S. holder that makes a Mark-to-Market Election generally also will adjust such U.S. holder's tax basis in our ordinary shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of our ordinary shares, a U.S. holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years).

        A Mark-to-Market Election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year, unless our ordinary shares cease to be "marketable stock" or the IRS consents to revocation of such election. Each U.S. holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market Election.

        Although a U.S. holder may be eligible to make a Mark-to-Market Election with respect to our ordinary shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a

56

Table of Contents

U.S. holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a Subsidiary PFIC.

Other PFIC Rules

        Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of our ordinary shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. holder may vary based on the manner in which our ordinary shares are transferred.

        Certain additional adverse rules may apply with respect to a U.S. holder for years in which Theravance Biopharma is a PFIC, regardless of whether such U.S. holder makes a QEF Election. For example under Section 1298(b)(6) of the Code, a U.S. holder that uses our ordinary shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such our ordinary shares. In addition, a U.S. holder who acquires our ordinary shares from a decedent will not receive a "step up" in tax basis of such ordinary shares to fair market value. Special rules also apply to the amount of foreign tax credit that a U.S. holder may claim on a distribution from a PFIC.

        The PFIC rules are complex, and each U.S. holder should consult its own tax advisor regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the receipt, ownership, and disposition of our ordinary shares.

Market for Our Ordinary Shares; Trading of Our Ordinary Shares in Connection with the Spin-Off

        There is currently no trading market for our ordinary shares. We will apply to have our ordinary shares listed on the Nasdaq Global Market under the symbol "TBPH". We expect that a limited market, commonly known as a "when-issued" trading market, for our ordinary shares will develop on or about                        , 2014, the record date of the distribution. The term "when-issued" means that our shares will trade even though Theravance has not yet issued and distributed the Theravance Biopharma shares. "When-issued" trading in our ordinary shares will end and "regular way" trading will begin either on the distribution date or the first trading date after the distribution date. "Regular way" trading with respect to our ordinary shares refers to trading after Theravance has issued and distributed Theravance Biopharma shares to Theravance's stockholders. Neither Theravance nor we will set the initial trading price of our ordinary shares; the public markets will establish our trading price.

        We cannot predict the price at which our ordinary shares will trade either in the "when-issued" trading market or in the "regular way" trading market after the spin-off. In fact, the combined trading prices of our ordinary share, adjusted for the distribution ratio, and a share of Theravance common stock after the spin-off may not equal or exceed the trading price of a "regular way" traded share of Theravance common stock immediately prior to the spin-off. The price at which our ordinary shares trades is likely to fluctuate significantly, particularly until an orderly public market develops. Prices for our ordinary shares will be determined in the public markets and may be influenced by many factors, many of which are beyond our control. See "Risk Factors—Risks relating to Our Ordinary Shares."

        We have appointed Computershare Shareowner Services to serve as transfer agent and registrar for our ordinary shares.

        Our ordinary shares distributed to holders of Theravance common stock in connection with the spin-off will be transferable under the Securities Act, except for shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the spin-off generally

57

Table of Contents

include individuals or entities that control, are controlled by or are under common control with us and may include certain of our officers, directors or principal shareholders. After we become a publicly traded company, securities held by our affiliates will be subject to the resale restrictions under the Securities Act. Our affiliates will be permitted to sell our ordinary shares only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Trading of Theravance Common Stock After the Record Date and Prior to or on the Distribution Date

        Beginning on the record date and through the distribution date, Theravance common stock will trade "regular way" with the symbol "THRX". On the "regular way" market, from the record date through the distribution date, shares of Theravance common stock will trade with an entitlement to our ordinary shares distributed in connection with the spin-off. After the distribution date, shares of Theravance common stock will trade without an entitlement to our ordinary shares distributed in connection with the spin-off. Therefore, if you own shares of Theravance ordinary stock at 5:00 p.m. Eastern Time on the record date and sell those shares on the regular way market prior to or on the distribution date, you also will be selling your right to receive our ordinary shares that would have been distributed to you in connection with the spin-off. If you hold those shares of Theravance common stock held on the record date through the distribution date, then Theravance will distribute to you our ordinary shares with respect to your ownership of those shares of Theravance common stock, even if you sell the shares of Theravance common stock thereafter.

        During the time period between the record date and the distribution date, we anticipate that Theravance common stock will also be available to trade on an "ex-distribution when-issued market" with the symbol "THRXV". On an "ex-distribution" market, shares of Theravance common stock would trade without an entitlement to our ordinary shares distributed in connection with the spin-off. The "ex-distribution when-issued market" will cease to exist following the distribution date.

Distribution Conditions and Termination

        We expect that the distribution will be effective, and the spin-off complete, on the distribution date,                         , 2014, provided that, among other things:

•
the Securities and Exchange Commission, or SEC, shall have declared effective our registration statement on Form 10, of which this Information Statement is a part, under the Securities Exchange Act of 1934, as amended, or Exchange Act, and no stop order relating to the registration statement shall be in effect;

•
all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution shall have been received;

•
all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution shall have been received;

•
the listing of our ordinary shares on the Nasdaq Global Market shall have been approved, subject to official notice of issuance;

•
all material government and third party approvals and other consents necessary to consummate the distribution shall have been received;

•
the transfers of the assets and liabilities contemplated by the Separation and Distribution Agreement shall be in effect; and

58

Table of Contents

•
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution or any of the transactions related thereto, including those contemplated by the Separation and Distribution Agreement, shall be in effect.

        The fulfillment of the foregoing conditions will not create any obligation on Theravance's part to effect the distribution, and the Theravance board of directors has reserved the right to amend, modify or abandon the distribution and the related transactions at any time prior to the distribution date. The Theravance board of directors may waive any of these conditions in its sole and absolute discretion.

Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off

        The following discussion describes the treatment of outstanding Theravance equity awards, including stock options, restricted stock awards ("RSAs") and restricted stock units ("RSUs"), in connection with the spin-off, which has been approved by Theravance's compensation committee.

        For purposes of this section, "Theravance Biopharma Employees" refers to persons who are or will be officers, employees or non-employee directors of Theravance Biopharma or its subsidiaries at the time of the spin-off, and "Remaining Theravance Employees" refers to current or former employees and non-employee directors of Theravance who will not become Theravance Biopharma Employees at the time of the spin-off including any of the foregoing who will also serve as officers, employees and/or non-employee directors of Theravance Biopharma or its subsidiaries.

        Stock Options.    The exercise price and number of shares subject to each stock option to purchase Theravance common stock that is outstanding on the date of the spin-off (a "Theravance Option") will be adjusted using a formula designed to generally preserve the intrinsic value of the original stock option prior to the spin-off.

•
Theravance Biopharma Employees.  

•
Vested Theravance Options.  Vested Theravance Options held by Theravance Biopharma Employees, other than any that are incentive stock options (or ISOs) under the Federal tax laws, have been amended, effective as of immediately prior to and contingent upon the spin-off, to remain outstanding and exercisable based on the Theravance Biopharma Employee's service to Theravance Biopharma and its subsidiaries and affiliates following the spin-off. All other terms and conditions of such options, including the maximum term of the option, will generally remain unchanged. No changes are expected to vested ISOs. As a result, if a Theravance Biopharma Employee's service with Theravance will terminate on the date of the spin-off, Theravance Options held by such employee that are vested ISOs must be exercised within the applicable post-termination exercise period following the spin-off.

•
Unvested Theravance Options.  Unvested Theravance Options held by Theravance Biopharma Employees other than non-employee directors have been amended, effective as of immediately prior to and contingent upon the spin-off, to provide that they will remain outstanding and continue to vest based on service to Theravance Biopharma and its subsidiaries and affiliates following the spin-off. Further, unvested Theravance Options held by Theravance Biopharma Employees other than non-employee directors have been amended, effective as of immediately following the spin-off, to provide that they will fully vest in the event the Theravance Biopharma Employee holding such option is subject to an involuntary termination in connection with or following a change in control of Theravance Biopharma. For Theravance Biopharma Employees who are non-employee directors, the unvested Theravance Options that they hold have been amended, effective as of immediately prior to and contingent upon the spin-off, to provide that they will fully vest in

59

Table of Contents

connection with the spin-off and remain outstanding and exercisable based on service to Theravance Biopharma and its subsidiaries and affiliates following the spin-off.•
Remaining Theravance Employees.  Each outstanding Theravance Option that is held by a Remaining Theravance Employee will remain a Theravance Option, subject to its existing terms and conditions; provided that the Theravance Options have been amended, contingent upon the spin-off, as described above for Theravance Biopharma Employees in the event that a Remaining Theravance Employee becomes an employee of Theravance Biopharma after the spin-off.

        RSAs and RSUs.    The number of shares subject to each RSU covering shares of Theravance common stock outstanding on the date of the spin-off (a "Theravance RSU") will be adjusted using a formula designed to generally preserve the intrinsic value of the RSU prior to the spin-off. No adjustments will be made to the number of shares of Theravance restricted stock outstanding on the date of the spin-off ("Theravance RSAs") as the holders of Theravance RSAs will receive Theravance Biopharma ordinary shares in the spin-off. The Theravance Biopharma ordinary shares received by the holders of Theravance RSAs will be subject to the same terms and conditions, including vesting, as apply to the applicable Theravance RSAs.

•
Theravance Biopharma Employees.  Except as described below with respect to the Six-Year Performance RSAs, unvested Theravance RSAs and RSUs held by Theravance Biopharma Employees other than non-employee directors have been amended, effective as of immediately prior to and contingent upon the spin-off, to provide that they will remain outstanding and continue to vest based on service to Theravance Biopharma and its subsidiaries and affiliates following the spin-off. Further, unvested Theravance RSAs and RSUs held by Theravance Biopharma Employees other than non-employee directors have been amended, effective as of immediately following the spin-off, to provide that they will fully vest in the event the Theravance Biopharma Employee holding such Theravance RSA or RSU is subject to an involuntary termination in connection with or following a change in control of Theravance Biopharma. For Theravance Biopharma Employees who are non-employee directors, the unvested Theravance RSUs that they hold have been amended, effective as of immediately prior to and contingent upon the spin-off, to provide that they will fully vest in connection with the spin-off. All other terms and conditions of such Theravance RSAs and RSUs will generally remain unchanged.

•
Remaining Theravance Employees.  Except as described below with respect to the Six-Year Performance RSAs, unvested Theravance RSAs and RSUs held by Remaining Theravance Employees will continue to be subject to their existing terms and conditions; provided that the Theravance RSAs and RSUs have been amended, contingent upon the spin-off as, described above for Theravance Biopharma Employees in the event that a Remaining Theravance Employee becomes an employee of Theravance Biopharma after the spin-off.

•
Six-Year Performance RSAs.  It is expected that the special long-term retention and incentive performance-contingent RSAs granted by Theravance in February 2011 to members of senior management (the "Six-Year Performance RSAs") will be modified as follows:

•
A portion of the Six-Year Performance RSAs subject to each award will be accelerated as of the spin-off based on the number of milestones and corresponding achievement points that have been met as of the spin-off;

•
An additional portion of the Six-Year Performance RSAs subject to each award will be converted to time-based vesting, determined based on the increase from the base performance price assigned to such award (which, in all instances, was $24.73) compared to the value of Theravance common stock on a date or dates to be determined. Such portion

60

Table of Contents

of the Six-Year Performance RSAs will be eligible to vest on the one year anniversary of the spin-off, subject to the holder's continued service with Theravance Biopharma or Theravance, as applicable, following the spin-off; and•
New performance goals will be established for the remaining portion of each award that relate to the entity employing the holder of the award following the spin-off.

Reason for Furnishing this Information Statement

        This Information Statement is being furnished solely to provide information to stockholders of Theravance who will receive Theravance Biopharma ordinary shares in connection with our spin-off. It is not provided as an inducement or encouragement to buy or sell any of our securities. You should not assume that the information contained in this Information Statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this Information Statement may occur after that date, and we undertake no obligation to update the information.

61

Table of Contents
Dividend Policy

        We do not currently anticipate paying any dividends for the foreseeable future. The declaration and payment of dividends are subject to the discretion of our board of directors. Any future determination to pay dividends will depend on our financial condition, earnings, capital requirements, legal requirements, regulatory constraints, contractual restrictions and other factors deemed relevant at the time by our board of directors.

62

Table of Contents
Capitalization

        The following table sets forth Theravance Biopharma's capitalization as of December 31, 2013 on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in our unaudited pro forma combined balance sheet. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. While such adjustments are subject to change based on the finalization of the terms of the spin-off and the transaction agreements, in management's opinion, the pro forma adjustments are not expected to materially differ from the final adjustments. In addition, such adjustments are estimates and may not prove to be accurate or indicative of future adjustments.

        You should read this table together with "Historical Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Combined Financial Statement" and our historical combined financial statements and the notes thereto included elsewhere in this Information Statement.

	 	December 31, 2013	 	
(in thousands, except per share amounts)
	 	Historical	 	Pro Forma	 	

	 	(Unaudited)
	 	
Cash and cash equivalents	 	$	—	 	$	300,000	  (1)	
 	 	 	 	 	 	
Parent company (deficit)/stockholders' equity:	 	 	 	 	 	 	 	
Ordinary shares, $0.00001 par value; none authorized, issued and outstanding;        shares authorized pro forma;                  million shares issued and outstanding pro forma	 	$	—	 	$	—	  (2)	
Parent company deficit	 	 	(17,035	)	 	—	 	
Additional paid-in capital	 	 	—	 	 	283,527	  (3)	
 	 	 	 	 	 	
Total Parent company (deficit)/stockholders' equity	 	 	(17,035	)	 	283,527	 	
 	 	 	 	 	 	
Total capitalization	 	$	(17,035	)	$	283,527	 	

(1)
Amount represents the pro forma cash contribution by Theravance of approximately $300 million as of December 31, 2013. In addition, under the Separation and Distribution Agreement, Theravance will remain responsible for all operating expenses and related liabilities that were incurred prior to the spin-off.

(2)
Represents the distribution of         million shares of our ordinary shares to holders of Theravance common stock based on the number of shares of Theravance common stock outstanding at December 31, 2013, assuming distribution rate of one ordinary share of Theravance Biopharma, Inc. for every      shares of Theravance common stock.

(3)
The pro forma adjustment to additional paid-in capital is equal to the amount of net assets recorded by Theravance Biopharma plus the reclassification of parent company deficit on the distribution date.

63

Table of Contents
Our Business

Overview

        Theravance Biopharma is a biopharmaceutical company with one approved product that was discovered and developed internally, a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical companies. We also have an economic interest in future payments that may be made by GSK pursuant to agreements with Theravance relating to certain drug programs, including UMEC/VI/FF and the MABA program, as monotherapy with GSK961081 ('081) and as a combination ('081/FF). We are focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including bacterial infections, central nervous system ("CNS")/pain, respiratory disease, and gastrointestinal ("GI") motility dysfunction. By leveraging our proprietary insight of multivalency to drug discovery, we are pursuing a best-in-class strategy designed to discover superior medicines in areas of significant unmet medical need. The principal office of our Delaware wholly-owned subsidiary is located at 901 Gateway Boulevard, South San Francisco, California 94080. Theravance Biopharma was incorporated in the Cayman Islands in July 2013 under the name Theravance Biopharma, Inc. and will begin operations upon the spin-off through a wholly-owned subsidiary organized as a Delaware corporation.

        Our strategy focuses on the discovery, development and commercialization of medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. Multivalency refers to the simultaneous attachment of a single molecule to multiple binding sites on one or more biological targets. When compared to monovalency, whereby a molecule attaches to only one binding site, multivalency can significantly increase a compound's potency, duration of action and/or selectivity. Multivalent compounds generally consist of several individual small molecules, at least one of which is biologically active when bound to its target, joined by linking components. In addition, we believe that we can enhance the probability of successfully developing and commercializing medicines by identifying at least two structurally different product candidates, whenever practicable, in each therapeutic program.

Our Programs

        The table below summarizes the status of our approved product and our most advanced product candidates for internal development or co-development. The table also includes the status of the respiratory programs in which we have an economic interest that are being developed and commercialized by GSK pursuant to agreements with Theravance, which we refer to as the GSK-partnered respiratory programs. We have an economic interest in these programs through our non-voting interest in Theravance Respiratory Company LLC ("TRC"), a Delaware limited liability company controlled by Theravance. See "The Spin-Off—Formation of Theravance Respiratory Company LLC" and "Business-Economic Interests in GSK Respiratory Programs Partnered with Theravance."

64

Table of Contents

Programs

Key:
CNS: Central Nervous System;FF: Fluticasone Furoate;GI: Gastrointestinal;LAMA: Long-Acting Muscarinic Antagonist;MABA: Bifunctional Muscarinic Antagonist-Beta 2  Agonist; UMEC:  Umeclidinium; VI:  Vilanterol

In the table above:

Status indicates the most advanced stage of clinical development that has been completed or is in process.

Phase 1 indicates initial clinical safety testing in healthy volunteers, or studies directed toward understanding the mechanisms of action of the drug.

Phase 2 indicates further clinical safety testing and preliminary efficacy testing in a limited patient population.

Phase 3 indicates evaluation of clinical efficacy and safety within an expanded patient population.

Filed indicates that a marketing application has been submitted to a regulatory authority.

65

Table of Contents

Approved indicates the drug has been approved for marketing in at least one jurisdiction.

We consider programs in which at least one compound has successfully completed a Phase 2a study showing efficacy and tolerability as having achieved Proof-of-Concept.

Program Highlights

Economic Interests in GSK Respiratory Programs Partnered with Theravance

        Prior to the spin-off, Theravance will assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. Our equity interest in TRC will entitle us an 85% economic interest in any future payments made by GSK under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. The drug programs assigned to TRC include 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 these GSK agreements. Our economic interest will not include any payments associated with RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ or vilanterol monotherapy. See "The Spin-Off—Formation of Theravance Respiratory Company LLC."

        Theravance and GSK entered into amendments to their collaboration agreement and strategic alliance agreement that will become effective upon the effectiveness of the spin-off, provided that the spin-off is effected by June 30, 2014. These amendments provide that GSK's diligent efforts obligations regarding commercialization matters under both the collaboration agreement and strategic alliance agreement will change upon regulatory approval in either the U.S. or the European Union of UMEC/VI/FF or a MABA in combination with fluticasone furoate. Upon such regulatory approval, GSK's diligent efforts obligations as to commercialization matters under the GSK agreements will have the objective of focusing on the best interests of patients and maximizing the net value of the overall portfolio of products under the collaboration agreement and strategic alliance agreement. These amendments do not change GSK's diligent efforts obligations regarding development under the GSK agreements. However, since GSK's commercialization efforts following such regulatory approval will be guided by a portfolio approach across products in which we have an indirect interest through TRC and products in which we have no interests, GSK's commercialization efforts may have the effect of reducing the value of our interests in TRC.

UMEC/VI/FF

        The UMEC/VI/FF program seeks to provide the activity of two bronchodilators (UMEC and VI) plus an inhaled corticosteroid (FF) in a single delivery device. In this program, the LABA and LAMA molecules that comprise GSK's ANORO™ ELLIPTA™ will be co-formulated in a single blister strip, and the inhaled corticosteroid, FF, will be administered from an adjacent blister strip—both of which would be administered together in GSK's ELLIPTA™ inhaler. The royalty rates applicable to worldwide net sales of UMEC/VI/FF under the collaboration agreement are upward-tiering from 6.5% to 10%.

Inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA)

        GSK961081 ('081) is an investigational, single molecule bifunctional bronchodilator discovered by Theravance with both muscarinic antagonist and beta 2  receptor agonist activities. '081 has completed a Phase 2b study, a Phase 1 study in combination with the inhaled corticosteroid, fluticasone propionate ("FP"), and a number of Phase 3-enabling non-clinical studies. '081 is now being progressed as a combination with FF delivered once-daily in the ELLIPTA inhaler which requires additional work on non-clinical studies, manufacturing and a Phase 1 bioequivalence study. As a result, it is unlikely that a

66

Table of Contents

Phase 3 study with '081 will commence in 2014. Preclinical Phase 3-enabling studies with the combination '081/FF are ongoing to explore its potential as a once-daily medicine delivered in the ELLIPTA™ inhaler.

        In 2005, GSK licensed Theravance's bifunctional muscarinic antagonist-beta2 agonist (MABA) program under the strategic alliance agreement, which agreement will be assigned to TRC, and in October 2011, Theravance and GSK expanded the MABA program by adding six additional Theravance-discovered preclinical MABA compounds (the "Additional MABAs"). GSK is obligated to use diligent efforts to develop and commercialize at least one MABA within the MABA program, but may terminate progression of any or all Additional MABAs at any time and return them to TRC, at which point TRC may develop and commercialize such Additional MABAs alone or with a third party. Both GSK and Theravance have agreed not to conduct any MABA clinical studies outside of the strategic alliance agreement so long as GSK is in possession of the Additional MABAs. If a single-agent MABA medicine containing '081 is successfully developed and commercialized, TRC is entitled to receive royalties from GSK of between 10% and 20% of annual global net sales up to $3.5 billion, and 7.5% for all annual global net sales above $3.5 billion. If a MABA medicine containing '081 is commercialized only as a combination product, such as '081/FF, the royalty rate is 70% of the rate applicable to sales of the single-agent MABA medicine. For single-agent MABA medicines containing an Additional MABA, TRC is entitled to receive royalties from GSK of between 10% and 15% of annual global net sales up to $3.5 billion, and 10% for all annual global net sales above $3.5 billion. For combination products containing an Additional MABA, such as a MABA/ICS combination, the royalty rate is 50% of the rate applicable to sales of the single-agent MABA medicine. If a MABA medicine containing '081 is successfully developed and commercialized in multiple regions of the world, TRC could earn total contingent payments of up to $125.0 million for a single-agent medicine and up to $250.0 million for both a single-agent and a combination medicine. If a MABA medicine containing an Additional MABA is successfully developed and commercialized in multiple regions of the world, TRC could earn total contingent payments of up to $129.0 million.

Bacterial Infections Programs

VIBATIV® (telavancin)

        VIBATIV® (telavancin) is a bactericidal, once-daily injectable antibiotic discovered by Theravance in a research program dedicated to finding new antibiotics for serious infections due to Staphylococcus aureus  and other Gram-positive bacteria, including methicillin-resistant (MRSA) strains. VIBATIV® is approved in the U.S. and Canada for the treatment of adult patients with complicated skin and skin structure infections (cSSSI) caused by susceptible Gram-positive bacteria. VIBATIV® is also approved in the U.S. for the treatment of adult patients with hospital-acquired and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Staphylococcus aureus  when alternative treatments are not suitable.

        In May 2012, Theravance entered into a Technology Transfer and Supply Agreement with Hospira Worldwide, Inc. ("Hospira") for VIBATIV® drug product supply. In June 2013, the U.S. Food and Drug Administration ("FDA") approved Hospira as a VIBATIV® drug product manufacturer. This agreement with Hospira will be assigned to us. On August 14, 2013 Theravance announced the reintroduction of VIBATIV® to the U.S. market with the commencement of shipments into the wholesaler channel. While Theravance has contracted a small sales force and is expanding its medical affairs presence, other commercialization alternatives for the U.S. market are being evaluated.

        In September 2011, the European Commission granted marketing authorization for VIBATIV® for the treatment of adults with nosocomial pneumonia (NP), including ventilator-associated pneumonia, known or suspected to be caused by MRSA when other alternatives are not suitable. However, in May 2012, the European Commission suspended this marketing authorization because the previous single-

67

Table of Contents

source drug product supplier did not meet the current Good Manufacturing Practice ("cGMP") requirements for the manufacture of VIBATIV®. In March 2014, the European Commission lifted the suspension. We anticipate that commercialization in the European Union will commence upon availability of product and satisfaction of all pre-launch requirements.

        Commercialization Agreement with Clinigen.    In March 2013, Theravance entered into a commercialization agreement with Clinigen Group plc ("Clinigen") to commercialize VIBATIV® for the treatment of nosocomial pneumonia, including ventilator-associated pneumonia, known or suspected to be caused by MRSA when other alternatives are not suitable. Under the agreement, Theravance granted Clinigen exclusive commercialization rights in the European Union and certain other European countries (including Switzerland and Norway). Theravance received a $5.0 million upfront payment in March 2013. This agreement with Clinigen will be assigned to us. After the spin-off, we will be eligible to receive tiered royalty payments on net sales of VIBATIV® ranging from 20% to 30%. We will be responsible, either directly or through our vendors or contractors, for supplying at Clinigen's expense both API and finished drug product for Clinigen's commercialization activities. The agreement has a term of at least 15 years, with an option to extend exercisable by Clinigen. However, Clinigen may terminate the agreement at any time after it has initiated commercialization upon 12 months' advance notice.

        Development and Commercialization Agreements with R-Pharm.    In October 2012, Theravance entered into two separate development and commercialization agreements with R-Pharm CJSC ("R-Pharm"): one to develop and commercialize VIBATIV® and the other to develop and commercialize TD-1792, one of Theravance's investigational glycopeptide-cephalosporin heterodimer antibiotics for the treatment of Gram-positive infections. Under each agreement, Theravance granted R-Pharm exclusive development and commercialization rights in Russia, Ukraine, other member countries of the Commonwealth of Independent States, and Georgia for a period of 20 years after commercialization in the territory or, if later, until certain patents expire. Theravance received $1.1 million in upfront payments for each agreement. These agreements with R-Pharm will be assigned to us. Following the spin-off, we will be eligible to receive potential future contingent payments totaling up to $10.0 million for both agreements and royalties on net sales by R-Pharm of 15% from TD-1792 and 25% from VIBATIV®.

        Commercialization Agreement with Hikma.    In May 2013, Theravance entered into a commercialization agreement with Hikma Pharmaceuticals LLC ("Hikma") providing Hikma with the right to commercialize telavancin for the treatment of Gram-positive bacterial infections, including MRSA. Under the agreement, Theravance granted Hikma exclusive commercialization rights in the Middle East and North Africa ("MENA") region to register, and upon regulatory approval, market and distribute telavancin in 16 countries across MENA. Theravance received a $0.5 million upfront payment in June 2013. Also, Theravance is eligible to receive contingent payments of up to $0.5 million related to the successful commercialization of telavancin. This agreement with Hikma will be assigned to us. We will be responsible, either directly or through our vendors or contractors, for supplying drug product for Hikma's commercialization activities for 15 years after which such agreement will terminate unless renewed on an annual basis by mutual agreement of the parties.

Glycopeptide-Cephalosporin Heterodimer Program

        Through our glycopeptide-cephalosporin heterodimer program we intend to discover and develop a multivalent antibiotic for serious Gram-positive bacterial infections.

TD-1792

        TD-1792 is an investigational glycopeptide-cephalosporin heterodimer antibiotic for the treatment of Gram-positive infections. TD-1792 has successfully completed a Phase 2 proof-of concept study in

68

Table of Contents

complicated skin and skin structure infections and a human bronchoalveolar lavage study. Our partner, R-Pharm, currently intends to initiate Phase 2 studies in Russia for hospital-acquired pneumonia.

TD-1607

        TD-1607 is our second investigational glycopeptide-cephalosporin heterodimer antibiotic for the treatment of Gram-positive infections. It is structurally distinct from TD-1792 but demonstrates a similar potent and rapidly bactericidal profile in vitro. In October 2013, we progressed TD-1607 into a Phase 1 randomized, double-blind placebo-controlled multiple ascending dose study to evaluate the safety, tolerability and pharmacokinetics of TD-1607 in healthy subjects. This study is expected to complete in 2014.

Central Nervous System/Pain Programs

Oral Peripheral Mu Opioid Receptor Antagonist—TD-1211

        TD-1211 is an investigational once-daily, orally administered, peripherally selective, multivalent inhibitor of the mu opioid receptor designed with a goal of alleviating gastrointestinal side effects of opioid therapy without affecting analgesia. In July 2012, Theravance announced positive topline results from the Phase 2b Study 0084, the key study in the Phase 2b program evaluating TD-1211 as potential treatment for chronic, non-cancer pain patients with opioid-induced constipation. The Phase 2b program consisted of three studies (0074, 0076 and 0084) designed to evaluate doses and dosing regimens for Phase 3. We are currently evaluating our Phase 3 strategy due to potentially evolving FDA requirements for this class of drug.

Monoamine Reuptake Inhibitor—TD-9855

        We are developing TD-9855, an investigational norepinephrine and serotonin reuptake inhibitor discovered by Theravance, for the treatment of chronic pain conditions. TD-9855 is currently being evaluated in an ongoing Phase 2 study in patients with fibromyalgia and the results of the study are anticipated to be reported the first half of 2014. Recently, TD-9855 did not meet the primary efficacy endpoints in the Phase 2 study in adult patients with Attention-Deficit/Hyperactivity Disorder.

Theravance Biopharma Respiratory Program

Long-Acting Muscarinic Antagonist (LAMA)—TD-4208

        We are developing TD-4208, a once-daily inhaled nebulized muscarinic antagonist discovered by Theravance, for the treatment of a subset of COPD patients whom we believe are underserved by current hand-held products. We believe that such a medicine could serve as a foundation for several combination nebulized products as well as potential metered dose inhaler ("MDI") or dry powder inhaler ("DPI") products. In November 2011, Theravance announced positive topline results from a Phase 2a single-dose COPD study of TD-4208. In this study, TD-4208 met the primary endpoint by demonstrating a statistically significant mean change from baseline in peak forced expiratory volume in one second ("FEV1") compared to placebo, and was generally well tolerated. In September 2013, Theravance reported positive top-line data from a Phase 2b study to evaluate the bronchodilatory effect, pharmacokinetics, safety and tolerability of multiple doses of TD-4208. In this study, TD-4208 met the primary efficacy endpoint for all six doses studied and demonstrated a statistically significant change versus placebo from baseline in trough FEV1. All doses of TD-4208 were generally well tolerated in the study with rates of adverse events comparable to placebo.

        We have entered into an extension agreement with GSK in which we have agreed to be subject to certain restrictive covenants similar to those applicable to Theravance under the collaboration and strategic alliance agreement with GSK. One of those covenants provides that for so long as a MABA

69

Table of Contents

product candidate remains in active development under the strategic alliance agreement with GSK, we will not, whether alone or with a third party, conduct a clinical study with respect to a MABA compound (or a product containing a MABA compound). Although exploring the combination of TD-4208 with a MABA may be clinically attractive, we have agreed not to pursue such a combination product so long as a MABA product candidate remains in active development under the strategic alliance agreement with GSK, which product candidate we will have an economic interest in pursuant to our interest in TRC. Similarly, for so long as there is at least one collaboration product being developed or commercialized under the collaboration agreement in which we have an economic interest pursuant to our interest in TRC, we will not carry out clinical development with any LABA that is not a compound under the collaboration agreement, subject to limited exceptions. However, if we license TD-4208 to a third party that chooses to combine TD-4208 with a LABA compound, that third party would not be similarly restricted provided that we do not direct the third party's development or commercialization efforts or share any GSK confidential information.

Gastrointestinal (GI) Motility Dysfunction Programs

Velusetrag

        Velusetrag is an oral, investigational medicine discovered by Theravance and developed for gastrointestinal motility disorders. It is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor. In October 2012, Theravance entered into a development and collaboration arrangement with Alfa Wassermann società per azioni (S.p.A.) ("Alfa Wassermann") for velusetrag, under which the parties agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal). In January 2013, Theravance and Alfa Wassermann announced the initiation of a Phase 2 proof-of-concept study to evaluate the efficacy and safety of velusetrag for the treatment of patients with diabetic or idiopathic gastroparesis. This agreement with Alfa Wassermann will be assigned to us and such agreement provides for a term of 15 years from first commercialization or, if later, until certain patents expire. Alfa Wassermann has an exclusive option to develop and commercialize velusetrag in the European Union, Russia, China, Mexico and certain other countries, while we retain full rights to velusetrag in the U.S., Canada, Japan and certain other countries. We will be entitled to receive funding for the Phase 2a study and a subsequent Phase 2b study if the parties agree to proceed. If Alfa Wassermann exercises its license option at the completion of the Phase 2 program, then we will be entitled to receive a $10.0 million option fee. If velusetrag is successfully developed and commercialized, we will be entitled to receive potential future contingent payments totaling up to $53.5 million, and royalties on net sales by Alfa Wassermann ranging from the low teens to 20%.

TD-8954

        TD-8954, like velusetrag, is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor. We are investigating the development potential of TD-8954 for acute use in the hospital setting for patients who require rapid restoration of upper and lower GI motility. We believe that TD-8954 may help hospitalized patients with enteral feeding intolerance, or EFI, and potentially other GI disorders. We recently initiated a Phase 2a study to evaluate the safety, tolerability and pharmacodynamics of a single-dose of TD-8954 administered intravenously compared to metoclopramide in critically ill patients with EFI. This study is expected to read out at the end of 2014.

Preclinical Research Programs

        We have a number of early-stage research programs in a wide range of therapeutic areas.

70

Table of Contents

Our Approach

        Our strategy focuses on the discovery, development and commercialization of medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. Multivalency refers to the simultaneous attachment of a single molecule to multiple binding sites on one or more biological targets. When compared to monovalency, whereby a molecule attaches to only one binding site, multivalency can significantly increase a compound's potency, duration of action and/or selectivity. Multivalent compounds generally consist of several individual small molecules, at least one of which is biologically active when bound to its target, joined by linking components.

        Our approach is based on an integration of the following insights:

•
many targets have multiple binding sites and/or exist in clusters with similar or different targets;

•
biological targets with multiple binding sites and/or those that exist in clusters lend themselves to multivalent drug design;

•
molecules that simultaneously attach to multiple binding sites can exhibit considerably greater potency, duration of action and/or selectivity than molecules that attach to only one binding site; and

•
greater potency, duration of action and/or selectivity provides the basis for superior therapeutic effects, including enhanced convenience, tolerability and/or safety compared to conventional drugs.

Our Strategy

        Our objective is to discover, develop and commercialize new medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. The key elements of our strategy are to:

        Apply our expertise in chemistry, biology and multivalency to discover and develop superior medicines in areas of significant unmet medical need. We intend to continue to concentrate our efforts on discovering and developing product candidates where:

•
existing drugs have levels of efficacy, convenience, tolerability and/or safety that are insufficient to meet an important medical need;

•
we believe our expertise in chemistry, biology and multivalency can be applied to create superior product candidates that are more potent, longer acting and/or more selective than currently available medicines;

•
there are established animal models that can be used to provide us with evidence as to whether our product candidates have the potential to provide superior therapeutic benefits relative to current medicines; and

•
there is a relatively large commercial opportunity.

        Identify two structurally different product candidates in each therapeutic program whenever practicable. We believe that we can increase the likelihood of successfully bringing superior medicines to market by identifying, whenever practicable, two product candidates for development in each program. Our second product candidates are typically in a different structural class from the first product candidate. Applying this strategy can reduce our dependence on any one product candidate and provide us with the potential opportunity to commercialize two compounds in a given area.

71

Table of Contents

        Partner with pharmaceutical companies.    Our strategy is to seek collaborations with pharmaceutical companies to accelerate development and commercialization of our product candidates at the strategically appropriate time.

        Leverage the extensive experience of our people.    We have an experienced management team with many years of experience discovering, developing and commercializing new medicines with companies such as Amgen Inc., Bristol-Myers Squibb Company, Eli Lily and Company, Gilead Sciences, Merck and Theravance.

        Improve, expand and protect our technical capabilities.    We have created a substantial body of know-how and trade secrets in the application of our multivalent approach to drug discovery. We believe this is a significant asset that distinguishes us from our competitors. We expect to continue to make substantial investments in drug discovery using multivalency and other technologies to maintain what we believe are our competitive advantages.

Manufacturing

        We have limited in-house active pharmaceutical ingredient ("API") production capabilities, and we rely primarily on a number of third parties, including contract manufacturing organizations and our collaborative partners, to produce our active pharmaceutical ingredient and drug product.

        We believe that we have in-house expertise to manage a network of third party manufacturers. We believe that we will be able to continue to negotiate third-party manufacturing arrangements on commercially reasonable terms and that it will not be necessary for us to obtain internal manufacturing capacity in order to develop or commercialize our products. However, if we are unable to obtain contract manufacturing or obtain such manufacturing on commercially reasonable terms, or if manufacturing is interrupted at one of our suppliers, whether due to regulatory or other reasons, we may not be able to develop or commercialize our products as planned.

        We have a single source of supply of telavancin API and another, separate single source of supply of VIBATIV® drug product. If, for any reason, either the single-source third party manufacturer of telavancin API or of VIBATIV® drug product is unable or unwilling to perform, or if its performance does not meet regulatory requirements, including maintaining cGMP compliance, we may not be able to locate alternative manufacturers, enter into acceptable agreements with them or obtain sufficient quantities of API or finished drug product in a timely manner. Any inability to acquire sufficient quantities of API or finished drug product in a timely manner from current or future sources would adversely affect the commercialization of VIBATIV® and our obligations to our partners and could cause the price of our securities to fall.

Government Regulation

        The development and commercialization of VIBATIV® and our product candidates by us and our collaborative partners and our ongoing research are subject to extensive regulation by governmental authorities in the United States and other countries. Before marketing in the United States, any medicine must undergo rigorous preclinical studies and clinical studies and an extensive regulatory approval process implemented by the FDA under the Federal Food, Drug, and Cosmetic Act. Outside the United States, the ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory authorities. The requirements governing the conduct of clinical studies, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, the commercialization of medicines is permitted only if the appropriate regulatory authority is satisfied that we have presented adequate evidence of the safety, quality and efficacy of our medicines.

72

Table of Contents

        Before commencing clinical studies in humans in the United States, we must submit to the FDA an Investigational New Drug application that includes, among other things, the results of preclinical studies. If the FDA accepts the Investigational New Drug submission, clinical studies are usually conducted in three phases and under FDA oversight. These phases generally include the following:

        Phase 1.    The product candidate is introduced into healthy human volunteers and is tested for safety, dose tolerance and pharmacokinetics.

        Phase 2.    The product candidate is introduced into a limited patient population to assess the efficacy of the drug in specific, targeted indications, assess dosage tolerance and optimal dosage, and identify possible adverse effects and safety risks.

        Phase 3.    If a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 evaluations, the clinical study will be expanded to further demonstrate clinical efficacy, optimal dosage and safety within an expanded patient population.

        The results of product development, preclinical studies and clinical studies must be submitted to the FDA as part of a new drug application, or NDA. The NDA also must contain extensive manufacturing information. NDAs for new chemical entities are subject to performance goals defined in the Prescription Drug User Fee Act which suggests a goal for FDA action within six months of the 60-day filing date for applications that are granted priority review and ten months of the 60-day filing date for applications that receive standard review. For a product candidate no active ingredient of which has been previously approved by the FDA, the FDA must either refer the product candidate to an advisory committee for review or provide in the action letter on the application for the product candidate a summary of the reasons why the product candidate was not referred to an advisory committee prior to approval. In addition, under the 2009 Food and Drug Administration Amendments Act, the FDA has authority to require submission of a formal risk evaluation and management strategy to ensure safe use of the product. At the end of the review period, the FDA communicates an approval of the NDA or issues a complete response listing the application's deficiencies.

        Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if safety or quality issues are identified after the product reaches the marketplace. In addition, the FDA may require post-marketing studies, referred to as Phase 4 studies, to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-marketing studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to suspend or delay issuance of approvals, seize products, withdraw approvals, enjoin violations, and institute criminal prosecution.

        If regulatory approval for a medicine is obtained, the clearance to market the product will be limited to those diseases and conditions for which the medicine is effective, as demonstrated through clinical studies and included in the medicine's labeling. Even if this regulatory approval is obtained, a marketed medicine, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections by the FDA. The FDA ensures the quality of approved medicines by carefully monitoring manufacturers' compliance with its cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities, and controls used in manufacturing, processing, and packaging of a medicine. The regulations are intended to make sure that a medicine is safe for use, and that it has the ingredients and strength it claims to have. Discovery of previously unknown problems with a medicine, manufacturer or facility may result in restrictions on the medicine or manufacturer, including costly recalls or withdrawal of the medicine from the market.

        We and our collaborative partners are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including the

73

Table of Contents

ability to suspend or delay issuance of approvals, seize products, withdraw approvals, enjoin violations, and institute criminal prosecution, any one or more of which could have a material adverse effect upon our business, financial condition and results of operations.

        Outside the United States our ability to market our products will also depend on receiving marketing authorizations from the appropriate regulatory authorities. Risks similar to those associated with FDA approval described above exist with the regulatory approval processes in other countries.

Patents and Proprietary Rights

        We will be able to protect our technology from unauthorized use by third parties only to the extent that our technology is covered by valid and enforceable patents or is effectively maintained as trade secrets. Our success in the future will depend in part on obtaining patent protection for our product candidates. Accordingly, patents and other proprietary rights are essential elements of our business. Our policy is to seek in the United States and selected foreign countries patent protection for novel technologies and compositions of matter that are commercially important to the development of our business. For proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug discovery process that involve proprietary know-how and technology that is not covered by patent applications, we rely on trade secret protection and confidentiality agreements to protect our interests. We require all of our employees, consultants and advisors to enter into confidentiality agreements. Where it is necessary to share our proprietary information or data with outside parties, our policy is to make available only that information and data required to accomplish the desired purpose and only pursuant to a duty of confidentiality on the part of those parties.

        As of December 31, 2013, Theravance owned 369 issued United States patents and 1,364 granted foreign patents, as well as additional pending United States patent applications and foreign patent applications. We anticipate that all or substantially all of the patents and patent applications related to our business will be assigned by Theravance to Theravance Biopharma or to its wholly-owned Cayman Islands subsidiary. The claims in these various patents and patent applications are directed to compositions of matter, including claims covering product candidates, lead compounds and key intermediates, pharmaceutical compositions, methods of use and processes for making our compounds along with methods of design, synthesis, selection and use relevant to multivalency in general and to our research and development programs in particular. In particular, we will be assigned ownership of the following U.S. patents which are listed in the FDA Approved Drug Products with Therapeutic Equivalence Evaluations  (Orange Book) for telavancin: U.S. Patent No. 6,635,618 B2, expiring on September 11, 2023; U.S. Patent No. 6,858,584 B2, expiring on August 24, 2022; U.S. Patent No. 6,872,701 B2, expiring on June 5, 2021; U.S. Patent No. 7,008,923 B2, expiring on May 6, 2021; U.S. Patent No. 7,208,471 B2, expiring on May 1, 2021; U.S. Patent No. 7,351,691 B2, expiring on May 1, 2021; U.S. Patent No. 7,531,623 B2, expiring on January 1, 2027; U.S. Patent No. 7,544,364 B2, expiring on May 1, 2021; U.S. Patent No. 7,700,550 B2, expiring on May 1, 2021; U.S. Patent No. 8,101,575 B2, expiring on May 1, 2021; and U.S. Patent No. 8,158,580 B2, expiring on May 1, 2021.

        United States issued patents and foreign patents generally expire 20 years after filing. The patent rights relating to VIBATIV® which will be assigned to us currently consist of United States patents that expire between 2019 and 2027, additional pending United States patent applications and counterpart patents and patent applications in a number of jurisdictions, including Europe. Nevertheless, issued patents can be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products and threaten our ability to commercialize our product candidates. Our patent position, similar to other companies in our industry, is generally uncertain and involves complex legal and factual questions. To maintain our proprietary position we will need to obtain effective claims and enforce these claims once granted. It is possible that, before any of our products can be commercialized, any related patent may expire or remain in force only for a short

74

Table of Contents

period following commercialization, thereby reducing any advantage of the patent. Also, we do not know whether any of our patent applications will result in any issued patents or, if issued, whether the scope of the issued claims will be sufficient to protect our proprietary position.

        Theravance entered into a License Agreement with Janssen Pharmaceutica ("Janssen") pursuant to which it licensed rights under certain patents owned by Janssen covering an excipient used in the formulation of telavancin. This license agreement will be assigned by Theravance to Theravance Biopharma. We believe that the general and financial terms of the agreement with Janssen are ordinary course terms. Pursuant to the terms of this license agreement, we will be obligated to pay royalties to Janssen based on any commercial sales of telavancin at percentage rates in the mid-single digits, and further will be obligated to make potential milestone payments to Janssen of up to $1,000,000. The license is terminable by us upon prior written notice to Janssen or upon an uncured breach or a liquidation event of one of the parties.

Competition

        Our objective is to discover, develop and commercialize new medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. We expect that any medicines that we commercialize with our collaborative partners or on our own will compete with existing and future market-leading medicines.

        Many of our potential competitors have substantially greater financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial infrastructures than we have. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery and development to:

•
discover and develop medicines that are superior to other products in the market;

•
attract qualified scientific, product development and commercial personnel;

•
obtain patent and/or other proprietary protection for our medicines and technologies;

•
obtain required regulatory approvals; and

•
successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicines.

        VIBATIV® (telavancin).    VIBATIV® competes with vancomycin, a generic drug that is manufactured by a variety of companies, as well as other drugs marketed to treat complicated skin and skin structure infections and hospital-acquired and ventilator-associated bacterial pneumonia caused by Gram-positive bacteria. Currently marketed products include but are not limited to Cubicin® (daptomycin) marketed by Cubist Pharmaceuticals, Zyvox® (linezolid) and Tygacil® (tigecycline) both marketed by Pfizer, and Teflaro® (ceftaroline) marketed by Forest Laboratories. To compete effectively with these medicines, and in particular with the relatively inexpensive generic option of vancomycin, we will need to demonstrate to physicians that, based on experience, clinical data, side-effect profiles and other factors, VIBATIV® is a suitable alternative to vancomycin and other existing or subsequently-developed anti-infective drugs in certain clinical situations.

        In addition, as the principles of multivalent medicine design become more widely known and appreciated based on patent and scientific publications and regulatory filings, we expect the field to become highly competitive. Pharmaceutical companies, biotechnology companies and academic and research institutions may seek to develop product candidates based upon the principles underlying our multivalent technologies.

75

Table of Contents

Employees

        After giving effect to the spin-off, we expect our U.S. operating subsidiary to have approximately 270 employees, of which 200 are expected to be engaged primarily in research and development activities on behalf of our other subsidiaries and affiliates pursuant to intercompany service agreements. We anticipate that after the spin-off, our Chief Executive Officer will also continue to serve as chief executive officer of Theravance and some of our employees will provide services to Theravance and some employees of Theravance will provide services to us pursuant to agreements between our companies. None of our employees are expected to be represented by a labor union. We consider our employee relations to be good.

76

Table of Contents
Historical Selected Financial Data

        The tables below set forth selected historical financial data of Theravance Biopharma. This information has been derived from our (i) audited combined financial statements as of December 31, 2012 and 2013 and for the three years in the period ended December 31, 2013, which are included elsewhere in this Information Statement. The December 31, 2011 balance sheet data is derived from audited combined financial statements, which are not included in this Information Statement. During these periods, Theravance Biopharma was an integrated business of Theravance. The historical financial information may not be indicative of the results of operations or financial position that we would have obtained if we had been an independent company during the periods presented or of our future performance as an independent company. See "Risk Factors." Per share data has not been presented as no ordinary shares were outstanding during the periods presented and such information would not be meaningful.

        The selected historical financial data should be read in conjunction with the combined financial statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this Information Statement.

Combined Statements of Operations Data

	 	Year Ended December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Revenue	 	$	14,854	 	$	130,145	 	$	226	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	98,850	 	 	113,995	 	 	120,579	 	
Selling, general and administrative	 	 	25,339	 	 	25,725	 	 	35,931	 	
 	 	 	 	 	 	 	 	
Total operating expenses(1)	 	 	124,189	 	 	139,720	 	 	156,510	 	
 	 	 	 	 	 	 	 	
Net loss	 	$	(109,335	)	$	(9,575	)	$	(156,284	)	

(1)
The following table discloses the allocation of stock- based compensation expense included in total operating expenses:

	 	Year Ended
December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Research and development	 	$	12,696	 	$	13,192	 	$	15,444	 	
General and administrative	 	 	8,767	 	 	8,131	 	 	7,032	 	
 	 	 	 	 	 	 	 	
Total stock-based compensation	 	$	21,463	 	$	21,323	 	$	22,476	 	
 	 	 	 	 	 	 	 	
Combined Balance Sheet Data

	 	December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Cash and cash equivalents	 	$	—	 	$	—	 	$	—	 	
Restricted cash	 	 	893	 	 	833	 	 	833	 	
Working capital (deficit)	 	 	(33,565	)	 	(11,837	)	 	(22,747	)	
Total assets	 	 	13,821	 	 	20,962	 	 	25,177	 	
Long-term liabilities(1)	 	 	118,664	 	 	5,280	 	 	5,359	 	
Total parent company (deficit)	 	 	(140,724	)	 	(6,990	)	 	(17,035	)	

(1)
Long-term liabilities include the long-term portion of deferred revenue as follows:

	 	December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Deferred revenue	 	$	112,843	 	$	206	 	$	585	 	
77

Table of Contents
Management's Discussion and Analysis of Financial Condition and Results of Operations

        This Information Statement includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this Information Statement, other than statements of historical facts, including statements regarding the spin-off, our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, expectations and objectives could be forward-looking statements. The words "anticipates," "believes," "could," "designed," "estimates," "expects," "goal," "intends," "may," "plans," "projects," "pursuing," "will," "would" and similar expressions (including the negatives thereof) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward-looking statements that we make. Factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to, those discussed in "Risk Factors" above, "Management's Discussion and Analysis of Financial Condition and Results of Operations" below and elsewhere in this Information Statement. Our forward-looking statements in this Information Statement are based on current expectations and we do not assume any obligation to update any forward-looking statements.

Management Overview

        We are a biopharmaceutical company with one approved product that was discovered and developed internally, a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical companies. We are focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including bacterial infections, central nervous system ("CNS")/pain, respiratory disease, and gastrointestinal ("GI") motility dysfunction. By leveraging our proprietary insight of multivalency to drug discovery, we are pursuing a best-in-class strategy designed to discover superior medicines in areas of significant unmet medical need.

        Our strategy focuses on the discovery, development and commercialization of medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable. Multivalency refers to the simultaneous attachment of a single molecule to multiple binding sites on one or more biological targets. When compared to monovalency, whereby a molecule attaches to only one binding site, multivalency can significantly increase a compound's potency, duration of action and/or selectivity. Multivalent compounds generally consist of several individual small molecules, at least one of which is biologically active when bound to its target, joined by linking components. In addition, we believe we can enhance the probability of successfully developing and commercializing medicines by identifying at least two structurally different product candidates, whenever practicable, in each therapeutic program.

        We believe that strategic collaborations and licensing activities also will help us succeed at implementing our research, development and commercialization strategy for our product and product candidates. Through such strategic collaborations or licensing activities, we believe that we can enhance our ability to develop and expand our pipeline as well as commercialize products once approved.

        We have never operated as a separate, stand-alone entity. In addition, there have been a number of events over the past several years that have had a significant impact on our operations. As a result of these factors, our historical financial results are not likely to be indicative of our future financial performance.

78

Table of Contents

Summary Financial Results

        Our total revenue was $14.9 million in 2011, $130.1 million in 2012 and $226,000 in 2013. Revenue in 2012 reflects the recognition of deferred revenue of $125.8 million from Theravance's global collaboration arrangement with Astellas Pharma Inc. ("Astellas") for the development and commercialization of VIBATIV®. This recognition resulted from Astellas' January 6, 2012 termination of Theravance's agreement with them. Our total operating expenses increased from $124.2 million in 2011 to $139.7 million in 2012 to $156.5 million in 2013. Our research and development expenses increased from 2011 to 2012 and 2012 to 2013 primarily due to the advancement of our clinical development programs for opioid induced constipation with TD-1211 and in our CNS/Pain MARIN program with TD-9855. Selling, general and administrative expenses also increased over this same period to support the growth of our research and development business and our strategic initiatives. We recognized net losses of $109.3 million in 2011, $9.6 million in 2012 and $156.3 million in 2013.

The Separation of Theravance Biopharma from Theravance

        On April 25, 2013, Theravance announced its intention to separate its Drug Discovery and Development Business into an independent, publicly traded company through a spin-off of 100% of its shares to Theravance stockholders. Completion of the spin-off is expected in the second quarter of 2014, subject to certain conditions, including final approval from Theravance's board of directors to complete the spin-off. Following the distribution, Theravance's stockholders will own 100% of the equity in both companies. The separation will not require a vote by Theravance stockholders. The Drug Discovery and Development Business discussed herein represents the historical combined operating results and financial condition of Theravance Biopharma. Any references to "we," "us," "Theravance Biopharma" or the "Company" refer to the Drug Discovery and Development Business as operated as a part of Theravance prior to the spin-off.

Basis of Presentation

        The combined financial statements have been prepared using Theravance's historical cost basis of the assets, liabilities, revenues, and expenses of the various activities that comprise the Drug Discovery and Development Business as a component of Theravance and reflect the results of operations, financial condition and cash flows of the Drug Discovery and Development Business as a component of Theravance. The statements of operations include expense allocations for general corporate overhead functions historically shared with Theravance, including finance, legal, human resources, information technology and other administrative functions, which include the costs of salaries, benefits and other related costs, as well as consulting and other professional services. Where appropriate, these allocations were made on a specific identification basis. Otherwise, the expenses related to services provided to the Drug Discovery and Development Business by Theravance were allocated to Theravance Biopharma based on the relative percentages, as compared to Theravance's other businesses, of headcount or square footage usage.

        The costs historically allocated to us by Theravance for the services it has shared with us may not be indicative of the costs we will incur for these services following the spin-off. Certain anticipated incremental costs and other adjustments that give effect to the spin-off are not reflected in our historical combined financial statements.

Program Highlights

Economic Interests in GSK Respiratory Programs Partnered with Theravance

        Prior to the spin-off, Theravance will assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ and vilanterol monotherapy. Our equity interest in TRC will entitle us an 85% economic interest in any future payments made by GSK

79

Table of Contents

under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. The drug programs assigned to TRC include 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 these GSK agreements. Our economic interest will not include any payments associated with RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO™ ELLIPTA™ or vilanterol monotherapy. See "The Spin-Off—Formation of Theravance Respiratory Company LLC.

UMEC/VI/FF

        The UMEC/VI/FF program seeks to provide the activity of two bronchodilators (UMEC and VI) plus an inhaled corticosteroid (FF) in a single delivery device. In this program, the LABA and LAMA molecules that comprise GSK's ANORO TM  ELLIPTA TM  will be co-formulated in a single blister strip, and the inhaled corticosteroid, FF, will be administered from an adjacent blister strip—both of which would be administered together in GSK's ELLIPTA TM  inhaler. The royalty rates applicable to worldwide net sales of UMEC/VI/FF under the collaboration agreement are upward-tiering from 6.5% to 10%.

        Inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA)

        GSK961081 ('081) is an investigational, single molecule bifunctional bronchodilator with both muscarinic antagonist and beta2 receptor agonist activities. '081 has completed a Phase 2b study, a Phase 1 study in combination with the ICS, fluticasone propionate ("FP"), and a number of Phase 3 enabling non-clinical studies. '081 is now being progressed as a combination with FF delivered once-daily in the ELLIPTA inhaler which requires additional work on non-clinical studies, manufacturing and a Phase 1 bioequivalence study. As a result, it is unlikely that a Phase 3 study with '081 will commence in 2014. Preclinical Phase 3-enabling studies with the combination '081/FF are ongoing to explore its potential as a once-daily medicine delivered in the ELLIPTA™ inhaler.

        In 2005, GSK licensed Theravance's bifunctional muscarinic antagonist-beta2 agonist (MABA) program under the strategic alliance agreement, which agreement will be assigned to TRC, and in October 2011, Theravance and GSK expanded the MABA program by adding six additional Theravance-discovered preclinical MABA compounds (the "Additional MABAs"). GSK is obligated to use diligent efforts to develop and commercialize at least one MABA within the MABA program, but may terminate progression of any or all Additional MABAs at any time and return them to TRC, at which point TRC may develop and commercialize such Additional MABAs alone or with a third party. Both GSK and Theravance have agreed not to conduct any MABA clinical studies outside of the strategic alliance agreement so long as GSK is in possession of the Additional MABAs. If a single-agent MABA medicine containing '081 is successfully developed and commercialized, TRC is entitled to receive royalties from GSK of between 10% and 20% of annual global net sales up to $3.5 billion, and 7.5% for all annual global net sales above $3.5 billion. If a MABA medicine containing '081 is commercialized only as a combination product, such as '081/FF, the royalty rate is 70% of the rate applicable to sales of the single-agent MABA medicine. For single-agent MABA medicines containing an Additional MABA, TRC is entitled to receive royalties from GSK of between 10% and 15% of annual global net sales up to $3.5 billion, and 10% for all annual global net sales above $3.5 billion. For combination products containing an Additional MABA, such as a MABA/ICS combination, the royalty rate is 50% of the rate applicable to sales of the single-agent MABA medicine. If a MABA medicine containing '081 is successfully developed and commercialized in multiple regions of the world, TRC could earn total contingent payments of up to $125.0 million for a single-agent medicine and up to $250.0 million for both a single-agent and a combination medicine. If a MABA medicine containing an Additional MABA is successfully developed and commercialized in multiple regions of the world, TRC could earn total contingent payments of up to $129.0 million.

80

Table of Contents

Bacterial Infections Programs

VIBATIV® (telavancin)

        VIBATIV® (telavancin) is a bactericidal, once-daily injectable antibiotic discovered by Theravance in a research program dedicated to finding new antibiotics for serious infections due to Staphylococcus aureus  and other Gram-positive bacteria, including methicillin-resistant (MRSA) strains. VIBATIV® is approved in the U.S. and Canada for the treatment of adult patients with complicated skin and skin structure infections (cSSSI) caused by susceptible Gram-positive bacteria. VIBATIV® is also approved in the U.S. for the treatment of adult patients with hospital-acquired and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Staphylococcus aureus  when alternative treatments are not suitable.

        In May 2012, Theravance entered into a Technology Transfer and Supply Agreement with Hospira Worldwide, Inc. ("Hospira") for VIBATIV® drug product supply. In June 2013, the U.S. Food and Drug Administration ("FDA") approved Hospira as a VIBATIV® drug product manufacturer. This agreement with Hospira will be assigned to us. On August 14, 2013 Theravance announced the reintroduction of VIBATIV® to the U.S. market with the commencement of shipments into the wholesaler channel. While Theravance has contracted a small sales force and is expanding its medical affairs presence, other commercialization alternatives for the U.S. market are being evaluated.

        In September 2011, the European Commission granted marketing authorization for VIBATIV® for the treatment of adults with nosocomial pneumonia (NP), including ventilator-associated pneumonia, known or suspected to be caused by MRSA when other alternatives are not suitable. However, in May 2012, the European Commission suspended this marketing authorization because the previous singlesource drug product supplier did not meet the current Good Manufacturing Practice ("cGMP") requirements for the manufacture of VIBATIV®. In March 2014, the European Commission lifted the suspension. We anticipate that commercialization in the European Union will commence upon availability of product and satisfaction of all pre-launch requirements.

Central Nervous System/Pain Programs

Oral Peripheral Mu Opioid Receptor Antagonist—TD-1211

        TD-1211 is an investigational once-daily, orally administered, peripherally selective, multivalent inhibitor of the mu opioid receptor designed with a goal of alleviating gastrointestinal side effects of opioid therapy without affecting analgesia. In July 2012, Theravance announced positive topline results from the Phase 2b Study 0084, the key study in the Phase 2b program evaluating TD-1211 as potential treatment for chronic, non-cancer pain patients with opioid-induced constipation. The Phase 2b program consisted of three studies (0074, 0076 and 0084) designed to evaluate doses and dosing regimens for Phase 3. We are currently evaluating our Phase 3 strategy due to potentially evolving FDA requirements for this class of drug.

Monoamine Reuptake Inhibitor—TD-9855

        We are developing TD-9855, an investigational norepinephrine and serotonin reuptake inhibitor discovered by Theravance, for the treatment of chronic pain conditions. TD-9855 is currently being evaluated in an ongoing Phase 2 study in patients with fibromyalgia and the results of the study are anticipated to be reported the first half of 2014. Recently, TD-9855 did not meet the primary efficacy endpoints in the Phase 2 study in adult patients with Attention-Deficit/Hyperactivity Disorder.

81

Table of Contents

Theravance Biopharma Respiratory Program

Long-Acting Muscarinic Antagonist (LAMA)—TD-4208

        We are developing TD-4208, a once-daily inhaled nebulized muscarinic antagonist discovered by Theravance, for the treatment of a subset of COPD patients whom we believe are underserved by current hand-held products. We believe that such a medicine could serve as a foundation for several combination nebulized products as well as potential metered dose inhaler ("MDI") or dry powder inhaler ("DPI") products. In November 2011, Theravance announced positive topline results from a Phase 2a single-dose COPD study of TD-4208. In this study, TD-4208 met the primary endpoint by demonstrating a statistically significant mean change from baseline in peak forced expiratory volume in one second ("FEV1") compared to placebo, and was generally well tolerated. In September 2013, Theravance reported positive top-line data from a Phase 2b study to evaluate the bronchodilatory effect, pharmacokinetics, safety and tolerability of multiple doses of TD-4208. In this study, TD-4208 met the primary efficacy endpoint for all six doses studied and demonstrated a statistically significant change versus placebo from baseline in trough FEV1. All doses of TD-4208 were generally well tolerated in the study with rates of adverse events comparable to placebo.

        We have entered into an extension agreement with GSK in which we have agreed to be subject to certain restrictive covenants similar to those applicable to Theravance under the collaboration and strategic alliance agreement with GSK. One of those covenants provides that for so long as a MABA product candidate remains in active development under the strategic alliance agreement with GSK, we will not, whether alone or with a third party, conduct a clinical study with respect to a MABA compound (or a product containing a MABA compound). Although exploring the combination of TD-4208 with a MABA may be clinically attractive, we have agreed not to pursue such a combination product so long as a MABA product candidate remains in active development under the strategic alliance agreement with GSK, which product candidate we will have an economic interest in pursuant to our interest in TRC. Similarly, for so long as there is at least one collaboration product being developed or commercialized under the collaboration agreement in which we have an economic interest pursuant to our interest in TRC, we will not carry out clinical development with any LABA that is not a compound under the collaboration agreement, subject to limited exceptions. However, if we license TD-4208 to a third party that chooses to combine TD-4208 with a LABA compound, that third party would not be similarly restricted provided that we do not direct the third party's development or commercialization efforts or share any GSK confidential information.

GI Motility Dysfunction Program

Velusetrag

        Velusetrag is an oral, investigational medicine discovered by Theravance and developed for gastrointestinal motility disorders. It is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor. In October 2012, Theravance entered into a development and collaboration arrangement with Alfa Wassermann societ`a per azioni (S.p.A.) ("Alfa Wassermann") for velusetrag, under which the parties agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal). In January 2013, Theravance and Alfa Wassermann announced the initiation of a Phase 2 proof-of-concept study to evaluate the efficacy and safety of velusetrag for the treatment of patients with diabetic or idiopathic gastroparesis. This agreement with Alfa Wassermann will be assigned to us and such agreement provides for a term of 15 years from first commercialization or, if later, until certain patents expire. Alfa Wassermann has an exclusive option to develop and commercialize velusetrag in the European Union, Russia, China, Mexico and certain other countries, while we retain full rights to velusetrag in the U.S., Canada, Japan and certain other countries. We will be entitled to receive funding for the Phase 2a study and a subsequent Phase 2b

82

Table of Contents

study if the parties agree to proceed. If Alfa Wassermann exercises its license option at the completion of the Phase 2 program, then we will be entitled to receive a $10.0 million option fee. If velusetrag is successfully developed and commercialized, we will be entitled to receive potential future contingent payments totaling up to $53.5 million, and royalties on net sales by Alfa Wassermann ranging from the low teens to 20%.

TD-8954

        TD-8954, like velusetrag, is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor. We are investigating the development potential of TD-8954 for acute use in the hospital setting for patients who require rapid restoration of upper and lower GI motility. We believe that TD-8954 may help hospitalized patients with enteral feeding intolerance, or EFI, and potentially other GI disorders. We recently initiated a Phase 2a study to evaluate the safety, tolerability and pharmacodynamics of a single-dose of TD-8954 administered intravenously compared to metoclopramide in critically ill patients with EFI. This study is expected to read out at the end of 2014.

Other Collaborative Arrangements

        During the last three years, we have entered into several other collaborative arrangements, which have been accounted for in accordance with our accounting policies related to collaborative arrangements and revenue recognition. Refer to Notes 2 and 3, "Summary of Significant Accounting Policies" and "Collaborative Arrangements," to the combined financial statements appearing in this Information Statement on Form 10 for additional information.

Critical Accounting Policies and Estimates

        Our management's discussion and analysis of our financial condition and results of operations is based on our combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on Theravance's historical experiences and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

        We are an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We may avail ourselves of this exemption from new or revised accounting standards and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies."

        We believe that the following accounting policies relating to revenue recognition, accrued research and development expenses, the fair value of stock-based compensation awards, and inventories require us to make significant estimates, assumptions and judgments.

Revenue Recognition

        Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the nature of the fee charged for products or

83

Table of Contents

services delivered and the collectability of those fees. Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met.

        Product Revenues:    We sell VIBATIV® in the U.S. through a limited number of distributors, and title and risk of loss transfer upon receipt by these distributors. Healthcare providers order VIBATIV® through these distributors. For all product shipped in 2013, we are deferring the recognition of revenue until the product is sold through to healthcare providers, the end customers, due to the inherent uncertainties in estimating normal channel inventory at the distributors, and during which period we also provided extended payment terms and expanded return rights that allow distributors to return the product. As of December 31, 2013, we had deferred revenue of $0.9 million related to VIBATIV® shipments and recorded this amount as a current liability in the combined balance sheet.

        Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. We reflect such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management's estimates that consider payer mix in target markets, industry benchmarks and experience to date. We monitor inventory levels in the distribution channel, as well as sales of VIBATIV® by distributors to healthcare providers, using product-specific data provided by the distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of our agreements with customers, historical product returns of VIBATIV® experienced by Astellas, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. We update our estimates and assumptions each quarter and if actual future results vary from our estimates, we may adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment.

        Sales Discounts:    We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. We expect our customers to comply with the prompt payment terms to earn the cash discount. We account for cash discounts by reducing accounts receivable by the full amount and recognizing the discount as a reduction of revenue in the same period the related revenue is recognized.

        Chargebacks and Government Rebates:    For VIBATIV® sales in the U.S., we estimate reductions to product sales for qualifying federal and state government programs including discounted pricing offered to Public Health Service ("PHS") as well as government-managed Medicaid programs. Our reduction for PHS is based on actual chargebacks that distributors have claimed for reduced pricing offered to such health care providers. Our accrual for Medicaid is based upon statutorily-defined discounts, estimated payer mix, expected sales to qualified healthcare providers, and our expectation about future utilization. The Medicaid accrual and government rebates that are invoiced directly to us are recorded in other accrued liabilities on the combined balance sheet. For qualified programs that can purchase our products through distributors at a lower contractual government price, the distributors charge back to us the difference between their acquisition cost and the lower contractual government price, which we record as an allowance against accounts receivable.

        Distribution Fees and Product Returns:    We have written contracts with our distributors that include terms for distribution-related fees. We record distribution-related fees based on a percentage of the product sales price. We offer our distributors a right to return product purchased directly us, which is principally based upon the product's expiration date. Additionally, we have granted more expansive return rights to our distributors following our product launch of VIBATIV®. We will generally accept returns for expired product during the six months prior to and twelve months after the product expiration date on product that had been sold to the distributors. Product returned is generally not

84

Table of Contents

resalable given the nature of our products and method of administration. We have developed estimates for VIBATIV® product returns based upon historical VIBATIV® sales from our former collaborative partner, Astellas. We record distribution fees and product returns as an allowance against accounts receivable.

        Allowance for Doubtful Accounts:    We maintain a policy to record allowances for potentially doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. As of December 31, there was no allowance for doubtful accounts.

        Concentration of Credit Risk:    Financial instruments which potentially subject us to concentrations of credit risk include accounts receivable. At December 31, 2013, 99% of our accounts receivable balance represents amounts due to us from two distributors, AmerisourceBergen Drug Corporation and McKesson Corporation. Despite the significant concentration of distributors, the demand for VIBATIV® is driven primarily by patient therapy requirements and we are not dependent upon any individual distributor with respect to VIBATIV® sales.

        Royalties:    We recognize royalty revenue on licensee net sales of our products in the period in which the royalties are earned and reported to us and collectability is reasonably assured.

        Collaborative Arrangements and Multiple Element Arrangements:    We generate revenue from collaboration and license agreements for the development and commercialization of our product candidates. Collaboration and license agreements may include non-refundable upfront payments, partial or complete reimbursement of research and development costs, supply arrangement, contingent payments based on the occurrence of specified events under our collaborative arrangements, license fees and royalties on sales of product candidates if they are successfully approved and commercialized. Our performance obligations under the collaborations may include the transfer of intellectual property rights in the form of licenses, obligations to provide research and development services and related materials, supply of active pharmaceutical ingredient ("API") and/or drug product, and obligations to participate on certain development and/or commercialization committees with the collaborative partners. We make judgments that affect the periods over which we recognize revenue. We periodically review our estimated periods of performance based on the progress under each arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis.

        On January 1, 2011, we adopted an accounting standards update that amends the guidance on accounting for new or materially modified multiple-element arrangements that we enter into subsequent to January 1, 2011. This guidance removed the requirement for objective and reliable evidence of fair value of the undelivered items in order to consider a deliverable a separate unit of accounting. It also changed the allocation method such that the relative-selling-price method must be used to allocate arrangement consideration to all the units of accounting in an arrangement. This guidance established the following hierarchy that must be used in estimating selling price under the relative-selling-price method: (1) vendor-specific objective evidence of fair value of the deliverable, if it exists, (2) third-party evidence of selling price, if vendor-specific objective evidence is not available or (3) vendor's best estimate of selling price ("BESP") if neither vendor-specific nor third-party evidence is available.

        We may determine that the selling price for the deliverables within collaboration and license arrangements should be determined using BESP. The process for determining BESP involves significant judgment on our part and includes consideration of multiple factors such as estimated direct expenses and other costs, and available data. We have determined BESP for license units of accounting based on market conditions, similar arrangements entered into by third parties and entity-specific factors such as the terms of previous collaborative agreements, our pricing practices and pricing objectives, the likelihood that clinical trials will be successful, the likelihood that regulatory approval will be received and that the products will become commercialized. We have also determined BESP for services-related deliverables based on the nature of the services to be performed and estimates of the associated effort as well as estimated market rates for similar services.

85

Table of Contents

        For each unit of accounting identified within an arrangement, we determine the period over which the performance obligation occurs. Revenue is then recognized using either a proportional performance or straight-line method. We recognize revenue using the proportional performance method when the level of effort to complete our performance obligations under an arrangement can be reasonably estimated. Direct labor hours or full time equivalents are typically used as the measurement of performance. Any changes in the remaining estimated performance obligation periods under these collaborative arrangements will not have a significant impact on the results of operations, except for a change in estimated performance period resulting from the termination of a collaborative arrangement, which would result in immediate recognition of the related deferred revenue.

        For multiple element arrangements entered into prior to January 1, 2011, Theravance determined whether the elements had stand-alone value and whether there was objective and reliable evidence of fair value. When the delivered element did not have stand-alone value or there was insufficient evidence of fair value for the undelivered element(s), Theravance recognized the consideration for the combined unit of accounting ratably over the estimated period of performance, which was the same manner in which the revenue was recognized for the final deliverable.

        The former Collaboration Arrangement with Astellas was entered into prior to January 1, 2011. The deliverables under this collaboration agreement did not meet the criteria required to be accounted for as separate accounting units for the purposes of revenue recognition. As a result, revenue from non-refundable, upfront fees and development contingent payments was recognized ratably over the term of our performance period under the agreement. These upfront or contingent payments received, pending recognition as revenue, were recorded as deferred revenue and amortized over the estimated performance period. This collaboration agreement was terminated on January 6, 2012. The termination resulted in the recognition of deferred revenue of $125.8 million in 2012.

        On January 1, 2011, we also adopted an accounting standards update that provides guidance on revenue recognition using the milestone method. Payments that are contingent upon achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved. Milestones are defined as events that can be achieved based only on our performance and as to which, at the inception of the arrangement, there is substantive uncertainty about whether the milestone will be achieved. Events that are contingent only on the passage of time or only on third-party performance are not considered milestones subject to this guidance. Further, the amounts received must relate solely to prior performance, be reasonable relative to all of the deliverables and payment terms in the agreement and commensurate with our performance to achieve the milestone after commencement of the agreement. Total contingent payments that may become payable to us under our collaborative agreements were up to $66.5 million at December 31, 2013 and are considered non-substantive.

        Amounts related to research and development funding is recognized as the related services or activities are performed, in accordance with the contract terms. Payments may be made to us based on the number of full-time equivalent researchers assigned to the collaborative project and the related research and development expenses incurred. Accordingly, reimbursement of research and development expenses pursuant to the cost-sharing provisions of our agreements with Merck, Alfa Wassermann and R-Pharm are recognized as a reduction of research and development expenses. In 2013, we recorded a reduction in our research and development expenses of $6.5 million for reimbursement of research and development expenses related to these collaborative arrangements.

86

Table of Contents

Accrued Research and Development Expenses

        As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and development expenses. This process involves the following:

•
communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost;

•
estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and

•
periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.

        Examples of estimated research and development expenses that we accrue include:

•
fees paid to CROs in connection with preclinical and toxicology studies and clinical studies;

•
fees paid to investigative sites in connection with clinical studies;

•
fees paid to CMOs in connection with the production of product and clinical study materials; and

•
professional service fees for consulting and related services.

        We base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. Our service providers invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

        To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.

Fair Value of Stock-Based Compensation Awards

        We have not issued any Theravance Biopharma stock-based awards to our employees, nor do we plan on granting equity awards prior to or in conjunction with the spin-off. However, we plan to grant equity awards after the spin-off transaction. Any such awards will be accounted for pursuant to Financial Accounting Standards Board Accounting Standard Codification 718, "Stock-based Compensation" and valued using the Black-Scholes-Merton valuation model. In addition, our employees have in the past received Theravance stock-based compensation awards.

        Theravance equity awards were made to our employees while they were employees of Theravance and Theravance used the Black-Scholes-Merton option pricing model to estimate the fair value of options at the date of grant. The Black-Scholes-Merton option valuation model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. Theravance used the "simplified" method as described in Staff Accounting Bulletin No. 107, "Share-

87

Table of Contents

Based Payment", for the expected option term because the usage of Theravance's historical option exercise data is limited due to post-IPO exercise restrictions. Beginning April 1, 2011, Theravance used its historical volatility to estimate expected stock price volatility. Prior to April 1, 2011, Theravance used its peer company price volatility to estimate expected stock price volatility due to its limited historical common stock price volatility since its initial public offering in 2004. The estimated fair value of the option is expensed on a straight-line basis over the expected term of the grant.

        Theravance estimated the fair value of restricted stock units ("RSUs") and restricted stock awards ("RSAs") based on the fair market values of the underlying Theravance stock on the dates of grant. The estimated fair value of time-based RSUs and RSAs is expensed on a straight-line basis over the expected term of the grant. The estimated fair value of performance-contingent RSUs and RSAs is expensed using an accelerated method over the requisite service period based on management's best estimate as to whether it is probable that the shares awarded are expected to vest. Theravance assesses the probability of the performance indicators being met on a continuous basis.

        Stock-based compensation expense was calculated based on awards ultimately expected to vest and was reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. The estimated annual forfeiture rates for stock options, RSUs and RSAs are based on Theravance's historical forfeiture experience.

        In 2011, Theravance granted special long-term retention and incentive performance-contingent RSAs to members of senior management, which have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. The maximum potential expense associated with these RSAs is $28.2 million, which would be recognized in increments based on achievement of the performance conditions. As of December 31, 2013, Theravance determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. If sufficient performance conditions are achieved prior to the spin-off, which is expected in the second quarter of 2014, then we would recognize up to $6.7 million in stock-based compensation expense associated with these RSAs in the period we determined that the achievement of the requisite performance conditions was probable.

        Theravance Biopharma does not expect to recognize in the near future any tax benefit related to employee stock-based compensation expense as a result of the full valuation allowance on its deferred tax assets including deferred tax assets related to its net operating loss carry forwards.

        For more information, refer to Note 5, "Share-Based Compensation," to the combined financial statements appearing in this Form 10.

Inventories

        Inventories are stated at the lower of cost or market value. Raw materials include VIBATIV® API and other raw materials of $5.1 million, work-in-process of $0.4 million and finished goods of $4.9 million at December 31, 2013. Work-in-process and finished goods include third party manufacturing costs and labor and indirect costs we incur in the production process. Included in inventories are raw materials and wok-in-process that may be used as clinical products, which are charged to research and development expense when consumed. If information becomes available that suggests the inventories may not be realizable, we may be required to expense a portion or all of the previously capitalized inventories.

88

Table of Contents

Results of Operations

Revenues

        We recognized revenue from the amortization of upfront license fees and contingent payments related to our Merck collaboration, which was terminated in December 2013, and the telavancin collaboration arrangement with Astellas, which was terminated in January 2012. In addition, we recognized revenue related to our Astellas telavancin collaboration from royalties from net sales of VIBATIV® and from the impact of VIBATIV® inventory transfers or dispositions.

	 	 

	 	Change	 	 	
 
	 	Year Ended
December 31,	 	 	 	 	 	
 
	 	 	 	2012	 	2013	 	 	 	 	 	 	 	 	 	 	 	
(in thousands, except percentages)
	 	2011	 	2012	 	2013	 	$	 	%	 	$	 	%	 	 	 	 	 	 	 	 	 	 	 	
Collaborative arrangements:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Astellas collaboration arrangement	 	$	14,854	 	$	125,788	 	$	—	 	$	110,934	 	 	747	%	$	(125,788	)	 	(100	)%	 	 	 	 	 	 	 	 	 	 	
Merck collaboration arrangement	 	 	—	 	 	4,357	 	 	226	 	 	4,358	 	 	*	 	 	(4,132	)	 	(95	)%	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Revenue	 	$	14,854	 	$	130,145	 	$	226	 	$	115,292	 	 	776	%	$	(129,920	)	 	(100	)%	 	 	 	 	 	 	 	 	 	 	

*
Calculation not meaningful.

        Revenue increased 776% to $130.1 million in 2012 compared to 2011 and decreased to $266,000 in 2013 primarily due to accelerated recognition of deferred revenue of $125.8 million from our global collaboration arrangement with Astellas for the development and commercialization of VIBATIV® in 2012. This accelerated recognition was the result of the termination of the Astellas agreement in January 2012. Also, total revenue in 2012 included the recognition of the amount of the upfront payment allocated to licensing of $4.4 million received under the collaborative arrangement with Merck. This collaboration arrangement with Merck was terminated in December 2013.

        A portion of our upfront fees and certain contingent payments received from our collaborative arrangements have been deferred and are being amortized ratably into revenue or research and development expense over the estimated performance period. Future revenue will include the ongoing amortization of upfront and contingent payments earned. We periodically review and, if necessary, revise the estimated periods of our performance pursuant to these contracts.

Merck

        Under the Research Collaboration and License Agreement, the significant deliverables were determined to be the license, committee participation and research services.

        It was determined that the license represents a separate unit of accounting as the license, which includes rights to our underlying technologies for its therapeutic candidates, has standalone value because the rights conveyed permit Merck to perform all efforts necessary to use our technologies to bring a therapeutic candidate through development and, upon regulatory approval, commercialization. We based the best estimate of selling price on potential future cash flows under the arrangement over the estimated development period. It was determined that the committee participation represents a separate unit of accounting as Merck could negotiate for and/or acquire these services from other third parties and we based the best estimate of selling price on the nature and timing of the services to be performed. It was determined that the research services represent a separate unit of accounting and based the best estimate of selling price on the nature and timing of the services to be performed.

        The $5.0 million upfront payment received in November 2012 was allocated to three units of accounting based on the relative selling price method as follows: $4.4 million to the license, $0.4 million to the research services and $0.2 million to the committee participation. We recognized revenue of $4.4 million from the license in 2012 as the technical transfer activities were completed and the

89

Table of Contents

associated unit of accounting was delivered. The amount of the upfront payment allocated to the committee participation was deferred and is being recognized as revenue over the estimated performance period. The amount of the upfront payment allocated to the research services was deferred and is being recognized as a reduction of research and development ("R&D") expense as the underlying services are performed, as the nature of the research services is more appropriately characterized as R&D expense, consistent with the research reimbursements being received.

        In September 2013, Merck provided Theravance notice of its termination of the Research Collaboration and License Agreement. The termination was effective in December 2013. Due to the termination, Theravance revised the estimated performance period. As such, Theravance recognized the remaining deferred revenue of $226,000 into revenue in the second half of 2013, and we are no longer eligible to receive any further contingent payments from Merck.

Former Collaboration Arrangement with Astellas

        In November 2005, Theravance entered into a global collaboration arrangement with Astellas for the license, development and commercialization of VIBATIV®. Under this agreement, Astellas paid Theravance non-refundable cash payments totaling $191.0 million. Astellas had the right to terminate the agreement if a VIBATIV® new drug application was not approved by the FDA within two years of submission, or if VIBATIV® was not approved by the FDA for both complicated skin and skin structure infections and hospital-acquired pneumonia by December 31, 2008. Both of these conditions giving rise to Astellas' termination rights existed in January 2012 when Astellas exercised its right to terminate the agreement. The rights previously granted to Astellas ceased upon termination of the agreement and Astellas stopped all promotional sales efforts. Pursuant to the terms of the agreement, Astellas is entitled to a ten-year, 2% royalty on future net sales of VIBATIV®. As such, Theravance recognized into revenue $125.8 million of deferred revenue related to Astellas in the first quarter of 2012, and we are no longer eligible to receive any further contingent payments from Astellas.

Costs and Expenses

Research and Development Expenses

        Our R&D expenses consist primarily of employee-related costs, external costs, and various allocable expenses. We budget total R&D expenses on an internal department level basis, we do not have program level reporting capabilities. We manage and report our R&D activities across the following four cost categories:

        1)    Employee-related costs, which include salaries, wages and benefits;

        2)    Stock-based compensation, which includes expenses associated with our stock option and other award plans;

        3)    External costs, which include clinical trial related expenses, other contract research fees, consulting fees, and contract manufacturing fees, and

        4)    Facilities and other, which include laboratory and office supplies, depreciation and other allocated expenses, which include general and administrative support functions, insurance and general supplies.

90

Table of Contents

        The following table summarizes our research and development expenses incurred during the periods presented:

	 	 

	 	Change	 	 	
 
	 	Year Ended
December 31,	 	 	 	 	 	
 
	 	 	 	2012	 	2013	 	 	 	 	 	 	 	 	 	 	 	
(in thousands, except percentages)	 	2011	 	2012	 	2013	 	$	 	%	 	$	 	%	 	 	 	 	 	 	 	 	 	 	 	
Employee-related cost	 	$	34,437	 	$	36,391	 	$	36,917	 	$	1,954	 	 	6	%	 	526	 	 	1	%	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	12,696	 	 	13,192	 	 	15,444	 	 	496	 	 	4	%	 	2,252	 	 	17	%	 	 	 	 	 	 	 	 	 	 	
External costs	 	 	30,439	 	 	42,980	 	 	45,926	 	 	12,541	 	 	41	%	 	2,946	 	 	7	%	 	 	 	 	 	 	 	 	 	 	
Facilities and other expenses	 	 	21,278	 	 	21,432	 	 	22,292	 	 	154	 	 	1	%	 	860	 	 	4	%	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total research and development expenses	 	$	98,850	 	$	113,995	 	$	120,579	 	$	15,145	 	 	15	%	$	6,584	 	 	6	%	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
        R&D expenses increased 6% to $120.6 million in 2013 compared to $114.0 million in 2012 primarily due to higher external costs of $2.9 million and an increase of $2.3 million in stock-based compensation expense. The key Phase 2 clinical trials we were conducting in 2013 were our Phase 2 clinical studies in our MARIN program with TD-9855 and a Phase 2b study in our LAMA program with TD-4208. In the comparable period in 2012 our key Phase 2 clinical trials primarily consisted of our Phase 2b studies in our program for opioid induced constipation with TD-1211 and one Phase 2 study in our MARIN program with TD-9855.

        R&D expenses increased 15% to $114.0 million in 2012 compared to $98.9 in 2011. This increase was primarily due to an increase in external costs of $12.5 million, and to higher employee-related costs of $2.0 million related to increases in compensation and an increase in the number of employees. Substantially all of the increase in external costs was related to our clinical trial activities and regulatory consulting fees related to preparation activities for the VIBATIV® advisory committee. The key Phase 2 clinical trials we were conducting in 2012 were our Phase 2b studies in our program for opioid induced constipation with TD-1211 and two Phase 2 studies in our MARIN program with TD-9855. In 2011, our key Phase 2 clinical trials primarily consisted of initiating our Phase 2b studies in our TD-1211 program and our Phase 2 study in our LAMA program with TD-4208.

        Under certain of our collaborative arrangements we received partial reimbursement of external costs and employee-related costs, which have been reflected as a reduction of R&D expenses of $0.4 million, $0.9 million and $6.5 million in 2011, 2012 and 2013.

        We have not provided program costs in detail because we do not track, and have not tracked, all of the individual components (specifically the internal cost components) of our research and development expenses on a program basis. We do not have the systems and processes in place to accurately capture these costs on a program basis.

        We currently do not have reliable estimates of total costs for a particular drug candidate to reach the market. Our product candidates are subject to a lengthy and uncertain regulatory process that may involve unanticipated additional clinical trials and may not result in receipt of the necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition, clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval.

        The length of time that a development program is in a given phase varies substantially according to factors relating to the development program, such as the type and intended use of the potential product, the clinical trial design, and the ability to enroll patients. For partnered programs, advancement from one phase to the next and the related costs to do so is also dependent upon certain factors that are controlled by our partners. According to industry statistics, it generally takes 10 to 15 years to research, develop and bring to market a new prescription medicine in the United States. In light of the steps and complexities involved, the successful development of our potential products is

91

Table of Contents

highly uncertain. Actual timelines and costs to develop and commercialize a product are subject to enormous variability and are very difficult to predict. In addition, various statutes and regulations also govern or influence the manufacturing, safety reporting, labeling, storage, record keeping and marketing of each product.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses generally consist of costs of personnel, professional services, consulting and other expenses related to our administrative and commercial functions, and an allocation of facility and overhead costs.

	 	 

	 	Change	 	
 
	 	Year Ended December 31,	 	2012	 	2013	 	
(in thousands, except percentages)	 	2011	 	2012	 	2013	 	$	 	%	 	$	 	%	 	
Selling, general and administrative	 	$	25,339	 	$	25,725	 	$	35,931	 	$	386	 	 	2	%	$	10,207	 	 	40	%	
        Selling, general and administration expenses increased 40% to $35.9 million in 2013 from $25.7 million in 2012. The increase was primarily due to an increase in external legal and accounting fees in connection with our separation strategy, and selling costs resulting from our reintroduction of VIBATIV® into the U.S. wholesaler channel in August 2013 and employee-related expenses. Total external expenses related to the proposed Company separation were $5.5 million in 2013.

        Selling, general and administration expenses increased 2% to $25.7 million in 2012 from $25.3 million in 2011. An increase in consulting services costs, as well as higher facility-related costs, were partially offset by a decrease in employee-related expenses that was driven by lower stock-based compensation expense.

        Stock-based compensation expense included in selling, general and administrative expenses was $8.8 million, $8.1 million and $7.0 million in 2011, 2012 and 2013.

Liquidity and Capital Resources

        At the closing of the spin-off, Theravance will provide Theravance Biopharma, from its cash reserves on hand, cash and cash equivalents of approximately $300 million. We expect this initial cash will fund Theravance Biopharma's operations through significant potential corporate milestones for approximately the next two to three years after the completion of the spin-off, based on current operating plans and financial forecasts. Prior to the spin-off, the Drug Discovery and Development Business of Theravance is being funded entirely by Theravance.

        We expect to continue to incur net losses over the next several years as we reintroduce VIBATIV® to the U.S. market and continue our drug discovery and development activities and incur significant preclinical and clinical development and commercialization costs. On August 14, 2013, Theravance announced the reintroduction of VIBATIV® to the U.S. market with the commencement of shipments into the wholesaler channel. We currently believe that the costs associated with reintroduction of VIBATIV® to the U.S. market in 2013, principally associated with creating an independent sales and marketing organization with appropriate technical expertise, supporting infrastructure and distribution capabilities, expanding our medical affairs presence, manufacturing and third party vendor logistics and consultant support, will be approximately $5 million. We are continuing to evaluate other commercialization alternatives for the U.S. market. We expect to incur substantial expenses as we continue our drug discovery and development efforts, particularly to the extent we advance our product candidates into and through clinical studies, which are very expensive. For example, TD-9855 in our MARIN program is in an ongoing Phase 2 study for fibromyalgia and in September 2013 Theravance reported positive top-line data from a Phase 2b study with TD-4208, our LAMA compound. Also, in July 2012, Theravance announced positive results from the key study in our Phase 2b program with

92

Table of Contents

TD-1211 in our Peripheral Mu Opioid Receptor Antagonist program for opioid-induced constipation. Though we are seeking to partner these programs, we may choose to progress one or more of these programs into later-stage clinical studies by ourselves, which could increase our anticipated operating expenses substantially. Furthermore, if we cannot identify a suitable commercialization partner for VIBATIV® in the U.S., we will not be able to leverage a commercialization partner's capabilities and infrastructure and we will incur all of the costs and expenses associated with our reintroduction of VIBATIV® in the U.S., including the creation of an independent sales and marketing organization with appropriate technical expertise, supporting infrastructure and distribution capabilities, expansion of medical affairs presence, manufacturing and third party vendor logistics and consultant support.

        In 2011, Theravance granted special long-term retention and incentive cash bonus awards to certain employees. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. As of December 31, 2013, it was determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. If sufficient performance conditions are achieved in 2014, then we could recognize up to $9.5 million of cash bonus expense in 2014.

        If our current operating plans or financial forecasts change, we may require additional funding sooner in the form of public or private equity offerings, debt financings or additional collaborations and licensing arrangements. Furthermore, if in our view favorable financing opportunities arise, we may seek additional funding at any time. However, future financing may not be available in amounts or on terms acceptable to us, if at all. This could leave us without adequate financial resources to fund our operations as presently conducted.

Cash Flows

	 	Year Ended December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Net cash used in operating activities	 	$	(83,428	)	$	(119,107	)	$	(120,959	)	
Net cash used in investing activities	 	$	(3,052	)	$	(2,430	)	$	(2,634	)	
Net cash provided by financing activities	 	$	86,480	 	$	121,537	 	$	123,593	 	
Cash Flows from Operating Activities

        Cash used in operating activities is primarily driven by net loss, excluding the effect of non-cash charges or differences in the timing of cash flows and earnings recognition.

        Net cash used in operating activities in 2013 was $121.0 million, which was primarily due to:

•
$131.7 million used in operating expenses, after adjusting for non-cash related items of $24.8 million consisting primarily of stock-based compensation expense of $22.5 million and depreciation and amortization expenses of $2.7 million;

•
$6.5 million received in upfront fees from collaboration agreements with Clinigen, R-Pharm and Hikma;

•
$3.1 million used to increase inventories; and

•
$6.3 million increase in accrued liabilities due to a $4.2 million increase in accrued personnel related expenses, accrued clinical and development expense, and other accrued liabilities primarily due to increase in clinical studies in various programs, and an increase in external legal and accounting fees. The $2.1 million increase in accounts payable was primarily due to the timing of payments.

93

Table of Contents

        Net cash used in operating activities in 2012 was $119.1 million, which was primarily due to:

•
$115.7 million used in operating expenses, after adjusting for non-cash related items of $24.0 million consisting primarily of stock-based compensation expense of $21.3 million and depreciation and amortization expenses of $3.3 million, partially offset by a reduction of rent expense of $0.7 million;

•
$4.8 million used to increase work-in-process inventory;

•
$4.4 million received from the Merck collaboration arrangement recognized as license fee revenue; and

•
$3.2 million used to reduce accrued liabilities due to $1.7 million decrease in accrued personnel related expenses and other accrued liabilities and $1.5 million decrease in accounts payable primarily due to timing of payment.

        Net cash used in operating activities in 2011 was $83.4 million, which was primarily due to:

•
$96.4 million used in operating expenses, after adjusting for non-cash related items of $27.8 million consisting primarily of stock-based compensation expense of $21.5 million, depreciation and amortization expenses of $3.8 million and rent expense of $2.4 million;

•
$8.7 million used to increase accrued liabilities due to $5.4 million increase in accrued personnel related expenses and other accrued liabilities primarily due to increase in clinical studies completed towards the end of the year and $3.3 million increase in accounts payable primarily due to increase in clinical and development activities; and

•
$3.9 million received from our former collaboration arrangement with Astellas, $2.7 million in royalty payments received from sales of VIBATIV® and $1.2 million in proceeds from VIBATIV® delivered to Astellas.

Cash Flows from Investing Activities

        Net cash used in investing activities in 2013 was $2.6 million, which was primarily due to purchases of property and equipment of $2.7 million, partially offset by payments received on notes receivable of $0.1 million.

        Net cash used in investing activities in 2012 was $2.4 million, which was primarily due to purchases of property and equipment of $2.6 million. Net cash used in investing activities in 2011 was $3.1 million, which was primarily due to purchases of property and equipment of $3.6 million, partially offset by payments received on notes payable of $0.7 million.

Cash Flows from Financing Activities

        Net cash provided by financing activities in 2013 of $123.6 million, 2012 of $121.5 million and $86.5 million in 2011 was primarily due to transfers from Theravance.

Off-Balance Sheet Arrangements

        We lease various real properties under an operating lease that generally requires us to pay taxes, insurance, maintenance, and minimum lease payments. This lease has options to renew.

        We have not entered into any off-balance sheet financial arrangements and have not established any structured finance or special purpose entities. We have not guaranteed any debts or commitments of other entities or entered into any options on non-financial assets.

94

Table of Contents

Commitments and Contingencies

        The Company indemnifies its officers and directors for certain events or occurrences, subject to certain limits. The Company may be subject to contingencies that may arise from matters such as product liability claims, legal proceedings, shareholder suits and tax matters, as such, the Company is unable to estimate the potential exposure related to these indemnification agreements. The Company has not recognized any liabilities relating to these agreements as of December 31, 2013.

        In 2011, Theravance granted special long-term retention and incentive RSAs to members of senior management and special long-term retention and incentive cash bonus awards to certain employees. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year time frame from 2011 through December 31, 2016 and continued employment. The maximum potential expense associated with this program is $28.2 million related to stock-based compensation expense and $38.2 million related to cash bonus expense, which would be recognized in increments based on achievement of the performance conditions. As of December 31, 2013, it was determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. If sufficient performance conditions are achieved prior to the spin-off, which is expected in the second quarter of 2014, then we would recognize up to $6.7 million in stock-based compensation expense associated with these RSAs and $9.5 million of cash bonus expense in 2014.

Contractual Obligations and Commercial Commitments

        In the table below, we set forth Theravance's enforceable and legally binding obligations and future commitments, as well as obligations related to all contracts that we are likely to assume and continue, regardless of the fact that they were cancelable as of December 31, 2013. Some of the figures that we include in this table are based on management's estimate and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties, and other factors. Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those reflected in the table.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)
	 	Total	 	Less than 1 year	 	1 - 3 years	 	4 - 5 years	 	After 5 years	 	
Facility operating leases(1)	 	$	38,251	 	$	4,859	 	$	11,713	 	$	12,426	 	$	9,253	 	
Purchase obligations	 	 	8,188	 	 	7,402	 	 	786	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	46,439	 	$	12,261	 	$	12,499	 	$	12,426	 	$	9,253	 	

(1)
As security for performance of certain obligations under the operating leases for our headquarters, Theravance issued a letter of credit in the aggregate of approximately $0.8 million, collateralized by an equal amount of restricted cash.

Interest Rate Risk

        We expect to invest the cash and cash equivalents contributed to us by Theravance consistent with Theravance's current investment policies. Therefore, we expect to maintain a non-trading investment portfolio of investment grade, highly liquid debt securities, which are designed to limit the amount of credit exposure to any one issue, issuer or type of instrument. We do not plan to use derivative financial instruments for speculative or trading purposes. We expect to carry our investments in debt securities at fair value, estimated as the amount at which an asset or liability could be bought or sold in a current transaction between willing parties. We expect to diversify our credit risk and invest in debt securities with high credit quality. We will continue to monitor our credit risks and evaluate the potential need for impairment charges related to credit risks in future periods.

95

Table of Contents
Our Relationship with Theravance, Inc. after the Spin-Off

General

        Immediately prior to the spin-off, we will be a wholly owned subsidiary of Theravance. After the spin-off, Theravance will not have any ownership interest in our ordinary shares, and we will be an independent, publicly traded company.

        We will enter into agreements with Theravance prior to and concurrently with the spin-off to govern the terms of the spin-off and to define our ongoing relationship following the spin-off, allocating responsibility for obligations arising before and after the spin-off, including obligations with respect to liabilities relating to Theravance's business and to Theravance Biopharma's business and obligations with respect to our employees, certain transition services and taxes. We will enter into these agreements with Theravance while we are still a wholly owned subsidiary of Theravance, and certain terms of these agreements are not necessarily the same as could have been negotiated between independent parties.

        The following descriptions are summaries of the terms of the agreements. Any of these agreements that are material will be filed as exhibits to the registration statement into which this Information Statement is incorporated and the summaries of such agreements are qualified in their entirety by reference to the full text of such agreements. We encourage you to read, in their entirety, each of the material agreements when they become available. The terms of these agreements have not yet been finalized; changes, some of which may be material, may be made prior to the spin-off.

Separation and Distribution Agreement

        The Separation and Distribution Agreement will set forth our agreements with Theravance regarding the principal transactions necessary to separate us from Theravance. It will also set forth other agreements that govern certain aspects of our relationship with Theravance after the completion of the separation. Concurrently with our separation from Theravance, we will enter into the Separation and Distribution Agreement with Theravance.

        Transfer of Assets and Assumption of Liabilities.    The Separation and Distribution Agreement will identify assets to be transferred, liabilities to be assumed and contracts to be assigned to us as part of the separation of Theravance into two independent companies, and will describe when and how these transfers, assumptions and assignments will occur. In particular, the Separation and Distribution Agreement will provide that, subject to the terms and conditions contained in the Separation and Distribution Agreement:

•
Theravance will assign to us all of the assets and liabilities of Theravance related to the Drug Discovery and Development Business, including:

•
VIBATIV® (telavancin), a bactericidal, once-daily injectable antibiotic discovered by Theravance;

•
Theravance's small-molecule product candidate pipeline currently focused on bacterial infections, CNS/pain, respiratory disease, and GI motility dysfunction;

•
A portion of the equity interests in Theravance Respiratory Company LLC which will entitle us to receive 85% of the economic interest in any future payments made by GSK under the GSK agreements relating to in 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); and

•
Cash and cash equivalents in the amount of approximately $300 million in the aggregate.

96

Table of Contents

•
Theravance will retain all of the assets and liabilities of the Royalty Business, including all rights under the collaboration agreement with GSK related to the following drug programs:

•
RELVAR® ELLIPTA®/ BREO® ELLIPTA®;

•
ANORO™ ELLIPTA™; and

•
Vilanterol monotherapy.

        Except as may be expressly set forth in the Separation and Distribution Agreement or any ancillary agreement, all assets will be transferred to us on an "as is," "where is" basis and so long as Theravance is in compliance with the terms of the Separation and Distribution Agreement relating to the transfer, we will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in us good title, free and clear of any security interest, that any necessary consents or government approvals are not obtained and that any requirements of laws or judgments are not complied with.

        Information in this Information Statement with respect to the assets and liabilities of the parties following the separation is presented based on the allocation of such assets and liabilities pursuant to the Separation and Distribution Agreement, unless the context otherwise requires.

        Further Assurances.    To the extent that any transfers contemplated by the Separation and Distribution Agreement have not been consummated on or prior to the date of the separation, the parties will agree to cooperate to affect such transfers as promptly as practicable following the date of the separation. In addition, each of the parties will agree to cooperate with each other and use reasonable best efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the Separation and Distribution Agreement and the ancillary agreements.

        The Distribution.    The Separation and Distribution Agreement will also govern the rights and obligations of the parties regarding the proposed distribution. Prior to the distribution, we will distribute to Theravance as a stock dividend the number of our ordinary shares distributable in the distribution. Theravance will cause the distribution agent to distribute to Theravance stockholders that hold shares of Theravance common stock as of the applicable record date all the issued and outstanding shares of our ordinary shares. Theravance will have the sole and absolute discretion to determine the terms of, and whether to proceed with, the distribution.

        Releases and Indemnification.    Except as otherwise provided in the Separation and Distribution Agreement or any ancillary agreement, each party will release and forever discharge the other party 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 separation. The releases will not extend to obligations or liabilities under any agreements between the parties that remain in effect following the separation pursuant to the Separation and Distribution Agreement or any ancillary agreement.

        Legal Matters.    Except as otherwise set forth in the Separation and Distribution Agreement, we will assume the liability for, and control of, all pending and threatened legal matters related to our business or assumed liabilities and we will indemnify Theravance for any liability arising out of or resulting from such assumed legal matters. Each party to a claim will agree to cooperate in defending any claims against the other party for events that took place prior to, on or after the date of separation. Theravance will retain liability for pending and threatened legal matters related to the Royalty Business.

        Insurance.    The Separation and Distribution Agreement will provide for the rights of the parties to report claims under existing insurance policies for occurrences prior to the separation and set forth

97

Table of Contents

procedures for the administration of insured claims. In addition, the Separation and Distribution Agreement will allocate among the parties the right to insurance policy proceeds based on reported claims and the obligations to incur deductibles under certain insurance policies.

        Other Matters.    Other matters governed by the Separation and Distribution Agreement include, among others, access to financial and other records and information, legal privilege, confidentiality and resolution of disputes between the parties relating to the Separation and Distribution Agreement and the ancillary agreements and the agreements and transactions contemplated thereby.

        Term and Termination.    The Separation and Distribution Agreement may be terminated by Theravance at any time prior to the spin-off in its sole discretion. After the spin-off, all covenants, representations and warranties will survive indefinitely.

Transition Services Agreement

        Concurrently with our separation from Theravance, we will enter into a Transition Services Agreement with Theravance pursuant to which Theravance and Theravance Biopharma will provide each other with a variety of administrative services for a period of time following the spin-off. Among the principal services we will provide to Theravance are:

•
record-keeping support;

•
finance, tax and accounting support to assist Theravance in a secondary capacity to Theravance personnel through financial and administrative support for audits and inquiries related to Theravance Biopharma's historical combined financial statements;

•
legal support;

•
human resources support; and

•
facilities support to the extent Theravance occupies space at current South San Francisco, California facilities.

Among the principal services Theravance will provide to us are access to certain historical information and financial systems and the supporting documentation and other services to be determined.

        Theravance and Theravance Biopharma will agree to make each service available to the other for periods of time following the date the spin-off is completed as are provided in the Transition Services Agreement.

        The performance of the services under the Transition Services Agreement will commence at the spin-off and expire on the earlier of (i) the expiration date applicable to each such service or (ii) the second anniversary of the date of the Transition Services Agreement. The obligations under the Transition Services Agreement with respect to each service may be terminated prior to the applicable expiration date in accordance with the terms of each such service or upon mutual written agreement of the parties.

Employee Matters Agreement

        Concurrently with our separation from Theravance, it is anticipated that we will enter into an Employee Matters Agreement, which will govern the employee benefit obligations of Theravance and us 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 will also provide the mechanics for the adjustment on the distribution date of equity awards (including stock options, stock appreciation rights, restricted stock,

98

Table of Contents

and restricted stock units) granted under Theravance's equity compensation programs. See "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off" above.

        All covenants under the Employee Matters Agreement will survive the spin-off indefinitely.

Tax Matters Agreement

        Concurrently with our separation from Theravance, we will enter into a Tax Matters Agreement that generally will govern Theravance's and our respective rights, responsibilities and obligations after the separation with respect to taxes. Under the Tax Matters Agreement, all tax liabilities (including tax refunds and credits) (1) attributable to Theravance's Drug Discovery and Development Business for any and all periods or portions thereof ending prior to or on, the distribution date, (2) resulting or arising from the contribution of Theravance's Drug Discovery and Development Business to us, the distribution of our ordinary shares and the other separation transactions and (3) otherwise attributable to Theravance, will be borne solely by Theravance. As a result, we generally expect to be liable only for tax liabilities attributable to, or incurred with respect to, the biotechnology business after the distribution date.

TRC Limited Liability Company Agreement

        Prior to our separation from Theravance, we and Theravance will enter into the Theravance Respiratory Company LLC Limited Liability Company Agreement that will govern the operation of TRC. See "The Spin-Off—Formation of Theravance Respiratory Company LLC."

Actual and Potential Conflicts of Interest

        After the spin-off, Rick E Winningham will serve as our Chairman and Chief Executive Officer and will hold the same positions for Theravance. In addition, following the spin-off, certain of our directors and executive officers will own shares of Theravance's common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. This service to both companies and ownership of Theravance common stock may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for Theravance and us. See "Risk Factors—Risks Relating to the Spin-Off and "Compensation of Named Executive Officers." We plan to implement policies and procedures to identify and address such actual and potential conflicts of interest.

99

Table of Contents
Unaudited Pro Forma Combined Financial Statement

        The unaudited pro forma financial information discussed and presented below has been prepared from Theravance Biopharma's historical audited combined balance sheet as of December 31, 2013. The pro forma adjustments and notes to the pro forma financial information give effect to the legal formation and capitalization of Theravance Biopharma and the contribution of the assets and liabilities of Theravance Biopharma by Theravance as described below. The unaudited pro forma financial statement should be read together with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Theravance Biopharma's historical combined financial statements and notes related to those financial statements included elsewhere in the Information Statement.

        The unaudited pro forma combined balance sheet as of December 31, 2013 has been prepared as if the spin-off had occurred on December 31, 2013. The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable given the information available. While such adjustments are subject to change based upon the finalization of the terms of the separation and the underlying separation agreements, in management's opinion, the pro forma adjustments are not expected to materially differ from the final adjustments. The historical combined balance sheet is derived from our audited combined balance sheet as of December 31, 2013, which is included elsewhere in this Information Statement.

        The historical combined statements of operations of Theravance Biopharma include allocations of expenses from Theravance which reasonably approximate the costs that would have been incurred as an autonomous entity. Further, the contractual agreements directly attributable to the spin-off are not expected to have a material impact on our results of operations. Due to regulations governing the preparation of pro forma financial statements, the pro forma financial statement do not reflect certain estimated incremental expenses associated with being an independent, public company because they are projected amounts based on judgmental estimates and are not factually supportable. The estimated incremental expenses associated with being an independent, public company include costs for information technology and costs associated with corporate administrative services such as tax, treasury, audit, risk management, legal, stockholder relations and human resources. The Company also anticipates a portion of the Theravance performance-contingent RSAs that will be held by employees of Theravance Biopharma after the spin-off will convert to a time-based vesting award. The terms of the modification have yet to be determined or approved by the Theravance Board of Directors. In addition, the modification will be dependent upon the value of the Theravance stock on a date or dates to be determined. That fair market value input is unknown and cannot be estimated. If the Company uses the fair market value of Theravance's common stock as of the beginning of the period, January 1, 2013, then there would be no expense associated with the modification as the fair market value of the stock on January 1, 2013 is below the currently contemplated price upon which a modification will take place. As such, the Company cannot make a reasonable determination of the expense associated with these modifications. As such, pro forma adjustments to revenues or expenses in the statements of operations are not presented.

        The unaudited pro forma financial statement is for illustrative and information purposes only and is not intended to represent, or be indicative of, what Theravance Biopharma's financial position would have been had the spin-off occurred on the date indicated.

        A significant amount of charges to effect the separation that are not ongoing in nature have been and will continue to be incurred by Theravance, such as financial, legal, tax, accounting and other advisory fees and regulatory fees. Theravance Biopharma may also incur costs in connection with the separation such as, among other things, facility and information technology system reconfiguration costs. The total amount of such separation charges to be incurred by Theravance Biopharma is not estimable at this time.

100

Table of Contents
Theravance Biopharma, Inc.
(the Drug Discovery and Development Business of Theravance, Inc.)

Unaudited Pro Forma Combined Balance Sheet
(In thousands)

 
	 	December 31, 2013	 	 

	 	Historical	 	Pro Forma
Adjustment	 	Pro Forma	 	
ASSETS	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	—	 	$	300,000	(1)	$	300,000	 	
Accounts receivable, net	 	 	199	 	 	 	 	 	199	 	
Receivables from collaborative arrangements	 	 	934	 	 	 	 	 	934	 	
Notes receivable, current	 	 	140	 	 	 	 	 	140	 	
Inventories	 	 	10,406	 	 	 	 	 	10,406	 	
Prepaid and other current assets	 	 	2,427	 	 	 	 	 	2,427	 	
 	 	 	 	 	 	 	 	
Total current assets	 	 	14,106	 	 	300,000	 	 	314,106	 	
Restricted cash	 	 	833	 	 	 	 	 	833	 	
Property and equipment, net	 	 	10,238	 	 	 	 	 	10,238	 	
 	 	 	 	 	 	 	 	
TOTAL ASSETS	 	$	25,177	 	$	300,000	 	$	325,177	 	
 	 	 	 	 	 	 	 	
LIABILITIES AND PARENT COMPANY EQUITY (DEFICIT)	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	6,940	 	$	—	 	$	6,940	 	
Accrued personnel-related expenses	 	 	9,870	 	 	 	 	 	9,870	 	
Accrued clinical and development expenses	 	 	9,714	 	 	 	 	 	9,714	 	
Other accrued liabilities	 	 	2,122	 	 	 	 	 	2,122	 	
Deferred revenue, current	 	 	8,207	 	 	 	 	 	8,207	 	
 	 	 	 	 	 	 	 	
Total current liabilities	 	 	36,853	 	 	 	 	 	36,853	 	
Deferred rent	 	 	4,774	 	 	 	 	 	4,774	 	
Deferred revenue, non-current	 	 	585	 	 	 	 	 	585	 	
 	 	 	 	 	 	 	 	
Total liabilities	 	 	42,212	 	 	 	 	 	42,212	 	
 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	
Parent company deficit	 	 	(17,035	)	 	17,035	(1)	 	—	 	
Stockholders' equity (deficit):	 	 	 	 	 	 	 	 	 	 	
Common stock	 	 	—	 	 	—	(2)	 	—	 	
Additional paid in capital	 	 	—	 	 	282,965	(1)(2)	 	282,965	 	
 	 	 	 	 	 	 	 	
Total parent company stockholders' (deficit) / stockholders' equity	 	 	(17,035	)	 	300,000	 	 	282,965	 	
 	 	 	 	 	 	 	 	
TOTAL LIABILITIES AND PARENT COMPANY DEFICIT / STOCKHOLDERS' EQUITY PRO FORMA	 	$	25,177	 	$	300,000	 	$	325,177	 	
 	 	 	 	 	 	 	 	
Pro Forma Adjustments:(1)
Cash and cash equivalents pro forma include a cash capital contribution by Theravance, Inc. of approximately $300 million based on the anticipated post-separation capital structure.

(2)
Amount represents the pro forma capitalization of Theravance Biopharma, including the assumed issuance of                . Theravance Biopharma ordinary shares at $0.00001 par value, which is based on the number of outstanding shares of Theravance's common stock as of December 31, 2013 and assuming a distribution rate of one ordinary share of Theravance Biopharma, Inc. for every      shares of Theravance common stock outstanding. The pro forma adjustment to additional paid-in capital is equal to the amount of net assets recorded by Theravance Biopharma plus the reclassification of parent company equity on the spin-off date.

101

Table of Contents
Management

        The following table sets forth information as of December 31, 2013 regarding individuals who are expected to serve as our executive officers and as officers of Theravance Biopharma US, Inc. after the spin-off, including their anticipated positions.
 	 	 	 	 	 	
Name	 	Age	 	Expected Position	
Executive Officers	 	 	 	 	 	
Rick E Winningham	 	 	
54	 	Chief Executive Officer	
Steven L. Barriere	 	 	66	 	Vice President, Clinical and Medical Affairs of Theravance Biopharma US, Inc.	
Oranee T. Daniels	 	 	49	 	Vice President, Clinical Pharmacology and Experimental Medicine of Theravance Biopharma US, Inc.	
Renee D. Gala	 	 	41	 	Vice President, Finance	
Officers of Theravance Biopharma US, Inc.	 	 	 	 	 	
Daniel M. Canafax	 	 	
61	 	Vice President, Clinical Development	
Rebecca L. Coleman	 	 	61	 	Vice President, Regulatory Affairs and Quality	
Michael W. Conner	 	 	60	 	Vice President, Safety Assessment/Toxicology	
Jeffrey T. Finer	 	 	47	 	Vice President, Molecular and Cellular Biology	
Jeffrey A. Hagenah	 	 	57	 	Vice President & Chief Patent Counsel	
Brett Haumann	 	 	43	 	Vice President, Clinical Development and Operations	
Sharath S. Hegde	 	 	49	 	Vice President, Pharmacology	
Alan Hopkins	 	 	62	 	Vice President of Biometrics	
Daniel G. Marquess	 	 	45	 	Vice President, Medicinal Chemistry	
Edmund J. Moran	 	 	52	 	Vice President, R&D Program Leader	
Carlos A. Parra	 	 	61	 	Vice President, Quality	
Heather M. Shane	 	 	41	 	Vice President and Assistant General Counsel	
        Rick E Winningham joined Theravance as Chief Executive Officer and a member of the Theravance board of directors in October 2001. From 1997 to 2001 he served as President, Bristol-Myers Squibb Oncology/Immunology/Oncology Therapeutics Network (OTN) and also as President of Global Marketing from 2000 to 2001. In addition to operating responsibility for U.S. Oncology/Immunology/OTN at Bristol-Myers Squibb, Mr. Winningham also had full responsibility for Global Marketing in the Cardiovascular, Infectious Disease, Immunology, Oncology/ Metabolics and GU/GI/Neuroscience therapeutic areas. Mr. Winningham held various management positions with Bristol-Myers Squibb and its predecessor, Bristol-Myers, since 1986. Mr. Winningham is a member of the board of directors of Jazz Pharmaceuticals and the California Healthcare Institute. Mr. Winningham holds an M.B.A. from Texas Christian University and a B.S. degree from Southern Illinois University.

        Steven L. Barriere, Pharm.D., joined Theravance in 2002 as Senior Director, Clinical Research and was promoted to Vice President, Clinical and Medical Affairs in April 2008. Prior to joining Theravance, Dr. Barriere worked in anti-infective development programs at several biopharmaceutical companies. Prior to joining the pharmaceutical industry, Dr. Barriere held academic positions at University of California, San Francisco and University of California, Los Angeles. He is a Fellow of the Infectious Diseases Society of America and the American College of Clinical Pharmacy. Dr. Barriere obtained his Pharm.D. degree from the University of California, San Francisco, and currently holds an academic title at the University of California, San Francisco, where he is a Clinical Professor.

        Oranee T. Daniels, M.D., joined Theravance as Vice President, Clinical Pharmacology, in January 2009. In January 2011, she became Vice President, Clinical Pharmacology and Experimental Medicine. Prior to joining Theravance, Dr. Daniels worked in the Early Development—Clinical Pharmacology at

102

Table of Contents

Amgen Inc. since 2004, most recently as Executive Director. From 2001-2004, she was a clinical pharmacologist at Eli Lilly and Company. Early in her career, Dr. Daniels was Assistant Professor in Chulalongkorn University, Bangkok, Thailand and Research Associate of Life Sciences in Stanford University. She obtained her M.D. and completed her residency training in Internal Medicine at Chulalongkorn University. Dr. Daniels holds a M.Sc. degree in Cardiovascular Pharmacology from McMaster University. She completed her Clinical Pharmacology fellowship at Stanford University and is board certified in clinical pharmacology.

        Renee D. Gala joined Theravance in June 2006, initially as Director of Financial Planning and Analysis and then as Senior Director of Finance and Procurement in July 2008. Ms. Gala was promoted to Vice President of Finance in January 2013. From 2001 to 2006, Ms. Gala worked at Eli Lilly and Company, where she held positions of increasing responsibility in global treasury, pharmaceutical sales, and corporate strategy/business development. Prior to joining Eli Lilly, she spent seven years in the energy industry in the United States and internationally in positions focused on corporate finance, project finance, and mergers and acquisitions. Ms. Gala earned a B.S. in Mathematics from Vanderbilt University and an M.B.A. from Columbia Business School.

        Daniel M. Canafax, Pharm.D., joined Theravance in 2011 as Vice President, Clinical Development. Dr. Canafax recently served as Vice President, Clinical Development at XenoPort, Inc. in 2010 and previously from 2002 to 2007. Dr. Canafax served as Vice President and Chief Development Officer at Aryx Therapeutics, Inc. from 2007 to 2010. Prior to these positions, he worked in clinical research in other companies including MedImmune, Inc. and Elan Pharmaceuticals, Inc. Early in his career, Dr. Canafax was a Professor at the University of Minnesota. Dr. Canafax obtained his Pharm.D. degree from the University of Kentucky and he holds a B.S. degree in Pharmacy from Washington State University.

        Rebecca L. Coleman, Pharm.D., joined Theravance in 2002, initially as Director and then as Senior Director of Regulatory Affairs in February 2005. Dr. Coleman was promoted to Vice President, Regulatory Affairs and Quality in October 2008. From 1997 to 2002, she worked in the Clinical Research and Regulatory Affairs departments at Gilead Sciences, Inc., most recently as Director. Prior to her time at Gilead, Dr. Coleman spent 13 years as Pharmacist at the University of California, San Francisco. Dr. Coleman obtained her Pharm.D. degree from the University of the Pacific and currently holds an academic title at the School of Pharmacy, University of California, San Francisco, where she is an Associate Clinical Professor.

        Michael W. Conner, D.V.M., joined Theravance in 1999 as Senior Director of Safety Assessment and Toxicology and was promoted to Vice President, Safety Assessment/Toxicology in February 2001. Prior to joining Theravance, Dr. Conner worked for ten years at Merck Research Laboratories, most recently serving as a Director of Compound Management within the Department of Safety Assessment. Dr. Conner earned a D.V.M. from the University of Georgia, a B.S. degree in Biology from the Massachusetts Institute of Technology, and completed postdoctoral fellowships at Harvard and MIT prior to serving on the faculty of Boston University School of Medicine.

        Jeffrey T. Finer, M.D., Ph.D., joined Theravance in 2011 as Vice President, Molecular and Cellular Biology. Prior to joining Theravance, Dr. Finer served as Vice President, Discovery at Five Prime Therapeutics, Inc. since 2007. From 1998 to 2007, Dr. Finer worked in various positions with increasing responsibility at Cytokinetics, Inc., most recently as Director, Drug Discovery Technologies. Dr. Finer obtained his M.D. and Ph.D. in Biochemistry from Stanford University School of Medicine and he holds B.S. degrees in Chemistry and Biology from Massachusetts Institute of Technology. He completed residency training in Internal Medicine at Stanford and in Ophthalmology at Massachusetts Eye & Ear Infirmary and Harvard Medical School.

        Jeffrey A. Hagenah, Ph.D., joined Theravance in April 2000 as Senior Patent Counsel and was named Chief Patent Counsel in April 2003. He was promoted to Vice President and Chief Patent

103

Table of Contents

Counsel in January 2007. Prior to joining Theravance, Dr. Hagenah was an attorney at Burns, Doane, Swecker & Mathis, L.L.P. From 1984 to 1993, he held a variety of positions at Chevron Corporation in the Law Department and in Chevron Chemical Company. Dr. Hagenah holds a J.D. from Boalt Hall at the University of California, Berkeley; a Ph.D. in Chemistry from the University of California, Los Angeles; and a B.S. in Chemistry "With Great Distinction" from California State University, Long Beach.

        Brett K. Haumann, M.D., M.B.A., joined Theravance as Vice President, Clinical Development, in October 2013 and became Vice President, Clinical Development and Operations in March 2014. Prior to joining Theravance, Dr. Haumann served as Chief Medical Officer at Circassia Limited. Previously, Dr. Haumann held senior positions at GlaxoSmithKline, including Medicines Development Leader and Vice President Clinical Development. Dr. Haumann has more than 15 years of experience in the discovery and development of pulmonary and allergy medicines. Dr. Haumann completed his M.D. at the University of Witwatersrand Medical School, South Africa and holds an M.B.A. from Open University, United Kingdom.

        Sharath S. Hegde, Ph.D., joined Theravance in September 1999 and has held various positions in the Pharmacology team before being promoted to Vice President in June 2007. Prior to joining Theravance, Dr. Hegde spent nine years at Syntex Corporation, later acquired by Roche Holdings Ltd. Dr. Hegde obtained his Ph.D. in Pharmacology from the University of Houston and obtained his B.Pharm/M.Pharm degree in Pharmacy/Pharmacology from the University of Bombay.

        Alan Hopkins, Ph.D., joined Theravance in 2005 as Senior Director of Biometrics and was promoted to Vice President of Biometrics in January 2010. Prior to joining Theravance, Dr. Hopkins held the following positions: President and Founder of PharmaStat LLC, Vice President of Clinical and Regulatory Sciences for Acumen Sciences, and Senior Director of Medical Affairs at Genentech, Inc. At Genentech, he was responsible for Biostatistics, Data Management and Clinical Information Technology. Dr. Hopkins received his Ph.D. in Biostatistics from the University of California, Berkeley, and obtained both an M.S. in Biostatistics and an A.B. in Quantitative Psychology from the University of California, Los Angeles.

        Daniel G. Marquess, D.Phil., joined Theravance in 1998 and held various positions in the Medicinal Chemistry Department before being promoted to Vice President, Medicinal Chemistry in June 2007. Prior to joining Theravance, Dr. Marquess worked in the Medicinal Chemistry Department at GlaxoSmithKline, Stevenage UK from 1994-1998. Dr. Marquess was a NATO post-doctoral Fellow at Stanford University. He earned his D.Phil. in Organic Chemistry at the University of Oxford. He holds a B.Sc. in Chemistry from Queen's University of Belfast, N. Ireland.

        Edmund J. Moran, Ph.D., joined the Research team at Theravance in February 1998 and was promoted to Director, Research in June 2000. In February 2001, he was promoted to Senior Director, Research and in January of 2003 he was further promoted to Vice President, Research. He is currently responsible for two major research and development programs. Prior to Theravance, Dr. Moran founded the Medicinal Chemistry Department at Ontogen Corporation in 1993 and was its first employee. From 1992 to 1993 he was an NIH postdoctoral Fellow in the laboratories of Professor Peter G. Schultz at the University of California, Berkeley. Dr. Moran obtained his Ph.D. in Organic Chemistry from the University of California, Los Angeles. He holds a B.S. degree in Chemistry from the University of Connecticut.

        Carlos A. Parra joined Theravance as Vice President, Quality in July 2009. Prior to joining Theravance, Mr. Parra served as a Vice President of Quality at Alexza Pharmaceuticals. From 2002-2008, he worked at Telik, Inc., a biopharmaceutical company, most recently as the Vice President, Operations and Quality. Mr. Parra previously was a Principal Partner at West Coast Associates, a consulting firm to the pharmaceutical, biopharmaceutical, and device industries, from 1996 to 2002. Prior to that, he worked in various quality management capacities at other companies including

104

Table of Contents

Somatogen, Inc., Syntex Research, Genentech, Abbott Laboratories, and American Hospital Supply. Mr. Parra holds a B.S. in Microbiology from University of Texas, El Paso.

        Heather M. Shane joined Theravance as Senior Director and Assistant General Counsel in September 2005 and was promoted to Vice President & Assistant General Counsel in February 2011. Prior to joining Theravance, she was a corporate attorney at Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP where she focused on private financings, fund formations, mergers & acquisitions and public offerings. Ms. Shane graduated from the University of California at Santa Barbara with a B.A. in English Literature and obtained her J.D. from New York University School of Law.

Employment Arrangements

        We have or will have at the effective date of the spin-off entered into employment offer letters with each of our named executive officers in connection with their start of employment with us. None of these employment offer letters provides for or will provide for a specific term of employment, each officer is an "at-will" employee and each officer's employment may be terminated by either party at any time.
Board of Directors

Members of the Board of Directors

        Our board of directors currently is expected to be comprised of seven members at the time of the spin-off. The following table sets forth information as of December 31, 2013 regarding individuals who are expected to serve as our Board of Directors immediately after the spin-off:
 	 	 	 	 	
Name	 	Age	 	
Henrietta H. Fore	 	 	65	 	
Robert V. Gunderson, Jr. 	 	 	62	 	
Burton G. Malkiel Ph.D. 	 	 	81	 	
Peter S. Ringrose Ph.D. 	 	 	68	 	
George M. Whitesides Ph.D. 	 	 	74	 	
Rick E Winningham	 	 	54	 	
William D. Young	 	 	69	 	
        Henrietta H. Fore has served as a director since October 2013. Ms. Fore has also served as a director of Theravance since October 2010, but is expected to resign as a director of Theravance prior to the spin-off. Ms. Fore has served as the Chairman of the Board and Chief Executive Officer of Holsman International, an investment and management company, since 2009. From 2007 to 2009, Ms. Fore served as the Administrator of the U.S. Agency for International Development (USAID), and Director of United States Foreign Assistance, holding the equivalent rank as Deputy Secretary of State. In this position she was responsible for managing U.S. foreign assistance to countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms. She also served on the Boards of the Overseas Private Investment Corporation, and the Millennium Challenge Corporation during this period. From 2005 to 2007, Ms. Fore served as Under Secretary of State for Management, the Chief Operating Officer for the Department of State, where she was responsible for the people, resources, facilities, technology and security of the Department and was the Secretary's principal advisor on management issues. Ms. Fore is a Trustee of the Center for Strategic and International Studies, the Aspen Institute, the Asia Society, and the Center for Global Development. She serves on the Boards of Exxon Mobil Corporation, Diagnostics for All, and the Committee Encouraging Corporate Philanthropy, the Initiative for Global Development, and the Middle East Investment Initiative. She is co-Chair of Women Corporate Directors. Ms. Fore has a Bachelor of Arts degree in History from Wellesley College and a Master of Science degree in Public Administration from the University of

105

Table of Contents

Northern Colorado. Ms. Fore's senior management experience at high levels within the U.S. government and her current experience as a chief executive officer and chairman of an investment and management company contributed to our conclusion that she should serve as a director.

        Robert V. Gunderson, Jr.has served as a director since October 2013. Mr. Gunderson has also served as a director of Theravance since September 1999, but is expected to resign as a director of Theravance prior to the spin-off. He is a founding partner of the law firm of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, where he has practiced since 1995. Mr. Gunderson currently serves as a director of a number of private companies. Mr. Gunderson holds a J.D. from the University of Chicago, where he was Executive Editor of The University of Chicago Law Review. Mr. Gunderson also received an M.B.A. in Finance from The Wharton School, University of Pennsylvania and an M.A. from Stanford University. Mr. Gunderson's demonstrated leadership in his field, his understanding of our industry and his knowledge of financial and financing matters contributed to our conclusion that he should serve as a director.

        Burton G. Malkiel, Ph.D., has served as a director since October 2013. Dr. Malkiel has also served as a director of Theravance since July 2007, but is expected to resign as a director of Theravance prior to the spin-off. Dr. Malkiel, the Chemical Bank Chairman's Professor of Economics at Princeton University, is the author of A Random Walk Down Wall Street . He is also the author of over 125 articles and is the author or co-author of nine other books. From 1981 to 1988 he was dean of the Yale University School of Management and also served as the William S. Beinecke Professor of Management Studies. He is a past appointee to the President's Council of Economic Advisors. In addition, Dr. Malkiel currently serves on the board of directors of several corporations including The Vanguard Group Ltd. and Genmab. He also serves on several investment management boards including the Investment Committees for the American Philosophical Association and Alpha Shares, LLC. He is a past president of the American Finance Association and the International Atlantic Economic Association. He holds a B.A. and MBA degree from Harvard University and a Ph.D. degree from Princeton University. Dr. Malkiel's demonstrated leadership in his field, his knowledge of financial and financing matters, and his ability to serve as a financial expert on our Audit Committee contributed to our conclusion that he should serve as a director.

        Peter S. Ringrose, Ph.D., has served as a director since October 2013. Dr. Ringrose has also served as a director of Theravance since April 2010, but is expected to resign as a director of Theravance prior to the spin-off. Dr. Ringrose was Chief Scientific Officer and President of Bristol Myers Squibb Pharmaceutical Research Institute from 1997-2002 and Senior Vice-President for Worldwide Drug Discovery at Pfizer Inc from 1982-1996. Since 2002 Dr. Ringrose has served as chair of the Biotechnology and Biological Sciences Research Council UK (2003-2009) and was a non-executive director of Cambridge Antibody Technology until its acquisition by Astra Zeneca in 2006 and non-executive director of Astex Therapeutics Ltd. until its acquisition by SuperGen in 2011. He is currently a non-executive director of Rigel Pharmaceuticals Inc. and Biotica Technology Ltd. Dr. Ringrose is a council member of the UK Foundation for Science and Technology and was a member the UK Government's Technology Strategy Board until 2009. Dr. Ringrose received a BSc, MA and PhD from the University of Cambridge. His significant scientific leadership experience in the pharmaceutical industry contributed to our conclusion that Dr. Ringrose should serve as a director.

        George M. Whitesides, Ph.D., has served as a director since October 2013. Dr. Whitesides has also served as a director of Theravance since its inception in 1996, but is expected to resign as a director of Theravance prior to the spin-off. He has been Woodford L. and Ann A. Flowers University Professor at Harvard University since 2004. From 1986 until 2004, Dr. Whitesides was Mallinckrodt Professor of Chemistry at Harvard University. From 1982 until 1991 he was a member of the Department of Chemistry at Harvard University and Chairman of the Department of Chemistry from 1986 until 1989. He was a faculty member of the Massachusetts Institute of Technology from 1964 until 1982. Dr. Whitesides was a 1998 recipient of the National Medal of Science. He is a member of the editorial

106

Table of Contents

boards of 14 scientific journals. He is also a member of the board of directors of Surface Logix, Inc., Nano-Terra Inc., Arsenal Biomedical, Inc. and 480 Biomedical, Inc. In addition, in the past five years, Dr. Whiteside has served on the board of directors of Rohm and Haas Company. Dr. Whitesides holds a Ph.D. in Chemistry from the California Institute of Technology and a B.A. from Harvard University. Dr. Whiteside's demonstrated leadership in his field, his knowledge of scientific matters affecting our business and his understanding of our industry contributed to our conclusion that he should serve as a director.

        Rick E Winningham has served as a director since July 2013. Mr. Winningham has also served as a director of Theravance since October 2001 and is expected to continue to serve as a director of Theravance following the spin-off. From 1997 to 2001 he served as President, Bristol-Myers Squibb Oncology/Immunology/Oncology Therapeutics Network (OTN) and also as President of Global Marketing from 2000 to 2001. In addition to operating responsibility for U.S. Oncology/Immunology/OTN at Bristol-Myers Squibb, Mr. Winningham also had full responsibility for Global Marketing in the Cardiovascular, Infectious Disease, Immunology, Oncology/ Metabolics and GU/GI/Neuroscience therapeutic areas. Mr. Winningham held various management positions with Bristol-Myers Squibb and its predecessor, Bristol-Myers, since 1986. Mr. Winningham is a member of the board of directors of Jazz Pharmaceuticals, Inc. and the California Healthcare Institute. Mr. Winningham holds an M.B.A. from Texas Christian University and a B.S. degree from Southern Illinois University. We believe that it is appropriate and desirable for our Chief Executive Officer to serve on our Board. Mr. Winningham's demonstrated leadership in his field, his prior senior management experience in our industry and his experience as our Chief Executive Officer contributed to our conclusion that he should serve as a director.

        William D. Young has served as a director since October 2013. Mr. Young has also served as a director of Theravance since April 2001, but is expected to resign as a director of Theravance prior to the spin-off. He is currently a Venture Partner at Clarus Ventures and Executive Chairman of NanoString Technologies and Chairman of TyRx, Inc., Clarus portfolio companies. Mr. Young served from 1999 until 2009 as Chairman of the board of directors and Chief Executive Officer of Monogram Biosciences, Inc. From 1980 to 1999 Mr. Young was employed at Genentech, Inc., most recently as Chief Operating Officer, where he was responsible for all Product Development, Manufacturing and Commercial functions. Prior to joining Genentech, Mr. Young worked at Eli Lilly and Company for fourteen years and held various positions in production and process engineering, antibiotic process development and production management. He is Chairman of the board of directors of Biogen Idec, Inc. and a member of the board of directors of BioMarin, Inc. Mr. Young received his M.B.A. from Indiana University and his B.S. in Chemical Engineering from Purdue University, and an honorary Doctorate of Engineering from Purdue University. Mr. Young was elected to The National Academy of Engineering in 1993 for his contributions to biotechnology. Mr. Young's demonstrated leadership in his field, his understanding of our industry and his senior management experience in several companies in our industry contributed to our conclusion that he should serve as a director.

        We expect to have a classified board of directors at the time of the spin-off consisting of three classes of directors, each serving staggered three-year terms. Our directors will be divided among classes as follows:

•
Class I directors, whose initial term will expire at the annual general meeting of shareholders to be held in 2015, will consist of                                ;

•
Class II directors, whose initial term will expire at the annual general meeting of shareholders to be held in 2016, will consist of                                ; and

•
Class III directors, whose initial term will expire at the annual general meeting of shareholders to be held in 2017, will consist of                                .

107

Table of Contents

Independence of Directors

        We expect a majority of the members of our board of directors will qualify as independent directors as defined in Rule 5605 of the Nasdaq Marketplace rules for listed companies.

        Each expected member of each of our Compensation, Nominating and Governance and Audit Committees is also expected to qualify as an independent director under Nasdaq's Marketplace rules for listed companies.

Board Committees

        Our board of directors has established the following four standing committees: Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, and Science and Technology Advisory Committee. It also plans to establish a Stock Option Committee.

        The Audit Committee of the board of directors will oversee our accounting practices, systems of internal controls and financial reporting processes. For this purpose, the functions of our Audit Committee will include:

•
Approving the engagement of the independent auditors;

•
Determining whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors;

•
Reviewing and approving all audit and permissible non-audit services provided by the independent auditors;

•
Conferring with management and the independent auditors regarding the effectiveness of internal controls, financial reporting processes and disclosure controls;

•
Consulting with management and the independent auditors regarding our policies governing financial risk management;

•
Reviewing and discussing reports from the independent auditors on critical accounting policies;

•
Establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters;

•
Reviewing the financial statements to be included in our Annual Report on Form 10-K;

•
Discussing with management and the independent auditors the results of the annual audit and the results of quarterly reviews and any significant changes in our accounting principles; and

•
Reviewing and approving related-person transactions in accordance with our policies and procedures with respect to related-person transactions and applicable Nasdaq rules.

Compensation Committee

        The Compensation Committee of the board of directors will review and approve the overall compensation strategy and policies for the Company. The functions of the Compensation Committee will include:

•
Reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management;

•
Reviewing and approving the compensation and other terms of employment of our principal executive officer and other executive officers;

•
Approving the individual bonus programs in effect for the principal executive officer, other executive officers and key employees for each fiscal year;

108

Table of Contents

•
Recommending to the board of directors the compensation of the directors;

•
Recommending to the board of directors the adoption or amendment of equity and cash incentive plans and approving the adoption of and amendments to these plans;

•
Granting stock options and other equity awards; and

•
Administering our equity incentive plans and similar programs.

        We expect that the Compensation Committee will retain an independent compensation consultant to advise on various matters related to compensation of officers and directors and general compensation programs and matters, including in connection with planning for the spin-off. We expect that the Compensation Committee will continue the engagement of an independent compensation consultant to advise on these matters for us after the spin-off.

        Our Compensation Committee would generally engage independent compensation consultants to provide:

•
Assistance in selecting a peer group of companies for executive compensation comparison purposes;

•
Comparative market data on officer and board director compensation practices and programs of peer companies and competitors;

•
Guidance on industry best practices and emerging trends and developments in officer and board director compensation;

•
Preparation of tally sheets for each officer; and

•
Advice on determining the total compensation of each of our officers and the material elements of total compensation, including (1) annual base salaries, (2) target cash bonus amounts, (3) stock option awards and (4) restricted share awards.

        We expect that any independent compensation consultant will serve at the pleasure of the Compensation Committee rather than our management and its fees will be approved by the Compensation Committee. The Compensation Committee will assess the independence of compensation consultants pursuant to SEC rules and to confirm that no conflict of interest exists that would prevent compensation consultants from independently representing the Compensation Committee. The Compensation Committee, in consultation with its compensation consultants, reviews and approves the overall strategy for compensating members of the board of directors. Specifically, the Compensation Committee reviews the compensation of the directors and recommends to the board of directors any changes to the compensation of the directors.

Nominating/Corporate Governance Committee

        The Nominating/Corporate Governance Committee of the board of directors is responsible for:

•
Identifying, reviewing and evaluating candidates to serve as directors of the Company (consistent with criteria to be approved by the board of directors);

•
Reviewing and evaluating incumbent directors;

•
Recommending to the board of directors for selection candidates for election to the board of directors, making recommendations to the board of directors regarding the membership of the committees of the board of directors; and

•
Assessing the performance of the board of directors and advising the board of directors on corporate governance principles.

        The Nominating/Corporate Governance Committee will work to ensure that candidates for director have certain minimum qualifications, including being able to read and understand basic financial

109

Table of Contents

statements and having the highest personal integrity and ethics. The committee will also consider such factors as having relevant expertise upon which to be able to offer advice and guidance to management, sufficient time to devote to our affairs, demonstrated excellence in his or her field, the ability to exercise sound business judgment and the commitment to rigorously represent the long-term interests of our shareholders. However, the Nominating/Corporate Governance Committee will retain the right to modify these qualifications from time to time.

        Candidates for director nominees will be reviewed in the context of the current composition of our board of directors, our operating requirements and the long-term interests of our shareholders. While we will not have a formal policy on diversity, our Nominating/Corporate Governance Committee will consider diversity of experience as one of the factors it considers in conducting its assessment of director nominees, along with such other factors as it deems appropriate given the then current needs of the board of directors and the Company, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors, our Nominating/Corporate Governance Committee will review such directors' overall service during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors' independence. In the case of new director candidates, the committee will also determine whether the nominee must be independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary.

        The committee will use its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The committee will conduct appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the board of directors. The committee will meet to discuss and consider such candidates' qualifications and then select a nominee for recommendation to the board of directors by majority vote.

        The Nominating/Corporate Governance Committee will consider director candidates recommended by shareholders and evaluate them using the same criteria as candidates identified by the board of directors or the Nominating/Corporate Governance Committee for consideration. If a shareholder of the Company wishes to recommend a director candidate for consideration by the Nominating/Corporate Governance Committee, the shareholder recommendation should be delivered to the Secretary of the Company in writing at the principal executive offices of the Company, and must include information regarding the candidate and the shareholder making the recommendation as required by a to be established communications policy.

Science and Technology Advisory Committee

        The Science and Technology Advisory Committee of the board of directors will review and discuss scientific and technological matters affecting the Company. The Science and Technology Advisory Committee will also identify scientific and technological matters that may affect Theravance Biopharma in the future, and will develop strategies to address these issues in our research plans.

Stock Option Committee

        The primary purpose of the Stock Option Committee, of which Rick E Winningham will be the sole member, will be to approve and grant options and other equity grants to employees who are not executive officers. Grants to executive officers will be made by our Compensation Committee.

110

Table of Contents
Compensation of Non-Employee Directors

        The following is a description of the standard compensation arrangements under which our non-employee directors will be compensated for their service as directors, including as members of the various committees of our Board.

Cash Compensation

        Each member of our Board who is not an employee will be paid an annual retainer of $50,000 as well as $1,000 for each Board and committee meeting attended ($500 for scheduled in-person meetings that a Board member attends by video or telephone conference). In addition, the chairperson of the Audit Committee will be paid a $20,000 annual retainer, the chairperson of the Compensation Committee will be paid a $13,000 annual retainer, and the chairpersons of the Nominating/Corporate Governance Committee and the Science and Technology Advisory Committee will each be paid a $10,000 annual retainer. The lead independent director will also be paid a $25,000 annual retainer. The members of our Board will be eligible for reimbursement for their expenses incurred in attending Board meetings in accordance with company policy.

Equity Compensation

        Each of our non-employee directors will also be compensated with periodic automatic grants of equity awards under a program implemented under our 2013 Equity Incentive Plan. These grants will be non-discretionary, and only non-employee directors of the Company will be eligible to receive these automatic grants. Under the program, each individual who first becomes a non-employee director will, on the date such individual joins the Board, automatically be granted a one-time nonstatutory share option grant covering 12,000 common shares. These initial option grants will vest monthly over the director's first two years of service.

        In addition, on the date of joining the Board, a new non-employee director will also receive the standard annual equity award (if joining on the date of our annual meeting of shareholders) or pro-rated annual equity award (if joining on any other date), as described below. The pro-ration will be based upon the number of months of service the new Board member will provide during the 12-month period ending on the one-year anniversary of the most recent annual meeting of shareholders. Annually, upon his or her re-election to the Board at the annual meeting of shareholders, each non-employee director automatically will be granted a nonstatutory stock option covering 12,000 common shares. This standard annual option grant will vest monthly over the twelve month period of service following the date of grant. In addition, all automatic equity awards will vest in full if the Company is subject to a change in control or the Board member dies while in service. Each share option granted pursuant to the automatic grant program will have an exercise price equal to the fair market value of our common shares on the date of grant, a term of up to ten years and will remain exercisable for three years following termination of a director's service other than for cause. In addition to the automatic share options described above, directors will also be eligible to receive other equity awards under our 2013 Equity Incentive Plan.

        The non-employee directors of Theravance who join our Board will receive the initial option grant described above, with such awards made upon or shortly after the occurrence of the spin-off; provided, however, that such initial option grants will vest monthly over the director's first three years of service, instead of two years of service.

        In addition, as described in "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off" above, Theravance stock options held by Theravance non-employee directors who transfer to our Board have been amended to provide that they will fully vest in connection with the spin-off and remain outstanding and exercisable based on service on our Board following the spin-off. Theravance RSUs held by Theravance non-employee directors who transfer to our Board have also been amended to provide that they will fully vest in connection with the spin-off.

111

Table of Contents

2013 Director Compensation Table

        The following table sets forth the 2013 compensation awarded to, earned by, or paid to each non-employee director of Theravance who is expected to be one of our non-employee directors following the spin-off. The amounts and forms of compensation in the table below reflect compensation from Theravance and are not necessarily reflective of the compensation our non-employee directors may receive following the spin-off.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Name	 	Fees Earned or
Paid in Cash
($)(1)	 	Stock Awards
($)(2)(3)	 	Option Awards
($)(2)(4)	 	Total
($)	 	
(a)
	 	(b)
	 	(c)
	 	(d)
	 	(h)
	 	
Henrietta H. Fore	 	 	66,500	 	 	183,240	 	 	94,267	 	 	344,007	 	
Robert V. Gunderson, Jr.	 	 	66,000	 	 	183,240	 	 	94,267	 	 	343,507	 	
Burton G. Malkiel, Ph.D.	 	 	99,000	 	 	183,240	 	 	94,267	 	 	376,507	 	
Peter S. Ringrose, Ph.D.	 	 	73,000	 	 	183,240	 	 	94,267	 	 	350,507	 	
George M. Whitesides, Ph.D.	 	 	71,000	 	 	183,240	 	 	94,267	 	 	348,507	 	
William D. Young	 	 	88,000	 	 	183,240	 	 	94,267	 	 	365,507	 	

(1)
Includes the annual retainer paid by Theravance to each director, the annual retainers paid by Theravance to the chairperson of each committee and to the lead independent director, as well as fees for attendance at Theravance's board of director and committee meetings.

(2)
The amounts in these columns represent the aggregate grant date fair value of stock awards and option awards granted to the director by Theravance during 2013 computed in accordance with FASB ASC Topic 718. See Note 10 of the notes to Theravance's consolidated financial statements in Theravance's Annual Report on Form 10-K filed on March 3, 2014 for a discussion of all assumptions made by Theravance in determining the grant date fair value of its equity awards.

(3)
As of December 31, 2013, the above-listed directors held outstanding restricted stock units under which the following number of shares of Theravance's common stock were issuable: Ms. Fore (27,000); Mr. Gunderson (24,000); Dr. Malkiel (24,000); Dr. Ringrose (30,000); Dr. Whitesides (24,000); and Mr. Young (24,000).

(4)
As of December 31, 2013, the above-listed directors held outstanding options to purchase the following number of shares of Theravance's Common Stock: Ms. Fore (27,000); Mr. Gunderson (96,612); Dr. Malkiel (60,000); Dr. Ringrose (18,000); Dr. Whitesides (96,612); and Mr. Young (96,612).

112

Table of Contents
Compensation of Named Executive Officers

2013 Summary Compensation Table

        The following table sets forth all of the compensation awarded to, earned by, or paid to the persons we expect to be our "principal executive officer" and our two other highest paid executive officers based on the compensation they received from Theravance (our "named executive officers") for fiscal years 2013 and 2012. The amounts and forms of compensation set forth in the table below reflect compensation from Theravance and are not necessarily indicative of the compensation the officers may receive following the spin-off.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Name and Principal Position	 	Year	 	Salary
($)(1)	 	Bonus
($)(2)	 	Stock
Awards
($)(3)	 	Non-Equity
Incentive Plan
Compensation
($)(4)	 	All Other
Compensation
($)(5)	 	Total
($)	 	
Rick E Winningham	 	 	2013	 	 	857,940	 	 	129,004	 	 	244,420	 	 	516,016	 	 	500	 	 	1,747,880	 	
Chief Executive Officer	 	 	2012	 	 	833,280	 	 	35,112	 	 	199,210	 	 	450,888	 	 	500	 	 	1,518,990	 	
Steven L. Barriere	 	 	
2013	 	 	
321,664	 	 	
17,853	 	 	
533,280	 	 	
98,147	 	 	
500	 	 	
971,444	 	
Vice President, Clinical	 	 	2012	 	 	315,329	 	 	7,586	 	 	434,640	 	 	97,414	 	 	500	 	 	855,469	 	
and Medical Affairs of Theravance Biopharma US, Inc.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oranee T. Daniels	 	 	
2013	 	 	
330,804	 	 	
498	 	 	
533,280	 	 	
99,502	 	 	
500	 	 	
964,584	 	
Vice President, Clinical	 	 	2012	 	 	320,454	 	 	6,791	 	 	434,640	 	 	87,209	 	 	500	 	 	849,594	 	
Pharmacology and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Experimental Medicine of Theravance Biopharma US, Inc.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

(1)
Includes amounts deferred pursuant to Theravance's 401(k) plan.

(2)
The amounts in this column reflect cash bonuses awarded under Theravance's annual cash bonus plan at the discretion of Theravance (and for Mr. Winningham, at the discretion of the Theravance Compensation Committee).

(3)
The amounts in this column represent the aggregate grant date fair value of stock awards granted to the officer in the applicable fiscal year computed in accordance with FASB ASC Topic 718. See Note 10 of the notes to Theravance's consolidated financial statements in Theravance's Annual Report on Form 10-K filed on March 3, 2014 for a discussion of all assumptions made by Theravance in determining the grant date fair values of its equity awards. Each named executive officer was granted RSAs by Theravance in February 2013. For Mr. Winningham, the vesting of 50% of such RSAs was tied to the achievement of one of three possible performance goals. The grant date fair value of the performance-contingent portion of Mr. Winningham's RSAs assuming that one of the milestones was achieved is $244,420. In accordance with SEC rules, the grant date fair value of any award subject to a performance condition is based on the probable outcome of the performance conditions. At the time Mr. Winningham's RSAs were granted, it was not probable that any of the performance milestones would be achieved and therefore no amount attributable to the performance-contingent portion of his award is included in the "stock awards" column. One of the performance goals applicable to Mr. Winningham's award has since been achieved.

113

Table of Contents(4)
The amounts in this column reflect cash bonus awards earned by the named executive officers under Theravance's 2012 and 2013 annual cash bonus plans, which were (or, with respect to the 2013 amount, will be) paid in the first quarter of the following year.

(5)
Reflects a $500 401(k) matching contribution by Theravance in each of 2012 and 2013. The 401(k) matching contributions were provided to all Theravance employees.

Narrative Disclosure to Summary Compensation Table

Named Executive Officer Compensation Following the Spin-Off

        While compensation programs for Theravance Biopharma employees, including our named executive officers, have not yet been completely finalized, following the spin-off we anticipate that the compensation paid to our named executive officers will consist of the same elements that were provided to our named executive officers by Theravance prior to the spin-off, namely base salary, annual cash incentive compensation, equity incentive compensation and post-termination protection.

        Base salary.    We anticipate that the initial base salaries for Drs. Barriere and Daniels will be the same as those set by Theravance's Compensation Committee for fiscal 2014, which are as follows: Dr. Barriere, $336,974; and Dr. Daniels, $341,624. We anticipate that the initial base salary for Mr. Winningham will be $177,166, which reflects his part-time employment with us.

        Annual Cash Incentive Compensation.    Currently our named executive officers are eligible for annual cash incentives pursuant to Theravance's company-wide bonus program. We anticipate that our named executive officers will continue to be eligible for annual cash incentives pursuant to a company-wide bonus program that we adopt. We anticipate that the target bonus percentages (of an officer's annualized base salary for the year) for our named executive officers will remain the same as those set by Theravance's Compensation Committee for fiscal 2014, which are as follows: Mr. Winningham, 60%; Dr. Barriere and Dr. Daniels, 30%.

        Equity Incentive Compensation.    We anticipate that our employees, including our named executive officers, will be granted initial equity awards for Theravance Biopharma ordinary shares pursuant to our equity incentive plan following the spin-off and will thereafter be considered for annual replenishment equity awards. As described above in "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off," we also expect that our employees will continue to vest in their outstanding Theravance equity awards based on service to us following the spin-off.

        Post-Termination Protection.    Currently our named executive officers participate in Theravance's change in control plan, as described below in "Change in Control Severance Plan." We have adopted a similar change in control plan that our named executive officers will be eligible to participate in, as described below in "Change in Control Severance Plan."

Theravance Biopharma Employment Arrangements

        Prior to the spin-off, we expect to enter into employment offer letters with each of our named executive officers. We expect that these offer letters will set forth the officer's initial base salary, target bonus opportunity and will provide that the officer's employment will be "at will" and may be terminated by either party at any time.

Outstanding Theravance Equity Awards at 2013 Fiscal Year-End

        The following table sets forth information regarding each unexercised option to purchase shares of Theravance's common stock, all restricted common stock of Theravance and all restricted stock units for shares of Theravance's common stock held by each of our named executive officers as of

114

Table of Contents

December 31, 2013. The treatment of outstanding Theravance equity awards in connection with the spin-off is described in greater detail in the section titled "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off" above. All equity awards granted under Theravance's equity plans will fully vest in the event of a change in control of Theravance unless the awards are assumed by the successor corporation or replaced with comparable awards. For additional information regarding other vesting acceleration provisions applicable to the outstanding Theravance equity awards held by our named executive officers, please see the section titled "Change in Control Severance Plan" below.

	 	Option Awards	 	Stock Awards	 	
Name	 	Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)	 	Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)	 	Option
Exercise
Price
($)	 	Option
Expiration
Date	 	Number
of Shares
or Units
of Stock
That Have
Not
Vested
(#)	 	Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)	 	Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)	 	Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(2)	 	
(a)
	 	(b)
	 	(c)
	 	(e)
	 	(f)
	 	(g)
	 	(h)
	 	(i)
	 	(j)
	 	
Rick E Winningham	 	 	69,355	(3)	 	—	 	 	29.65	 	2/7/2016	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	69,355	(4)	 	—	 	 	34.00	 	2/13/2017	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	6,875	(5)	 	245,094	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	99,000	(6)	 	3,529,350	 	 	82,500	(7)	 	2,941,125	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	12,374	(8)	 	441,133	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	22,000	(9)	 	784,300	 	 	—	 	 	—	 	
Steven L. Barriere	 	 	
15,000	
(10)	 	
—	 	
$	
18.37	 	
2/9/2015	 	 	
—	 	 	
—	 	 	
—	 	 	
—	 	
 	 	 	24,900	(3)	 	—	 	$	29.65	 	2/13/2017	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	10,000	(4)	 	—	 	$	34.00	 	2/13/2017	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	1,500	(5)	 	53,475	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	7,500	(6)	 	267,375	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	12,500	(11)	 	445,625	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	13,500	(8)	 	481,275	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	24,000	(9)	 	855,600	 	 	—	 	 	—	 	
Oranee T. Daniels	 	 	
50,000	
(12)	 	
—	 	
$	
14.20	 	
2/1/2019	 	 	
—	 	 	
—	 	 	
—	 	 	
—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	1,500	(5)	 	53,475	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	7,500	(6)	 	267,375	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	13,500	(8)	 	481,275	 	 	—	 	 	—	 	
 	 	 	—	 	 	—	 	 	—	 	—	 	 	24,000	(9)	 	855,600	 	 	—	 	 	—	 	

(1)
Computed in accordance with SEC rules as the number of unvested RSUs or RSAs, as applicable, multiplied by the closing market price of Theravance's common stock at the end of the 2013 fiscal year, which was $35.65 on December 31, 2013 (the last business day of the 2013 fiscal year). The actual value (if any) to be realized by the officer depends on whether the shares vest and the future performance of Theravance's common stock.

(2)
Computed in accordance with SEC rules as the number of unvested RSAs multiplied by the closing market price of Theravance's common stock at the end of the 2013 fiscal year, which was $35.65 on December 31, 2013. The actual value (if any) to be realized by the officer depends on whether the performance milestones related thereto are achieved, whether the shares vest following achievement of the performance milestones, and the future performance of Theravance's common stock.

(3)
Mr. Winningham and Dr. Barriere received grants of options to purchase shares of Theravance common stock under Theravance's 2004 Incentive Plan on February 8, 2006. These options vested over a four-year period from the date of grant and became fully vested on February 8, 2010.

(4)
Mr. Winningham and Dr. Barriere received grants of options to purchase shares of Theravance common stock under Theravance's 2004 Incentive Plan on February 14, 2007. These options vested over a four-year period from the date of grant and became fully vested on February 14, 2011.

(5)
Mr. Winningham, Dr. Barriere and Dr. Daniels each received RSUs under Theravance's 2004 Incentive Plan on February 10, 2010. Each RSU vests in equal quarterly installments over approximately four years from the date of grant, provided the holder remains in continuous service with Theravance through each vesting date. Includes 17,188 RSUs in the case of Mr. Winningham that were subject to achievement of performance goals by December 31, 2011 that have already been achieved.

(6)
Mr. Winningham, Dr. Barriere and Dr. Daniels each received RSAs under Theravance's 2004 Incentive Plan on February 11, 2011. In the case of Mr. Winningham, 20% of the RSAs vested on February 20, 2012, and the remaining 80% of the RSAs vest in equal quarterly installments over the next four years, provided the holder remains in continuous service with Theravance through each vesting date. In the case of Dr. Barriere and Dr. Daniels, 25% of the RSAs vested on February 20, 2012, and the remaining 75% of the RSAs vest in equal

115

Table of Contents

quarterly installments over the next three years, provided the holder remains in continuous service with Theravance through each vesting date.(7)
Mr. Winningham received performance-contingent RSAs under Theravance's 2004 Incentive Plan on February 11, 2011, which we refer to herein as the Six-Year Performance RSAs. The vesting of these RSAs is contingent upon the achievement of performance milestones by December 31, 2016 as well as continued employment with Theravance, as described in detail in the "Equity Incentive Compensation" section of the Theravance proxy statement filed with the SEC on April 16, 2012. In accordance with SEC rules, the number of shares in column (i) and the value of those shares in column (j) reflects threshold performance assuming milestones that add up to ten points are achieved.

(8)
Mr. Winningham, Dr. Barriere and Dr. Daniels each received RSAs under Theravance's 2004 Incentive Plan on February 15, 2012. The first 25% of the RSAs vested on February 20, 2013, and the remaining 75% of the RSAs vest in equal quarterly installments over three years thereafter, provided the holder remains in continuous service with Theravance through each vesting date. Includes 11,000 RSAs in the case of Mr. Winningham that were subject to achievement of a performance goal by December 31, 2013 that has already been achieved.

(9)
Mr. Winningham, Dr. Barriere and Dr. Daniels each received RSAs under Theravance's 2012 Incentive Plan on February 7, 2013. The first 25% of the RSAs vested on February 20, 2014, and the remaining 75% of the RSAs vest in equal quarterly installments over three years thereafter, provided the holder remains in continuous service with Theravance through each vesting date. Includes 11,000 RSAs in the case of Mr. Winningham that were subject to the achievement of a performance goal by December 31, 2014 that has already been achieved.

(10)
Dr. Barriere received a grant of an option to purchase shares of Theravance common stock under Theravance's 2004 Incentive Plan on February 10, 2005. This option vested over a four-year period from the date of grant and became fully vested on February 10, 2009.

(11)
Dr. Barriere received a performance-contingent RSA under our 2004 Incentive Plan on August 29, 2011. The vesting of this RSA was contingent upon the achievement of a performance goal related to FDA approval of Theravance's drug application for telavancin for the treatment of hospital acquired pneumonia (or nosocomial pneumonia) by December 31, 2013 as well as continued employment with Theravance. The performance goal was achieved in July 2013 and the number of shares in column (g) and the value of those shares in column (h) reflect the number of shares subject to continued employment.

(12)
Dr. Daniels received a grant of an option to purchase shares of Theravance common stock under Theravance's 2004 Incentive Plan on February 2, 2009 in connection with the commencement of her employment. This option vested over a four-year period from the date of grant and became fully vested on February 2, 2013.

Change in Control Severance Plan

        Currently, our named executive officers participate in Theravance's change in control severance plan, which provides for the following benefits if a named executive officer is subject to an involuntary termination within 3 months prior to or 24 months after a change in control of Theravance, provided the officer signs a release of claims:

•
In the case of Theravance's Vice Presidents (including Dr. Barriere and Dr. Daniels), a lump sum payment equal to 100% of the officer's annual base salary and target bonus.

•
In the case of Theravance's Chief Executive Officer, Mr. Winningham, a lump sum payment equal to 200% of the officer's annual base salary and target bonus.

•
A pro-rata portion of the named executive officer's target bonus based on the number of full months of employment completed in the year of termination.

•
Continuation of the officer's health and welfare benefits for the shorter of 12 months (in the case of Theravance's Vice Presidents) or 24 months (in the case of Theravance's Chief Executive Officer) or the expiration of the officer's continuation coverage under COBRA.

•
Full vesting of any unvested stock options, RSAs and RSUs held by the officer; provided, however, that the Six-Year Performance RSAs held by Mr. Winningham for which the performance milestones have not been achieved as of the date vesting would occur under Theravance's change in control severance plan would be subject to reduced vesting acceleration if the per share value to be received by a holder of Theravance common stock is less than $49.46.

•
In the case of named executive officers eligible to participate in the change in control severance plan prior to December 16, 2009, a tax gross-up payment in the event an independent accounting firm selected by Theravance determines that the named executive officer would be subject to excise taxes under Section 4999 of the Code as a result of payments under the change in control severance plan or otherwise.

116

Table of Contents

        Following the spin-off, we expect that Mr. Winningham, who is expected to also remain an officer of Theravance, will continue to be eligible to participate in the Theravance change in control severance plan; however, we do not expect that Dr. Barriere or Dr. Daniels will be eligible to continue to participate in such plan. As a result, we have adopted a similar severance plan, effective as of immediately following the spin-off, that will provide substantially similar benefits as the Theravance plan in the event we undergo a change in control after the spin-off. In addition, as described in "The Spin-Off—Treatment of Outstanding Theravance Equity Awards in Connection with the Spin-Off" above, outstanding Theravance equity awards held by Theravance Biopharma employees, including our named executive officers, have been amended, effective as of immediately prior to and contingent upon the spin-off, so that they will fully vest in the event the Theravance Biopharma employee (who is not also an employee of Theravance) is subject to an involuntary termination in connection with or following a change in control of Theravance Biopharma.

        A "change in control" for purposes of Theravance's change in control severance plan includes:

•
The consummation of a merger or consolidation if persons who were not Theravance's stockholders prior to the merger or consolidation own 50% or more of the voting securities of the surviving company and its parent.

•
A sale, transfer or other disposition of all or substantially all of Theravance's assets.

•
A change in the composition of Theravance's board of directors as a result of which fewer than 50% of the incumbent directors either were directors on the date 24 months prior to the change in control (the "Original Directors") or were appointed or nominated for election to the board of directors by a majority of the Original Directors or directors whose appointment or nomination was approved by at least 50% of the Original Directors.

•
A transaction as a result of which any person becomes the beneficial owner of 50% or more of Theravance's outstanding voting securities.

        A transaction shall not constitute a change in control of Theravance if its sole purpose is to change the state of Theravance's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held Theravance's securities immediately before such transaction. In addition, except with respect to a GSK Change In Control (defined below), the following purchases of Theravance stock by GSK will not constitute a change in control:

•
The exercise by GSK of any of its rights under the Amended and Restated Governance Agreement, dated as of June 4, 2004, as amended, among Theravance, GSK, GlaxoSmithKline LLC and Glaxo Group Limited (the "Governance Agreement") to representation on Theravance's board of directors (and its committees).

•
Any acquisition by GSK of securities of Theravance (whether by merger, tender offer, private or market purchases or otherwise) not prohibited by the Governance Agreement.

        A "GSK Change In Control" means the acquisition by GSK, in compliance with the provisions of the Governance Agreement, of 100% of Theravance's outstanding voting stock.

        A "change in control" for purposes of our change in control severance plan includes:

•
The consummation of a merger or consolidation if persons who were not our stockholders prior to the merger or consolidation own 50% or more of the voting securities of the surviving company and its parent.

•
A sale, transfer or other disposition of all or substantially all of our assets.

•
A change in the composition of our board of directors as a result of which fewer than 50% of the incumbent directors either were directors on the date 12 months prior to the change in

117

Table of Contents

control (the "Original Directors") or were appointed or nominated for election to the board of directors by a majority of the Original Directors or directors whose appointment or nomination was approved by at least 50% of the Original Directors.•
A transaction as a result of which any person becomes the beneficial owner of 50% or more of our outstanding voting securities.

        A transaction shall not constitute a change in control of Theravance Biopharma if its sole purpose is to change our country or state of incorporation, as applicable, or to create a holding company that will be owned in substantially the same proportions by the persons who held our securities immediately before such transaction. In addition, a transaction shall not constitute a change in control of Theravance Biopharma unless it also constitutes a "change in control event" under Treasury Regulation 1.409A-3(a)(5).

        An "involuntary termination" for purposes of both the Theravance change in control severance plan and our change in control severance plan means a termination of an officer's employment for reasons other than misconduct, or an officer's resignation following (1) a material diminution in the officer's authority, duties or responsibilities, (2) a material reduction in the officer's base compensation, (3) a material change in the officer's work location or (4) a material breach of the officer's employment agreement by Theravance or us, as applicable. In order to qualify as an involuntary termination, the officer must give written notice to Theravance or us, as applicable, within 90 days after the initial existence of one of the conditions described above and Theravance such condition must not have been cured within 30 days thereafter.

        "Misconduct" for purposes of both the Theravance change in control severance plan and our change in control severance plan means an officer's (1) commission of any material act of fraud, embezzlement or dishonesty, (2) material unauthorized use or disclosure of confidential information or trade secrets or (3) other material intentional misconduct adversely affecting the business or affairs of Theravance or us, as applicable.

Retirement Benefits

        We anticipate that our employees, including our named executive officers, will be eligible to participate in a 401(k) tax-deferred savings plan that permits contributions by salary deduction pursuant to Section 401(k) of the Code.

Equity Plans

        In October 2013, our board of directors adopted our 2013 Equity Incentive Plan, that will allow us to grant equity incentive awards to our employees, non-employee directors and consultants, including our named executive officers, following the spin-off. Our board of directors also adopted our 2013 Employee Share Purchase Plan in October 2013. We expect that both our 2013 Equity Incentive Plan and our 2013 Employee Share Purchase Plan will be approved by Theravance, as our sole stockholder, prior to the spin-off.

2013 Equity Incentive Plan

        The 2013 Equity Incentive Plan (our "Equity Plan") became effective upon its adoption by our board of directors in October 2013; however, no grants will be made under the Equity Plan prior to the effective date of the information statement of which this summary is a part.

        Share Reserve.    We have reserved 5,428,571 ordinary shares for issuance under the Equity Plan. As of January 1st of each year, commencing on January 1, 2015 and ending on January 1, 2023, the

118

Table of Contents

aggregate number of ordinary shares that may be issued under the Equity Plan will automatically be increased by a number equal to the least of:

•
5% of the total number of our ordinary shares outstanding on December 31 of the prior year,

•
3,428,571 ordinary shares, or

•
a number of ordinary shares determined by our board of directors.

        In general, to the extent that awards under the Equity Plan are forfeited, terminate or are settled in cash for any reason without the issuance of ordinary shares, those shares will again become available issuance under the Equity Plan, as will restricted shares and ordinary shares issued upon the exercise of options that are repurchased by us. In addition, the number of ordinary shares that we may issue under the Equity Plan will not be reduced by the number of ordinary shares subject to any awards we grant in substitution or assumption of any outstanding awards that were previously issued by a corporation acquired by us, provided that ordinary shares subject to any award that is assumed or substituted by us will not again become available for grant to the extent the assumed or substituted award is later forfeited, expired or settled in cash. Further, to the extent permitted by the applicable NASDAQ Marketplace rules, if we acquire or combine with a company that has shares available under one or more pre-existing plans, then those shares will generally be available for awards under the Equity Plan, provided that the awards are made in compliance with the terms of the applicable pre-existing plan and those awards are only made to those individuals who were not employed by or providing service to us immediately prior to the acquisition or combination.

        Administration.    The compensation committee of our board of directors, which is comprised of two or more independent members of our board of directors, administers the Equity Plan. The committee has the complete discretion to make all decisions relating to the Equity Plan and outstanding awards, including repricing outstanding options and modifying outstanding awards. The stock option committee of our board of directors, of which our Chief Executive Officer, Rick E Winningham, is expected to be the sole member, is also expected to have the authority to make option and other equity award grants to employees who are not executive officers.

        Eligibility.    Employees (including officers), non-employee directors and consultants who render services to the Company or its affiliates (whether now existing or subsequently established) are eligible to receive awards under the Equity Plan.

        Types of Awards.    The Equity Plan provides for the grant of options to purchase ordinary shares (including both incentive stock options described in Section 422 of the Code and options not described in Sections 422 or 423 of the Code), restricted share awards, share unit awards and share appreciation rights (collectively, "share awards"), as well as performance cash awards.

        Options and Share Appreciation Rights.    The per share exercise price of options granted under the Equity Plan may not be less than 100% of the fair market value of a ordinary share on the date the option is granted. The exercise price of options granted under the Equity Plan may be paid in cash or, with the administrator's consent:

•
with ordinary shares that the optionee already owns;

•
by an immediate sale of the option shares through a broker approved by us;

•
by a margin loan;

•
by a net exercise procedure;

•
with a full-recourse promissory note, if permitted by applicable law; or

•
by any other form consistent with applicable laws, regulations and rules.

119

Table of Contents

        An optionee who exercises a share appreciation right receives the increase in value of a ordinary share over the exercise price. The exercise price for share appreciation rights may not be less than 100% of the fair market value of a ordinary share on the date the share appreciation right is granted. Share appreciation rights may be granted in tandem with, or independent of, option grants under the Equity Plan. Amounts paid with respect to share appreciation rights may be made in cash, in ordinary shares, or any combination thereof.

        Options and share appreciation rights vest as determined by the administrator at the time of grant. In general, we grant options that vest over a four-year period following the date of grant. Options and share appreciation rights expire at the time determined by the administrator, up to a maximum of ten years. They generally expire earlier if the participant's service terminates prior to the expiration of the original term. No participant may receive options and share appreciation rights under the Equity Plan covering more than 1,142,857 ordinary shares (in the aggregate) in any fiscal year, except that a new employee may receive options and/or share appreciation rights covering up to an additional 1,142,857 ordinary shares (in the aggregate) in the fiscal year in which his or her employment starts. Additionally, no non-employee director may receive options and share appreciation rights covering more than 228,571 ordinary shares (in the aggregate) in any fiscal year.

        Restricted Shares and Share Units.    Restricted shares may be granted under the Equity Plan in consideration for (a) cash, (b) property, (c) past or future services rendered to us or our affiliates, (d) full-recourse promissory notes or (e) any other form of legal consideration approved by the administrator. Share units may be granted under the Equity Plan for no consideration. In general, these awards will be subject to vesting. Vesting may be tied to length of service, attainment of performance goals, or a combination of both, as determined by the administrator. No participant may receive restricted shares and share units that are intended to comply with the performance-based exception under Section 162(m) of the Code covering more than 1,142,857 ordinary shares (in the aggregate) in any fiscal year, except that a new employee may receive restricted shares and/or share units that are intended to comply with the performance-based exception under Section 162(m) of the Code covering up to an additional 1,142,857 ordinary shares (in the aggregate) in the fiscal year in which his or her employment starts. This annual limit is in addition to any options and share appreciation rights the participant may receive during a fiscal year. Additionally, no non-employee director may receive restricted shares and share units covering more than 228,571 ordinary shares (in the aggregate) in any fiscal year. Settlement of vested share units may be made in cash, ordinary shares or any combination thereof.

        Performance Cash Awards.    Performance cash awards may be granted under the Equity Plan based on the attainment of performance goals over a specified performance period and may be intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code. No participant may be paid more than $5,000,000 in cash in any fiscal year pursuant to a performance cash award that is intended to comply with the performance-based exception under Section 162(m) of the Code.

        Performance Goals.    If the administrator grants any participant a performance cash award or an award of restricted shares or share units with performance-based vesting and such award is intended to qualify as performance-based compensation under Section 162(m) of the Code, the administrator may use any one or more of the following performance goals: share price; net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the ordinary shares or any other publicly-traded securities of the Company; market share; gross profits; net profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and

120

Table of Contents

amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; shareholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; drug discovery or development milestones; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities, successfully executing an advisory committee meeting or similar proceeding, or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Company or the Company's third-party manufacturer) and validation of manufacturing processes (whether the Company's or the Company's third-party manufacturer); initiation or completion of pre-clinical studies; clinical achievements (including initiating clinical studies; initiating enrollment, completing enrollment or enrolling particular numbers of subjects in clinical studies; completing phases of a clinical study (including the treatment phase); or announcing or presenting preliminary or final data from clinical studies; in each case, whether on particular timelines or generally); strategic partnerships, research joint ventures, licenses, collaborations or comparable transactions (including in-licensing and out-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company's products or development candidates (including with group purchasing organizations, distributors and other vendors)); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company's products or development candidates); co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company's equity or debt securities; factoring transactions; royalty monetizations, sales or licenses of the Company's assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research (including pre-clinical achievements, nominating a development candidate or initiating a new full discovery program), development, manufacturing (including initiating formulation or device development work or finalizing API or drug product processes), commercialization, development candidates, products or projects, safety, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel.

        In the areas of development, regulatory progress and commercialization, the achievements described above performed by a third party with which the Company has a licensing or collaborative agreement (a "Partner"), or relating to an asset in which the Company has an economic interest, shall apply to the Company. For example, if a Partner accomplishes development milestones, regulatory achievements, commercialization or sales targets with an asset within a program that is a subject of the licensing or collaboration agreement between the Company and the Partner, then such Partner's accomplishments shall constitute achievements of the Company. Similarly, if an asset in which the Company has an economic interest, which asset is controlled by a third party, achieves development milestones, regulatory achievements, commercialization or sales targets, then such third party's accomplishments with such asset shall constitute achievements of the Company. Such performance goals also may be based solely by reference to the Company's performance or the performance of a subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.

        Changes in Capital Structure.    In the event there is a stock split, a dividend payable in ordinary shares, or a combination or consolidation of the outstanding ordinary shares (by reclassification or otherwise) into a lesser number of ordinary shares, adjustments will automatically be made to (a) the

121

Table of Contents

number and kind of shares reserved for issuance under the Equity Plan, including the limit on incentive stock options and the number of shares that will be automatically added to the share reserve at the beginning of each year between 2015 and 2023, (b) the maximum number of options, share appreciation rights, performance-based restricted share awards and performance-based share units that can be granted to any participant in a fiscal year, and (c) the number and kind of shares and exercise prices, if applicable, of all outstanding share awards. In the event of an extraordinary dividend, a recapitalization, a spin-off or similar occurrence, the administrator shall, in its sole discretion, make one or more of the foregoing adjustments as it deems appropriate.

        Corporate Transactions.    In the event that we are a party to a merger, consolidation, or a change in control transaction, all outstanding share awards will be governed by the terms of the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which we are a party, in a manner determined by the administrator). Such treatment may include any of the following actions with respect to each outstanding share award:

•
the continuation, assumption, or substitution of a share award by the surviving entity or its parent;

•
full acceleration of the vesting of a share award followed by its termination prior to the closing of the transaction after an opportunity to exercise, if applicable, the share award;

•
the cancellation of a share award in exchange for a payment equal to the excess, if any, of (a) the value that the holder of a ordinary share receives in the transaction over (b) if applicable, the exercise price otherwise payable in connection with the share award; provided that such payment may be subject to the participant's continued service on a basis no less favorable than the schedule under which the share award would have originally vested; or

•
the assignment of any reacquisition or repurchase rights held by us in respect of an award of restricted shares to the surviving entity or its parent (with proportionate adjustments made to the price per share to be paid upon exercise of such rights).

        Unless the administrator provides otherwise in an award agreement, in the event of a change in control, each outstanding share award under the Equity Plan will, immediately prior to the effective date of the change in control, become fully vested and exercisable for all of the ordinary shares at the time subject to such share award. However, an outstanding share award will not accelerate vesting if, and to the extent such share award is, in connection with the change in control, either assumed by the successor corporation (or parent) or replaced with a comparable award from the successor corporation (or its parent). The administrator also has the discretion to accelerate the vesting of outstanding share awards whether or not upon a change in control, which acceleration may or may not be conditioned upon the subsequent termination of the participant's service within a specified period following the transaction.

        For this purpose, a change in control transaction includes:

•
any merger or consolidation of the Company where persons who were not shareholders of the Company prior to such merger or consolidation own 50% or more of the total voting power of the surviving entity or its parent;

•
the sale, transfer or other disposition of all or substantially all of our assets;

•
a change in the composition of our board of directors as a result of which fewer than 50% of the incumbent directors either were directors on the date 12 months prior to the change in control (the "Original Directors") or were appointed or nominated for election to the board of directors by a majority of the Original Directors or directors whose appointment or nomination was approved by at least 50% of the Original Directors; or

122

Table of Contents

•
any person acquiring beneficial ownership of at least 50% of our total voting power.

        Amendments or Termination.    Our board of directors may amend or terminate the Equity Plan at any time and for any reason and no awards will be made under the Equity Plan after it is terminated. If not terminated earlier by our board of directors, the Equity Plan will automatically terminate on the 10 th  anniversary of the date our board of directors adopted the Equity Plan. If our board of directors amends the plan, it does not need to ask for shareholder approval of the amendment unless applicable law so requires.

2013 Employee Share Purchase Plan

        The 2013 Employee Share Purchase Plan (our "Purchase Plan") will become effective on the effective date of the information statement of which this summary is a part. The Purchase Plan is intended to qualify under Section 423 of the Code.

        Share Reserve.    We have reserved 857,142 of our ordinary shares for issuance under the Purchase Plan. As of January 1st of each year, commencing with January 1, 2015 and ending on (and including) January 1, 2033, the aggregate number of ordinary shares available under the Purchase Plan will automatically be increased by a number equal to the least of:

•
1% of the total number of our ordinary shares outstanding on December 31 of the prior year,

•
571,428 ordinary shares, or

•
a number of ordinary shares determined by our board of directors.

        The number of shares reserved under the Purchase Plan will be automatically adjusted in the event of a share split, dividend (whether in the form of cash or shares), recapitalization or similar change in the corporate structure of the Company affecting the shares and effected without receipt or payment of consideration by the Company.

        Administration.    The compensation committee of our board of directors (or, if it so elects, our board of directors) will administer the Purchase Plan.

        Eligibility.    All of our employees are eligible to participate if we employ them for more than five months per year. Eligible employees may begin participating in the Purchase Plan at the start of any offering period.

        Offering Periods.    Each offering period will be for the duration established by the compensation committee, not to exceed 27 months (or such other period as may be imposed under applicable tax law). Unless the compensation committee determines otherwise, two overlapping offering periods will begin each calendar year on May 16 and November 16, each lasting 24 months. However, the first offering period will start on a date determined by the compensation committee. In addition, the compensation committee, in its discretion, may decide to offer additional offering periods commencing at times and for the durations it so determines.

        Purchase Periods.    Unless the compensation committee determines otherwise, the Purchase Plan will have two purchase periods that commence each calendar year on May 16 and November 16, each lasting six months and ending on the earliest of November 15 and May 15, respectively.

        Amount of Contributions.    Our Purchase Plan permits each eligible employee to purchase our ordinary shares through payroll deductions. Each employee's payroll deductions may not exceed 15% of the employee's cash compensation. Unless the compensation committee determines otherwise, purchases of our ordinary shares will occur on May 15 and November 15 of each year and each participant may purchase up to a maximum of 4,000 of our ordinary shares on any purchase date. In general, the value of our ordinary shares that may be purchased by a participant during any calendar

123

Table of Contents

year may not exceed $25,000. Participants may withdraw their contributions at any time before shares are purchased.

        Purchase Price.    The price of each of our ordinary shares purchased under our Purchase Plan will be 85% of the lower of:

•
the fair market value of one of our ordinary shares on the first day of the applicable offering period, or

•
the fair market value of one of our ordinary shares on the purchase date.

        Other Provisions.    Employees may end their participation in the Purchase Plan at any time. Participation will end automatically upon termination of their employment with us. If a change in control occurs and the acquirer does not continue or assume the Purchase Plan, then immediately prior to the change in control any offering period then in effect shall terminate and shares will be purchased with the payroll deductions accumulated to date by participating employees. The compensation committee may amend, suspend or terminate the Purchase Plan at any time. If we increase the number of ordinary shares reserved for issuance under the Purchase Plan, except for the automatic increases described above, then we must seek the approval of our shareholders. The Purchase Plan will terminate automatically 20 years after its adoption by our board of directors, unless it is extended by our board of directors and such extension is approved by our shareholders within 12 months thereafter.

124

Table of Contents
Security Ownership of Certain Beneficial Owners and Management

        As of the date of this Information Statement, all of our outstanding ordinary shares are owned by Theravance. In connection with the spin-off, Theravance will distribute to its stockholders all of our outstanding ordinary shares and will immediately thereafter own none of our ordinary shares. The following table provides information with respect to the expected beneficial ownership of our ordinary shares immediately upon the spin-off by (1) each of our shareholders who we believe would be a beneficial owner of more than 5% of our outstanding ordinary shares based on currently available information, (2) each member of our board of directors, (3) each named executive officer and (4) all of our executive officers and directors as a group. We based the share amounts on each person's ownership of Theravance common stock as of      , 2013, unless we indicate some other basis for the share amounts, and assuming a distribution ratio of one of our ordinary shares for every        shares of Theravance common stock. To the extent our directors and officers own Theravance common stock at the time of the separation, they will participate in the distribution on the same terms as other holders of Theravance common stock; however since Theravance options or RSUs are not converted to options or RSUs of Theravance Biopharma in connection with the spin-off, the options and RSUs for Theravance common stock held by our directors and officers will not affect their beneficial ownership of our ordinary shares at the time of the spin-off unless such options and RSUs are exercised or settled prior to the record date for the spin-off. Except as otherwise noted in the footnotes below, each person or entity identified below has sole voting and investment power with respect to such securities. As used in this Information Statement, "beneficial ownership" means that a person has, or may have within 60 days, the sole or shared power to vote or direct the voting of a security and/or the sole or shared investment power with respect to a security (i.e., the power to dispose or direct the disposition of a security). Unless otherwise specified, the address of each named individual in the table below is the address of Theravance Biopharma.
 	 	 	 	 	
Name of Beneficial Owner or Identity of Group(1)	 	Percent of
Outstanding	 	
GlaxoSmithKline plc(2)	 	 	 	 	
980 Great West Road	 	 	 	 	
Brentford	 	 	 	 	
Middlesex	 	 	 	 	
TW8 9GS	 	 	 	 	
United Kingdom	 	 	 	 	
The Baupost Group, L.L.C.(3)	 	 	 	 	
10 St. James Avenue, Suite 1700	 	 	 	 	
Boston, Massachusetts 02116	 	 	 	 	
FMR LLC(4)	 	 	 	 	
82 Devonshire Street	 	 	 	 	
Boston, MA 02109	 	 	 	 	
T. Rowe Price Associates, Inc.(5)	 	 	 	 	
100 East Pratt Street	 	 	 	 	
Baltimore, MD 21202	 	 	 	 	
Rick E Winningham	 	 	 	 	
Steven L. Barriere	 	 	*	 	
Oranee T. Daniels	 	 	*	 	
Henrietta H. Fore	 	 	 	 	
Robert V. Gunderson, Jr. 	 	 	 	 	
Arnold J. Levine Ph.D. 	 	 	 	 	
Burton G. Malkiel Ph.D. 	 	 	 	 	
Peter S. Ringrose Ph.D. 	 	 	 	 	
George M. Whitesides Ph.D. 	 	 	 	 	
William D. Young	 	 	 	 	
All directors and executive officers as a group	 	 	 	 	

*
Less than 1%

125

Table of Contents(1)
Unless otherwise indicated, the address for each beneficial owner is c/o Theravance, Inc., 901 Gateway Boulevard, South San Francisco, California 94080.

(2)
Based on a Form 4 filed with the Securities and Exchange Commission on        , 2013. Shares are held of record by Glaxo Group Limited, a limited liability company organized under the laws of England and Wales and a wholly owned subsidiary of GlaxoSmithKline plc, an English public limited company.

(3)
Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2013. The Baupost Group, L.L.C. ("Baupost") is a registered investment adviser. SAK Corporation is the Manager of Baupost. Seth A. Klarman, as the sole director and sole officer of SAK Corporation and a controlling person of Baupost, may be deemed to have beneficial ownership under Section 13(d) of the securities beneficially owned by Baupost.

(4)
The various individuals, funds and entities that are deemed to be the beneficial owners of these shares, and the individuals, funds and entities having sole and shared voting power over these shares, are set forth in the Schedule 13G/A filed on February 14, 2013 and on which the information reported herein is based.

(5)
Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 6, 2013. These securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. ("Price Associates") serves as investment advisor with power to direct investments and/or sole power to vote the securities. For purposes of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

126

Table of Contents
Description of Share Capital

General

        In July 2013, we were incorporated as an exempted limited liability company under the laws of the Cayman Islands. As such, our affairs will be governed by our amended and restated memorandum and articles of association to be effective following the spin-off, which we refer to as our amended and restated memorandum and articles of association, and the Companies Law, 2013 Revision, as amended (the "Companies Law"), and the common law of the Cayman Islands. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares. A Cayman Islands exempted company:

•
is a company that conducts its business mainly outside of the Cayman Islands;

•
is exempted from certain requirements of the Companies Law, including a filing of an annual return of its shareholders with the Registrar of Companies or the Immigration Board;

•
does not have to make its register of shareholders open to inspection; and

•
may obtain an undertaking against the imposition of any future taxation.

        As of the date of this Information Statement, we are authorized to issue            ordinary shares, par value $0.00001 per share, and            preferred shares, par value $0.00001 per share. As of            , 2013 there were            ordinary shares outstanding, held of record by            shareholders, no preferred shares outstanding and no outstanding equity awards for our ordinary shares.

        The following description summarizes the most important terms of our share capital. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our amended and restated memorandum and articles of association, a copy of which has been filed as an exhibit to our registration statement on Form 10, and the applicable provisions of the Companies Law.

Meetings of Shareholders

        Subject to our regulatory requirements, an annual general meeting and any extraordinary general meeting shall be called by not less than ten days' nor more than 60 days' notice. Notice of every general meeting will be given to all of our shareholders, our directors and our principal external auditors. Extraordinary general meetings may be called only by the chairman of our board of directors or a majority of our board of directors, and may not be called by any other person.

        Alternatively, subject to applicable regulatory requirements, a meeting will be deemed to have been duly called if it is so agreed (i) in the case of a meeting called as an annual general meeting, by all of our shareholders (or their proxies) entitled to attend and vote at the meeting, or (ii) in the case of an extraordinary meeting, by a majority in number of our shareholders (or their proxies) having a right to attend and vote at the meeting, being a majority together holding not less than 95% of the voting shares.

        At any general meeting, shareholders entitled to vote and present in person or by proxy that represent not less than a majority of our issued and outstanding voting shares will constitute a quorum. No business may be transacted at any general meeting unless a quorum is present at the commencement of business.

        A corporation being a shareholder shall be deemed for the purpose of our amended and restated memorandum and articles of association to be present in person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting or at any relevant general meeting of any class of our shareholders. Such duly authorized representative shall be entitled to

127

Table of Contents

exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual shareholder.

        The quorum for a separate general meeting of the holders of a separate class of shares is described in "Modification of Rights" below.

Voting Rights Attaching to the Shares

        Subject to any special rights or restrictions as to voting then attached to any shares, at any general meeting every shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) shall have one vote per ordinary share. The holders of preferred shares shall have limited voting rights as set out in our amended and restated memorandum and articles of association.

        No shareholder shall be entitled to vote or be deemed to be part of a quorum, in respect of any share, unless such shareholder is registered as our shareholder at the applicable record date for that meeting and all calls or installments due by such shareholder to us, if any, have been paid.

        If a clearing house or depository (or its nominee(s)) is our shareholder, it may authorize such person or persons as it thinks fit to act as its representative(s) at any meeting or at any meeting of any class of shareholders, provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person authorized pursuant to this provision is entitled to exercise the same powers on behalf of the recognized clearing house or depositary (or its nominee(s)) as if such person was the registered holder of our shares held by that clearing house or depositary (or its nominee(s)), including the right to vote individually on a show of hands.

        While there is nothing under the laws of the Cayman Islands that specifically prohibits or restricts the creation of cumulative voting rights for the election of our directors, unlike the requirement under Delaware law that cumulative voting for the election of directors is permitted only if expressly authorized in the certificate of incorporation, it is not a concept that is accepted as a common practice in the Cayman Islands, and we have made no provisions in our amended and restated memorandum and articles of association to allow cumulative voting for such elections.

Protection of Minority Shareholders

        The Grand Court of the Cayman Islands may, on the application of shareholders holding not less than one fifth of our shares in issue, appoint an inspector to examine our affairs and report thereon in a manner as the Grand Court shall direct.

        Any shareholder may petition the Grand Court of the Cayman Islands which may make a winding up order, if the court is of the opinion that it is just and equitable that we should be wound up.

        Claims against us by our shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by our amended and restated memorandum and articles of association.

        Our Cayman Islands counsel, Maples and Calder, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) the company's officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be

128

Table of Contents

applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

•
a company is acting, or proposing to act, illegally or beyond the scope of its authority;

•
the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or

•
those who control the company are perpetrating a "fraud on the minority."

A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.

Pre-emption Rights

        There are no pre-emption rights applicable to the issue of new shares under either Cayman Islands law or our amended and restated memorandum and articles of association.

Liquidation Rights

        Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation applicable to any class or classes of shares (i) if we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu among our shareholders in proportion to the amount paid up at the commencement of the winding up on the shares held by them, respectively, and (ii) if we are wound up and the assets available for distribution among our shareholders as such are insufficient to repay the whole of the paid-up capital, those assets shall be distributed so that, as nearly as may be, the losses shall be borne by our shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them, respectively.

        If we are wound up, the liquidator may with the sanction of an ordinary resolution and any other sanction required by the Companies Law, divide among our shareholders in specie or kind the whole or any part of our assets (whether they shall consist of assets of the same kind or not) and may, for such purpose, set such value as the liquidator deems fair upon any assets to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may also, with the sanction of an ordinary resolution, vest any part of these assets in trustees upon such trusts for the benefit of our shareholders as the liquidator shall think fit, but so that no shareholder will be compelled to accept any assets, shares or other securities upon which there is a liability.

Modification of Rights

        Except with respect to share capital (as described below), alterations to our amended and restated memorandum and articles of association may only be made by special resolution of no less than two-thirds of votes cast at a meeting of our shareholders at which a quorum is present.

        Subject to the Companies Law and our amended and restated memorandum and articles of association, all or any of the special rights attached to shares of any class (unless otherwise provided for by the terms of issue of the shares of that class) may be varied, modified or abrogated with the sanction of a resolution passed by a majority of not less than two-thirds of the votes cast passed at a separate meeting of the holders of the shares of that class at which a quorum is present. The provisions of our amended and restated memorandum and articles of association relating to general meetings shall apply similarly to every such separate general meeting, but so that the quorum for the purposes of any such separate general meeting or at its adjourned meeting shall be a person or persons together

129

Table of Contents

holding (or represented by proxy) not less than a majority in nominal value of the issued shares of that class, every holder of shares of the class shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in person or by proxy may demand a poll.

        The special rights conferred upon the holders of any class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares with the same rights and privileges.

Alteration of Capital

        We may from time to time by ordinary resolution:

•
increase our capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe;

•
consolidate and divide all or any of our share capital into shares of larger amount than our existing shares;

•
cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of our share capital by the amount of the shares so cancelled, subject to the provisions of the Companies Law;

•
subdivide our shares or any of them into shares of a smaller amount than is fixed by our amended and restated memorandum and articles of association, subject to the Companies Law, and so that the resolution whereby any share is subdivided may determine that, as between the holders of the share resulting from such subdivision, one or more of the shares may have any such preference or other special rights over, or may have such deferred rights or be subject to any such restrictions as compared with, the others as we have power to attach to unissued or new shares; and

•
divide shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares, attach to the shares respectively as preferential, deferred, qualified or special rights, privileges, conditions or such restrictions which in the absence of any such determination in general meeting may be determined by our directors.

        We may, by special resolution, subject to any confirmation or consent required by the Companies Law, reduce our share capital or any capital redemption reserve in any manner authorized by law.

Transfer of Shares

        Subject to any applicable restrictions set forth in our amended and restated memorandum and articles of association, any of our shareholders may transfer all or a portion of their shares by an instrument of transfer in the usual or common form or in a form prescribed by the Nasdaq Global Market or in any other form which our directors may approve.

        Our directors may, in their absolute discretion, decline to register any transfer of shares, subject to any applicable requirements imposed from time to time by the U.S. Securities and Exchange Commission, the Nasdaq Global Market or any recognized stock exchange on which our securities are listed. If our directors refuse to register a transfer, they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.

        The registration of transfers may be suspended and the register closed at such times and for such periods as our directors may from time to time determine.

130

Table of Contents

Share Repurchase

        We are empowered by the Companies Law and our amended and restated memorandum and articles of association to purchase our own shares, subject to certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Law, our amended and restated memorandum and articles of association and to any applicable requirements imposed from time to time by the U.S. Securities and Exchange Commission, the Nasdaq Global Market or any recognized stock exchange on which our securities are listed.

Dividends

        Subject to the Companies Law, we may declare dividends in any currency to be paid to our shareholders but no dividend shall be declared in excess of the amount recommended by our directors. Dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits that our directors determine is no longer needed. Our board of directors may also declare and pay dividends out of the share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Law.

Governance Agreement

        Our Governance Agreement contains agreements relating to future acquisitions or dispositions and voting of our securities by GSK, and exempts GSK from triggering our Rights Agreement until December 31, 2017 (as further described under "Rights Agreement" below), among other matters. Except as otherwise noted below, the provisions of the Governance Agreement described below will terminate at the earliest of (i) when GSK beneficially owns 100% of our outstanding voting shares, (ii) the effective time of a change in control of us and (iii) December 31, 2017.

Voting Arrangements

        GSK has agreed to vote the voting shares held by them (at their election) either (i) in accordance with the recommendation of our independent directors or (ii) in proportion to the votes cast by the other holders of our voting shares; however, GSK can vote as it chooses on any matter involving:

•
any proposal to issue equity securities to one or more parties (other than in a public offering) that would result in that party or parties owning or having the right to acquire 20% or more of the aggregate voting power of all of our equity securities; or

•
a change in control of us.

In addition, for so long as GSK owns 50.1% or more of our voting share, it can also vote as it chooses on any matter involving:

•
an acquisition by us of any business or assets that would constitute a substantial portion of our business or our assets; or

•
the sale, lease, license, transfer or otherwise disposal of all or a substantial portion of our business or our assets (other than a sale, lease, license or transfer of assets in the ordinary course of the Company's business).

        If a person or group acquires 20% or more of our voting shares, GSK may vote its voting shares without any restrictions. GSK has granted an irrevocable proxy coupled with an interest in all voting shares owned by them to our Board of Directors. This proxy will enable the proxyholder to vote or otherwise act with respect to all of the voting shares of GSK in the manner required by the Governance Agreement.

131

Table of Contents

Limitations and Exceptions to Rights to Acquire Our Securities

Limitation on Acquisition of Our Equity Securities

        Except as expressly permitted by the Governance Agreement or as agreed to by us in writing following approval by a majority of our independent directors, GSK may not, directly or indirectly:

•
acquire any of our equity securities;

•
make or participate in any solicitation of proxies to vote from any holders of our equity securities;

•
form or participate in a group with any person not bound by the terms of the Governance Agreement (other than GSK's affiliates) with respect to any of our voting shares;

•
acquire any of our assets or rights to purchase any of our assets except for assets offered for sale by us;

•
enter into any arrangement or understanding with others to do any of the actions listed immediately above; or

•
act in concert with others to offer to us or any of our shareholders any business combination, restructuring, recapitalization or similar transaction involving us or otherwise seek in concert with others to control, change or influence the management, Board of Directors or our policies or nominate any person as a director who is not nominated by the then incumbent directors, or propose any matter to be voted upon by our shareholders.

Permitted Purchases of Our Equity Securities from Us

        GSK may acquire our equity securities from us in the following circumstances:

•
if we issue equity securities to a third party (other than equity awards issued as compensation to our directors, officers, employees or consultants), GSK may purchase all or a portion of the number of equity securities that would bring their percentage ownership of our voting shares to the same level that it was at immediately prior to the issuance of equity securities to the third party at the same price at which the equity securities were sold to the third party;

•
the purchase, on a quarterly basis, of equity securities comparable to those that are issued as compensation to our directors, officers, employees or consultants during the preceding quarter pursuant to option exercises, settlement of restricted stock unit awards and vesting of restricted stock, at the fair market value at the time of GSK's notification to us of its intention to purchase such equity securities that would bring their percentage ownership of our voting shares to the same level that it was at immediately prior to such issuances or vesting;

•
the acquisition of additional equity securities issued in connection with a share split or recapitalization; and

•
the purchase of equity securities for a pension plan or benefit plan for the benefit of GSK's employees.

Permitted Purchases of Equity Securities from Our Shareholders

        GSK may acquire our equity securities from our shareholders in the following circumstances:

•
the acquisition of securities of another biotechnology or pharmaceutical company that owns our equity securities (provided that those shares will be subject to the provisions of the Governance Agreement); or

132

Table of Contents

•
the making of an offer to acquire equity securities if (i) a person or group (other than GSK) acquires 20% or more of our voting shares or (ii) our Board of Directors formally takes certain actions to facilitate a change in control of us (other than with GSK), subject to the following conditions:

•
that the offer be an offer for 100% of our voting shares;

•
that the offer include no condition as to financing; and

•
that the offer includes a condition that the holders of a majority of the voting shares not owned by GSK accept the offer by tendering their shares or voting their shares in favor of the offer.

        The term "change in control" is referred to as (i) any transaction or series of related transactions (including mergers, consolidations and other forms of business consolidations) after which our continuing shareholders hold less than 50% of the outstanding voting securities of either us or the entity that survives the transaction (or the parent of the surviving entity) or (ii) subject to certain exceptions, the sale, lease, license, transfer or other disposal of all or substantially all of our business or assets other than to our majority owned and controlled subsidiaries.

        The term "equity securities" is referred to as (i) any of our voting shares, (ii) our securities convertible into or exchangeable for voting shares, and (iii) options, rights and warrants issued by us to acquire voting shares.

Limitation on Disposition of Our Equity Securities

        Prior to the date that is six months after the date of the Governance Agreement, GSK is only permitted to dispose of our voting shares (i) to any of its affiliates who agree to be bound by the terms and conditions of the Governance Agreement or (ii) in connection with a change in control of us that is approved by a majority of our directors. Also, pursuant to the Registration Rights Agreement, GSK agreed to be locked up for up to 90 days following our first underwritten public offering of our shares provided that such offering closes on or before the one-year anniversary of the spin-off.

Registration Rights Agreement

        The ordinary shares to be issued to GSK in the spin-off and following the spin-off will be entitled to the rights set forth in the Registration Rights Agreement by and between the Company and GSK, dated March 3, 2014 (the "Registration Rights Agreement"). The rights under the Registration Rights Agreement will expire on December 31, 2024, or if GSK or its permitted assigns each hold one and a half percent or less of our then outstanding ordinary shares, if each such holder can sell its shares in a single transaction pursuant to Rule 144 under the Securities Act.

Demand Registration Rights

        At any time following six months after the spin-off, under the Registration Rights Agreement, GSK and its permitted assigns have the right to require that we register their ordinary shares, provided such demand comes from holders of at least 50% of the aggregate shares held by GSK and its permitted assigns and such registration relates to ordinary shares having an anticipated aggregate offering price of $10 million. We are only obligated to effect one registration in response to these demand registration rights (subject to certain exceptions). We may postpone the filing of a registration statement for up to 90 days once in any 12-month period if our Board of Directors determines in good faith that the filing would be seriously detrimental to our shareholders or us. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all

133

Table of Contents

expenses, except for underwriters' discounts and commissions, incurred in connection with these demand registration rights.

Piggyback Registration Rights

        If we register any securities for public sale, under the Registration Rights Agreement GSK has the right to include its shares in the registration, subject to specified exceptions. The underwriters of any underwritten offering have the right to limit the number of shares registered by GSK and its permitted assigns (but to no less than 25% of the shares to be registered in such registration) due to marketing reasons. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these piggyback registration rights.

F-3 Registration Rights

        While we are eligible to file a registration statement on Form F-3, under the Registration Rights Agreement GSK and its permitted assigns can request that we register their shares, provided that such registration request is made by holders of not less than 10% in aggregate of GSK's and its permitted assigns shares and the total price of the ordinary shares offered to the public is at least $10 million. GSK and its permitted assigns may only require us to file two Form F-3 registration statements in any 12-month period. We may postpone the filing of a Form F-3 registration statement for up to 90 days once in any 12-month period if our Board of Directors determines in good faith that the filing would be seriously detrimental to our shareholders or us. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these F-3 registration rights.

Rights Agreement

        Under our rights agreement, each ordinary share has associated with it one preferred share purchase right. Each of these rights entitles its holder to purchase, at a price of $[        ] for each, one one-thousandth of a share of Series A junior participating preferred share, (each subject to adjustment) under circumstances provided for in the rights agreement. The purpose of our rights agreement is to:

•
give our board of directors the opportunity to negotiate with any persons seeking to obtain control of us;

•
deter acquisitions of voting control of us without assurance of fair and equal treatment of all of our shareholders; and

•
prevent a person from acquiring in the market a sufficient amount of voting power over us to be in a position to block an action sought to be taken by our shareholders.

        The exercise of the rights under our rights agreement would cause substantial dilution to a person attempting to acquire us on terms not approved by our board of directors, and therefore would significantly increase the price that such person would have to pay to complete the acquisition. Our rights agreement may deter a potential acquisition or tender offer. Until a "distribution date" occurs, the rights will:

•
not be exercisable;

•
be represented in the same book-entry form or by the same certificate that represents the shares with which the rights are associated; and

•
trade together with those shares.

        The rights will expire at the close of business on        , unless earlier redeemed or exchanged by us. Following a "distribution date," the rights would become exercisable and we would issue separate

134

Table of Contents

certificates representing the rights, which would trade separately from the shares of our common stock. A "distribution date" would occur upon the earlier of:

•
ten business days after a public announcement that the person has become an "acquiring person;" or

        A holder of rights will not, as such, have any rights as a shareholder, including the right to vote or receive dividends.

        Under our rights agreement, a person becomes an "acquiring person" if the person, alone or together with a group, acquires beneficial ownership of 19% or more of the outstanding shares of our common stock. GSK is not an "acquiring person" because we have, pursuant to our governance agreement with GSK, exempted GSK from the application of our rights agreement. In addition, an "acquiring person" shall not include us, any of our subsidiaries, or any of our employee benefit plans or any person or entity acting pursuant to such employee benefit plans. Our rights agreement also contains provisions designed to prevent the inadvertent triggering of the rights by institutional or certain other shareholders.

        If any person becomes an acquiring person, each holder of a right, other than the acquiring person, will be entitled to purchase, at the purchase price, a number of our [ordinary shares] having a market value of two times the purchase price. If, following a public announcement that a person has become an acquiring person:

•
we merge or enter into any similar business combination transaction and we are not the surviving corporation; or

•
50% or more of our assets, cash flow or earning power is sold or transferred,

each holder of a right, other than the acquiring person, will be entitled to purchase a number of ordinary shares of the surviving entity having a market value of two times the purchase price.

        After a person becomes an acquiring person, but prior to such person acquiring 50% of our outstanding ordinary shares, our board of directors may exchange each right, other than rights owned by the acquiring person, for

•
one ordinary share;

•
one one-thousandth of a share of our Series A junior preferred share; or

•
a fractional share of another series of preferred share having equivalent value.

        At any time until a person has become an acquiring person, our board of directors may redeem all of the rights at a redemption price of $[0.01] per right. On the redemption date, the rights will expire and the only entitlement of the holders of rights will be to receive the redemption price.

        [For so long as the rights are redeemable, our board of directors may amend any provisions in the rights agreement without stockholder consent. After the rights are no longer redeemable, our board of directors may only amend the rights agreement without stockholder consent if such amendment would not change the amendment provisions, adversely affect the interests of the holders of rights, or cause the rights to again become redeemable. Despite the foregoing, at no time may the redemption price of the rights be amended or changed.]

        The adoption of the rights agreement and the distribution of the rights should not be taxable to our shareholders or us. Our shareholders may recognize taxable income when the rights become exercisable in accordance with the rights agreement.

135

Table of Contents

Differences in Corporate Law

        The Companies Law is modeled after similar laws in the United Kingdom but does not follow recent changes in United Kingdom laws. In addition, the Companies Law differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.

Mergers and Similar Arrangements

        The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies.

        For these purposes, (a) "merger" means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a "consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company and such other authorization, if any, as may be specified in such constituent company's articles of association. The plan must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette.

        Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

        In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement in question is approved by a majority in number representing 75% in value of each class of shareholders and creditors with whom the arrangement is to be made that are present and voting either in person or by proxy at a meeting, or meetings convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not be approved, the court can be expected to approve the arrangement if it satisfies itself that:

•
we are not proposing to act illegally or ultra vires and the statutory provisions as to majority vote have been complied with;

•
the shareholders have been fairly represented at the meeting in question;

•
the arrangement is such as a businessman would reasonably approve; and

•
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law or that would amount to a "fraud on the minority."

        When a takeover offer is made and accepted by holders of at least 90% of the shares within four months, the offeror may, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection may be made to the Grand Court of the Cayman Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

136

Table of Contents

        If the arrangement and reconstruction are thus approved, any dissenting shareholders would have no rights comparable to appraisal rights, which might otherwise ordinarily be available to dissenting shareholders of U.S. corporations and allow such dissenting shareholders to receive payment in cash for the judicially determined value of their shares.

Shareholders' Suits

        We are not aware of any reported class action or derivative action having been brought in a Cayman Islands court. However, a class action suit could nonetheless be brought in a U.S. court pursuant to an alleged violation of U.S. securities laws and regulations. Our Cayman Islands counsel, Maples and Calder, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, the company will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) the company's officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

•
a company is acting, or proposing to act, illegally or beyond the scope of its authority;

•
the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or

•
those who control the company are perpetrating a "fraud on the minority."

A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.

Corporate Governance

        Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe fiduciary duties to the companies for which they serve. Under our amended and restated memorandum and articles of association, subject to any separate requirement for audit committee approval under the applicable rules of the Nasdaq Global Market or unless disqualified by the chairman of the relevant board meeting, so long as a director discloses the nature of his interest in any contract or arrangement which he is interested in, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.

Board of Directors

        We are managed by our board of directors. Our amended and restated memorandum and articles of association will provide that the number of our directors will be fixed from time to time by our board of directors but may not consist of less than three or more than 15 directors. Each director holds office until the expiration of his or her term in accordance with the terms of our amended and restated memorandum and articles of association, until his or her successor has been duly elected and qualified or until his or her death, resignation or removal. Our directors may only be removed for cause by our board of directors. Any vacancies on our board of directors or additions to the existing board of directors can only be filled by the affirmative vote of a simple majority of the remaining directors, although this may be less than a quorum. Any director so appointed by the board of directors shall hold office only for the remaining term of the class of director which he or she replaces and shall then be eligible for re-election. Our directors are not required to hold any of our shares to be qualified to serve on our board of directors.

137

Table of Contents

        Meetings of our board of directors may be convened at any time deemed necessary by our secretary on request of the chairman of our board of directors, our chief executive officer, if not the chairman of our board of directors, or a majority of our board of directors. Advance notice of a meeting is not required if each director entitled to attend consents to the holding of such meeting.

Issuance of Additional Ordinary Shares or Preferred Shares

        Our amended and restated memorandum and articles of association authorize our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent available, authorized but unissued shares. The issuance of additional ordinary shares may, subject to applicable law, be used as an anti-takeover device without further action on the part of our shareholders. Such issuance may dilute the voting power of existing holders of ordinary shares.

        Our board of directors may authorize by resolution or resolutions from time to time the issuance of one or more classes or series of preferred shares and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of any such class or series (but not below the number of shares of any class or series of preferred shares then outstanding) to the extent permitted by applicable law. The resolution or resolutions providing for the establishment of any class or series of preferred shares may, to the extent permitted by applicable law, provide that such class or series shall be superior to, rank equally with or be junior to the preferred shares of any other class or series. Additionally, the issuance of preference shares may have the effect of decreasing the market price of the ordinary shares and may adversely affect the voting and other rights of the holders of ordinary shares.

        Our board of directors may issue series of preferred shares without action by our shareholders to the extent authorized but unissued. Accordingly, the issuance of preferred shares may adversely affect the enjoyment of the rights of the holders of our ordinary shares. In addition, the issuance of preferred shares may be used as an anti-takeover device without further action on the part of our shareholders, subject to applicable law. Issuance of preferred shares may dilute the voting power of holders of ordinary shares.
No Dissenters' Rights

        Shareholders of Theravance Biopharma are not entitled to appraisal or dissenters' rights with respect to the spin-off under Cayman Islands law or our amended and restated memorandum and articles of association.
Indemnification of Directors and Officers

        Cayman Islands law does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of directors and officers, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. The registrant's amended and restated memorandum and articles of association provide for indemnification of directors and officers for actions, costs, charges, losses, damages and actual expenses incurred in their capacities as such, except that such indemnification does not extend to any matter in respect of any actual fraud or willful default that may attach to any of them.

        We expect to enter into indemnification agreements with our directors and officers providing for indemnification to the fullest extent permitted by Cayman Islands law and, in certain respects, the

138

Table of Contents

indemnification agreements may provide greater protection than that specifically provided for by Cayman Islands law. The indemnification agreements will not provide indemnification for, among other things, conduct which is found to be knowingly fraudulent or deliberately dishonest, or for willful misconduct. We also intend to obtain policies that insure our directors and officers against certain liabilities they may incur in their capacity as directors and officers. Under these policies, the insurer, on our behalf, may pay amounts for which we have granted indemnification to the directors or officers.
Related Person Transactions

        Following Theravance's distribution of our ordinary shares to Theravance's stockholders, we will have a continuing relationship with Theravance as a result of the agreements we are entering into in connection with the distribution, including the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, and the Tax Matters Agreement. For a detailed discussion of each of these agreements, please see "Our Relationship with Theravance, Inc. after the Spin-Off."

Procedures for Approval of Related Person Transactions

        The Audit Committee will establish procedures for the review, approval or ratification of related party transactions. We expect that pursuant to these procedures, the Audit Committee will review and approve (i) all related party transactions when and if required to do so by applicable rules and regulations, (ii) all transactions between us and any of our executive officers, directors, director nominees, directors emeritus or any of their immediate family members and (iii) all transactions between us and any security holder who is known by us to own of record or beneficially more than 5% of any class of our voting securities, other than transactions that (a) have an aggregate dollar amount or value of less than $120,000 (either individually or in combination with a series of related transactions) and (b) are made in the ordinary course of business of our company and such related party. See "Board of Directors—Board Committees—Review and Approval of Transactions with Related Persons."
Distribution of Information Statement

        We will pay the costs of distributing this Information Statement. The distribution will be made by mail.
Where to Obtain More Information

        We have filed with the SEC a registration statement on Form 10 under the Exchange Act the ordinary shares being issued to you in the distribution of our ordinary shares. This Information Statement, filed as an exhibit to the registration statement and incorporated therein by reference, omits certain information contained in the registration statement and the other exhibits and schedules thereto, to which reference is hereby made. Statements contained herein concerning the provisions of any documents filed as exhibits to the registration statement are not necessarily complete, and are qualified by reference to the copy of such document. The registration statement, including exhibits and schedules filed therewith, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of such materials may be obtained at prescribed rates by writing to the SEC. The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.

        We are not currently subject to the informational requirements of the Exchange Act. Following the distribution, we will be subject to such informational requirements, and in accordance therewith, we will file reports, proxy and Information Statements and other information with the SEC. Such reports, proxy

139

Table of Contents

and Information Statements and other information can be inspected and copied at the address set forth above. We intend to furnish our shareholders with annual reports containing financial statements audited by our independent accountants and quarterly reports for the first three quarters of each fiscal year containing unaudited summary financial information.

        We will maintain an Internet site at                            , which we expect to be operational on or before the date that the Form 10 is declared effective. Our website and the information contained on that site, or connected to that site, are not incorporated into this Information Statement or the registration statement on Form 10.

140

Table of Contents
INDEX TO COMBINED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	 	F-2	
Combined Balance Sheets as of December 31, 2012 and 2013	 	F-3	
Combined Statements of Operations and Comprehensive Loss for the years ended December 31, 2011, 2012 and 2013	 	F-4	
Combined Statements of Changes in Parent Company Deficit for the years ended December 31, 2011, 2012 and 2013	 	F-5	
Combined Statements of Cash Flows for the years ended December 31, 2011, 2012 and 2013	 	F-6	
Notes to Combined Financial Statements	 	F-7	
F-1

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholder
Theravance Biopharma, Inc.

        We have audited the accompanying combined balance sheets of Theravance Biopharma, Inc. (the "Company") (the Drug Discovery and Development Business of Theravance, Inc.) as of December 31, 2012 and 2013, and the combined statements of operations and comprehensive loss, changes in parent company deficit, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Company at December 31, 2012 and 2013, and the combined results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Redwood City, California
April 8, 2014

F-2

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

COMBINED BALANCE SHEETS

(In thousands)

 
	 	December 31,	 	
 
	 	2012	 	2013	 	
ASSETS	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	
Accounts receivable, net of allowances of $0 and $89 at December 31, 2012 and 2013, respectively	 	$	—	 	$	199	 	
Receivables from collaborative arrangements	 	 	941	 	 	934	 	
Notes receivable, current	 	 	100	 	 	140	 	
Inventories	 	 	7,514	 	 	10,406	 	
Prepaid and other current assets	 	 	2,280	 	 	2,427	 	
 	 	 	 	 	 	
Total current assets	 	 	10,835	 	 	14,106	 	
Restricted cash	 	 	833	 	 	833	 	
Property and equipment, net	 	 	9,154	 	 	10,238	 	
Notes receivable, non-current	 	 	140	 	 	—	 	
 	 	 	 	 	 	
TOTAL ASSETS	 	$	20,962	 	$	25,177	 	
 	 	 	 	 	 	
LIABILITIES AND PARENT COMPANY DEFICIT	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable	 	$	5,225	 	$	6,940	 	
Accrued personnel-related expenses	 	 	7,974	 	 	9,870	 	
Accrued clinical and development expenses	 	 	6,550	 	 	9,714	 	
Other accrued liabilities	 	 	1,804	 	 	2,122	 	
Deferred revenue, current	 	 	1,119	 	 	8,207	 	
 	 	 	 	 	 	
Total current liabilities	 	 	22,672	 	 	36,853	 	
Deferred rent	 	 	5,074	 	 	4,774	 	
Deferred revenue, non-current	 	 	206	 	 	585	 	
 	 	 	 	 	 	
Total liabilities	 	 	27,952	 	 	42,212	 	
 	 	 	 	 	 	
Commitments and contingencies (Notes 3, 5 and 7)	 	 	 	 	 	 	 	
Parent company deficit	 	 	(6,990	)	 	(17,035	)	
 	 	 	 	 	 	
TOTAL LIABILITIES AND PARENT COMPANY DEFICIT        	 	$	20,962	 	$	25,177	 	

See accompanying notes to combined financial statements.

F-3

Table of Contents
THERAVANCE BIOPHARMA INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands)

 
	 	Year Ended December 31,	 	
 
	 	2011	 	2012	 	2013	 	
Revenue	 	$	14,854	 	$	130,145	 	$	226	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	98,850	 	 	113,995	 	 	120,579	 	
Selling, general and administrative	 	 	25,339	 	 	25,725	 	 	35,931	 	
 	 	 	 	 	 	 	 	
Total operating expenses	 	 	124,189	 	 	139,720	 	 	156,510	 	
 	 	 	 	 	 	 	 	
Net and comprehensive loss	 	$	(109,335	)	$	(9,575	)	$	(156,284	)	

See accompanying notes to combined financial statements.

F-4

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

COMBINED STATEMENTS OF CHANGES IN PARENT COMPANY DEFICIT

(In thousands)

 
	 	Changes in Parent
Company Deficit	 	
Balance as of December 31, 2010	 	$	(139,538	)	
Net loss	 	 	(109,335	)	
Parent allocation—stock-based compensation	 	 	21,463	 	
Transfers from parent company	 	 	86,686	 	
 	 	 	 	
Balance as of December 31, 2011	 	 	(140,724	)	
Net loss	 	 	(9,575	)	
Parent allocation—stock-based compensation	 	 	21,703	 	
Transfers from parent company	 	 	121,606	 	
 	 	 	 	
Balance as of December 31, 2012	 	 	(6,990	)	
Net loss	 	 	(156,284	)	
Parent allocation—stock-based compensation	 	 	22,646	 	
Transfers from parent company	 	 	123,593	 	
 	 	 	 	
Balance as of December 31, 2013	 	$	(17,035	)	

See accompanying notes to combined financial statements.

F-5

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

 
	 	Year Ended December 31,	 	
 
	 	2011	 	2012	 	2013	 	
CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(109,335	)	$	(9,575	)	$	(156,284	)	
Adjustments to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	3,844	 	 	3,251	 	 	2,653	 	
Stock-based compensation	 	 	21,463	 	 	21,323	 	 	22,476	 	
Loss on disposal of equipment	 	 	—	 	 	196	 	 	20	 	
Forgiveness of notes receivable	 	 	16	 	 	—	 	 	—	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	—	 	 	—	 	 	(199	)	
Receivables from collaborative arrangements        	 	 	1,303	 	 	(617	)	 	7	 	
Inventories	 	 	1,709	 	 	(4,822	)	 	(3,101	)	
Prepaid and other current assets	 	 	(548	)	 	(388	)	 	19	 	
Accounts payable	 	 	3,312	 	 	(1,532	)	 	2,113	 	
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities	 	 	5,355	 	 	(1,702	)	 	4,170	 	
Deferred rent	 	 	2,429	 	 	(747	)	 	(300	)	
Deferred revenue	 	 	(12,976	)	 	(124,494	)	 	7,467	 	
 	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	(83,428	)	 	(119,107	)	 	(120,959	)	
 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
Purchases of property and equipment	 	 	(3,627	)	 	(2,590	)	 	(2,734	)	
Release of restricted cash	 	 	—	 	 	60	 	 	—	 	
Issuance of notes receivable	 	 	(140	)	 	(140	)	 	—	 	
Payments received on notes receivable	 	 	715	 	 	240	 	 	100	 	
 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	(3,052	)	 	(2,430	)	 	(2,634	)	
 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
Payments on note payable and capital leases          	 	 	(206	)	 	(69	)	 	—	 	
Transfers from parent company	 	 	86,686	 	 	121,606	 	 	123,593	 	
 	 	 	 	 	 	 	 	
Net cash provided by financing activities          	 	 	86,480	 	 	121,537	 	 	123,593	 	
 	 	 	 	 	 	 	 	
CHANGE IN CASH AND CASH EQUIVALENTS	 	 	—	 	 	—	 	 	—	 	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	 	$	—	 	$	—	 	$	—	 	

See accompanying notes to combined financial statements.

F-6

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Description of Operations

        In April 2013, Theravance, Inc. ("Theravance") announced its intent to spin off its drug discovery and development business which is focused on discovery, development and commercialization of small-molecule medicines in areas of significant unmet medical need ("Drug Discovery and Development Business") from its development and commercial responsibilities under the 2002 collaboration agreement and the 2004 strategic alliance agreement, each with Glaxo Group Limited, (which we refer to, together with its affiliates, as "GSK") and associated potential royalty revenues from RELVAR® ELLIPTA®/BREO® ELLIPTA™ (fluticasone furoate/vilanterol: FF/VI), ANORO™ ELLIPTA™ (umeclidinium bromide/vilanterol: UMEC/VI) and vilanterol monotherapy.

        If the spin-off is completed, the result will be two independent, publicly traded companies with different business models enabling investors to align their investment philosophies with the strategic opportunities and financial objectives of the two independent companies: the drug discovery and development business and the royalty business. To effect the spin-off, Theravance plans to distribute as a dividend to its stockholders, one ordinary share of Theravance Biopharma, Inc. ("Theravance Biopharma" or "we", "us", "our", and "Company") for every     shares of Theravance common stock outstanding on the record date for the dividend.

        In connection with and prior to the spin-off, Theravance incorporated Theravance Biopharma in July 2013 as a Cayman Islands exempted company for the purpose of transferring to Theravance Biopharma the Drug Discovery and Development Business and completing the spin-off. Theravance Biopharma has formed two or more wholly-owned Cayman Islands subsidiaries to hold most of the assets received from Theravance and a wholly-owned Delaware subsidiary that will employ most of the Theravance employees that become employees of the Drug Discovery and Development Business.

        Prior to the spin-off, the Drug Discovery and Development Business was not organized in a separate legal entity and a direct ownership relationship did not exist among all the components comprising the Drug Discovery and Development Business. Theravance's investment in the Drug Discovery and Development Business is shown in lieu of stockholders' equity in the combined financial statements.

        Theravance Biopharma is a biopharmaceutical company with a pipeline of internally discovered product candidates, strategic collaborations with pharmaceutical companies and an approved product. The Company is focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including bacterial infections, central nervous system ("CNS")/pain, respiratory disease, and gastrointestinal ("GI") motility dysfunction. We also have an economic interest in future payments that may be made by GSK under prior Theravance agreements relating to certain drug programs, including UMEC/VI/FF and the MABA program, as monotherapy with GSK961081 ('081) and as a combination ('081/FF).

        In connection with the spin-off, the Theravance board of directors is expected to approve a series of agreements, including a separation and distribution agreement, transition services agreement, employee matters agreement, and tax matters agreement between Theravance Biopharma and Theravance which will provide for the transfer of certain assets and liabilities relating to the businesses previously conducted by Theravance to Theravance Biopharma and its wholly-owned subsidiaries and will establish contractual arrangements between Theravance and Theravance Biopharma and its wholly-owned subsidiaries. Theravance will continue to own the royalty patents and the related business ("Royalty Business").

F-7

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

1. Description of Operations (Continued)

Formation of Theravance Respiratory Company LLC

        Prior to the spin-off, Theravance will form Theravance Respiratory Company LLC ("TRC"), a Delaware limited liability company, and assign to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA™, ANORO™ ELLIPTA™ and vilanterol monotherapy.

        The Company's equity interest in TRC will entitle it to an 85% economic interest in any future payments made by GSK under the strategic alliance agreement with GSK and under the portion of the collaboration agreement with GSK assigned to TRC. The drug programs assigned to TRC include 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 these GSK agreements. The Company's economic interest will not include any payments associated with RELVAR® ELLIPTA®/BREO® ELLIPTA™, ANORO™ ELLIPTA™ and vilanterol monotherapy.

Basis of Presentation

        The accompanying combined financial statements have been prepared using Theravance's historical cost basis of the assets and liabilities of the various activities that comprise the Drug Discovery and Development Business of Theravance and reflect the combined results of operations, financial condition and cash flows of Theravance Biopharma as a wholly-owned subsidiary of Theravance in conformity with U.S. generally accepted accounting principles ("GAAP"). The various assets, liabilities, revenues and expenses associated with Theravance have been allocated to the historical combined financial statements of Theravance Biopharma in a manner expected to be consistent with the separation and distribution agreement. Changes in parent company deficit represent Theravance's net investment in Theravance Biopharma, after giving effect to Theravance Biopharma's net loss, parent company expense allocations, and net cash transfers to and from Theravance.

        For purposes of preparing combined financial statements, the Drug Discovery and Development Business was derived from Theravance's historical consolidated financial statements, allocations of revenues, research and development expenses, and non-operating income and expenses to Theravance Biopharma were made on a specific identification basis. For purposes of allocating general and administrative expenses from Theravance's historical consolidated financial statements, costs directly related to the Drug Discovery and Development Business were allocated to Theravance Biopharma on a specific identification basis or based on the substance of the underlying effort. Theravance Biopharma's general and administrative expenses also include allocations of Theravance's general corporate overhead expenses, including finance, legal, human resources, information technology and other administrative functions. These allocations of general corporate overhead expenses were primarily based on the substance of the underlying effort or an estimated number of full-time employees that worked with the Drug Discovery and Development Business. The combined balance sheets of Theravance Biopharma include assets and liabilities that were allocated to Theravance Biopharma principally on a specific identification basis.

        Management believes that the combined statements of operations and comprehensive loss include a reasonable allocation of costs incurred by Theravance which benefited Theravance Biopharma. However, such expenses may not be indicative of the actual level of expense that would have been

F-8

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

1. Description of Operations (Continued)

incurred by Theravance Biopharma if it had operated as an independent, publicly traded company or of the costs expected to be incurred in the future. As such, the financial information herein may not necessarily reflect the financial position, results of operations, and cash flows of Theravance Biopharma in the future or what it would have been had Theravance Biopharma been an independent, publicly traded company during the periods presented.

        As Theravance Biopharma was not a separate legal entity until July 2013, no separate cash accounts for the Drug Discovery and Development Business were historically maintained and, therefore, Theravance is presumed to have funded Theravance Biopharma's operating, investing and financing activities as necessary. For purposes of the historical combined financial statements, funding of Theravance Biopharma's expenditures is reflected in the combined financial statements as a component of parent company deficit. In connection with the asset transfer and spin-off discussed above, Theravance will provide Theravance Biopharma cash and cash equivalents of approximately $300 million. In addition, under the terms of the separation and distribution agreement between Theravance and Theravance Biopharma, Theravance is responsible for all operating expenses and related liabilities that were incurred prior to the spin-off. However, for ease of administration and in connection with the assignment of certain rights and obligations from Theravance to Theravance Biopharma under the separation and distribution agreement, Theravance Biopharma will assume the obligation to pay for certain of the current liabilities upon the spin-off. Theravance and Theravance Biopharma will determine the amount of such current liabilities in accordance with the separation and distribution agreement within 30 business days after the date of the spin-off, and Theravance will deliver to Theravance Biopharma a payment to reimburse Theravance Biopharma for assuming the obligation to pay such liabilities.

        The Company describes the Theravance Biopharma business transferred to it by Theravance in connection with the spin-off as though it was the Company's business for all historical periods described. However, Theravance Biopharma is a newly-formed entity that has not conducted any operations prior to the spin-off and some of the actions necessary to transfer assets and liabilities of Theravance to the Company have not yet occurred, but will occur before the effectiveness of the spin-off. References in combined financial statements to the historical assets, liabilities, products, business or activities of the Company's business are intended to refer to the historical assets, liabilities, products, business or activities of Theravance Biopharma as those were conducted as part of Theravance prior to the spin-off.

Use of Management's Estimates

        The preparation of combined financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, management evaluates its significant accounting policies and estimates. Management based its estimates on historical experience and other relevant assumptions that management believes to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

F-9

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies

Segment Reporting

        The Company has determined that it operates in a single segment which is the discovery (research), development and commercialization of human therapeutics. Revenues are generated primarily from the Company's collaboration agreements with Astellas Pharma Inc. ("Astellas") (through January 2012), located in Japan, and Merck (which agreement terminated in December 2013) located in the United States. All long-lived assets, which were comprised of property and equipment, are maintained in the United States.

Restricted Cash

        Under certain lease agreements and letters of credit, the Company has pledged cash as collateral. Restricted cash related to such agreements was $0.8 million as of December 31, 2012 and 2013.

Accounts Receivable

        Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government rebate programs, cash discounts for prompt payment and sales returns. Estimates for wholesaler chargebacks for government rebates, cash discounts and sales returns are based on contractual terms, historical trends and the Company's expectations regarding the utilization rates for these programs. When appropriate, the Company records an allowance for doubtful accounts based upon its assessment of collectability. For the year ended December 31, 2013, the Company did not have any write-offs of accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

Concentration of Credit and Other Risks

        Accounts receivable at December 31, 2013, represent amounts due to the Company from distributors. The following table summarizes accounts receivable, net at December 31, 2013 by distributor:
 	 	 	 	 	 	 	 	
Distributor	 	Accounts
Receivable
(In thousands)	 	Percentage of
Total Accounts
Receivable
Balance	 	
McKesson Corporation	 	$	132	 	 	66	%	
AmerisourceBergen Drug Corporation	 	 	66	 	 	33	 	
Others	 	 	1	 	 	1	 	
 	 	 	 	 	 	
Total	 	$	199	 	 	100	%	
 	 	 	 	 	 	
        The Company depends on a single-source supplier of the active pharmaceutical ingredient (API) in VIBATIV® and one supplier to provide fill-finish services related to the manufacturing of VIBATIV®. If any of the Company's suppliers were to limit or terminate production or otherwise fail to meet the quality or delivery requirements needed to supply VIBATIV® at levels to meet market demand, the Company could experience a loss of revenue, which could materially and adversely impact its results of operations.

F-10

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

        Financial instruments include restricted cash, accounts receivable, accounts payable, and accrued liabilities. The carrying value of these instruments approximates their estimated fair value due to the relatively short-term nature of these instruments.

Notes Receivable

        The Company provided loans to certain employees to assist them primarily with the purchase of a primary residence, which collateralize the resulting loans. There was no interest receivable related to the loans as of December 31, 2012 and 2013. As of December 31, 2013, there remains one outstanding loan with a maturity date of May 2014.

Inventories

        Inventories consist of raw materials, work-in-process and finished goods related to the production of VIBATIV® (telavancin). Raw materials include the VIBATIV® API and other raw materials. Work-in-process and finished goods include third party manufacturing costs and labor and indirect costs the Company incurred in the production process. Included in inventories are raw materials and work-in-process that may be used as clinical products, which are charged to research and development expense when consumed. In addition, under certain commercialization agreements, the Company may sell VIBATIV® packaged in unlabeled vials that are recorded in work-in-process.

        Inventories are stated at the lower of cost or market value. The Company determines the cost of inventory using the average-cost method for validation batches. The Company analyzes its inventory levels quarterly and writes down any inventory that is expected to become obsolete, that has a cost basis in excess of its expected net realizable value or for inventory quantities in excess of expected requirements.

        Inventories are summarized as follows:

	 	December 31,	 	
(in thousands)
	 	2012	 	2013	 	
Raw materials	 	$	5,668	 	$	5,138	 	
Work-in-process	 	 	1,846	 	 	360	 	
Finished goods	 	 	—	 	 	4,908	 	
 	 	 	 	 	 	
Total inventories	 	$	7,514	 	$	10,406	 	
 	 	 	 	 	 	
Property and Equipment

        Property, equipment and leasehold improvements are stated at cost and depreciated using the straight-line method as follows:
 	 	 	
Leasehold improvements	 	Shorter of remaining lease terms or useful life	
Equipment, furniture and fixtures	 	5 - 7 years	
Software and computer equipment	 	3 years	
F-11

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Capitalized Software

        The Company capitalizes certain costs related to direct material and service costs for software obtained for internal use. Capitalized software costs are depreciated over three years.

Impairment of Long-Lived Assets

        Long-lived assets include property and equipment. The carrying value of long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

Bonus Accruals

        Theravance has short-term bonus programs for eligible Theravance Biopharma employees. Bonuses are determined based on various criteria, including the achievement of corporate, departmental and individual goals. Bonus accruals are estimated based on various factors, including target bonus percentages per level of employee and probability of achieving the goals upon which bonuses are based.

        In 2011, Theravance granted special long-term retention and incentive cash bonus awards to certain employees. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. As of December 31, 2013, Theravance's management determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized.

Deferred Rent

        Deferred rent consists of the difference between cash payments and the recognition of rent expense on a straight-line basis for the buildings the Company occupies. Rent expense is being recognized ratably over the life of the leases. Because the Company's facility operating leases provide for rent increases over the terms of the leases, average annual rent expense during the first 1.5 years of the leases exceeded the Company's actual cash rent payments. Also included in deferred rent are lease incentives of $2.6 million as of December 31, 2013, which is being recognized ratably over the life of the leases.

Revenue Recognition

        Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the nature of the fee charged for products or services delivered and the collectability of those fees. Where the revenue recognition criteria are not met, the Company defers the recognition of revenue by recording deferred revenue until such time that all criteria are met.

F-12

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Collaborative Arrangements and Multiple-Element Arrangements

        Revenue from nonrefundable, up-front license or technology access payments under license and collaborative arrangements that are not dependent on any future performance by the Company is recognized when such amounts are earned. If the Company has continuing obligations to perform under the arrangement, such fees are recognized over the estimated period of continuing performance obligation.

        The Company accounts for multiple element arrangements, such as license and development agreements in which a customer may purchase several deliverables, in accordance with Financial Accounting Standards Board ("FASB") Subtopic ASC 605-25, "Multiple Element Arrangements". For new or materially amended multiple element arrangements, the Company identified the deliverables at the inception of the arrangement and each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. The Company allocates revenue to each non-contingent element based on the relative selling price of each element. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence (VSOE) of selling price, if it exists, or third-party evidence (TPE) of selling price, if it exists. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses the best estimated selling price for that deliverable. Revenue allocated to each element is then recognized based on when the basic four revenue recognition criteria are met for each element.

        For multiple-element arrangements entered into prior to January 1, 2011, the Company's management determined the deliverables under its collaborative arrangements which did not meet the criteria to be considered separate accounting units for the purposes of revenue recognition. As a result, the Company recognized revenue from non-refundable, upfront fees and development contingent payments ratably over the term of its performance under the agreements. These upfront or contingent payments received, pending recognition as revenue, are recorded as deferred revenue and are classified as a short-term or long-term liability on the Company's combined balance sheets and amortized over the estimated period of performance. The Company periodically reviews the estimated performance periods of its contracts based on the progress of its programs.

        Where a portion of non-refundable upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue or as an accrued liability and recognized as a reduction of research and development expenses ratably over the term of its estimated performance period under the agreement. The Company's management determines the estimated performance periods, and they are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated performance period and, therefore revenue recognized, would occur on a prospective basis in the period that the change was made.

        Under certain collaborative arrangements, the Company has been reimbursed for a portion of its research and development expenses. These reimbursements have been reflected as a reduction of research and development expense in the Company's combined statements of operations, as the

F-13

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Company does not consider performing research and development services to be a part of its ongoing and central operations. Therefore, the reimbursement of research and developmental services and any amounts allocated to the Company's research and development services are recorded as a reduction of research and development expense.

        Amounts deferred under a collaborative arrangement in which the performance obligations are terminated will result in an immediate recognition of any remaining deferred revenue and accrued liability in the period that termination occurred, provided that all performance obligations have been satisfied.

        The Company accounts for contingent payments in accordance with FASB Subtopic ASC 605-28 "Revenue Recognition—Milestone Method". The Company recognizes revenue from milestone payments when (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement and (ii) the Company does not have ongoing performance obligations related to the achievement of the milestone. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment (a) is commensurate with either the Company's performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the Company's performance to achieve the milestone, (b) relates solely to past performance, and (c) is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. See Note 3, "Collaborative Arrangements," for analysis of each milestone event deemed to be substantive or non-substantive.

        In accordance with FASB Subtopic ASC 808-10, "Collaborative Arrangements," and pursuant to the Company's agreement with Astellas, the Company recognized as revenue the net impact of transactions with Astellas related to VIBATIV® inventories including revenue specifically attributable to any sales, and cost of inventories either transferred or expensed as unrealizable.

Product Revenues

        The Company sells VIBATIV® in the U.S. through a limited number of distributors, and title and risk of loss transfer upon receipt by these distributors. Healthcare providers order VIBATIV® through these distributors. For all product shipped in 2013, the Company deferred the recognition of revenue until the product is sold through to healthcare providers, the end customers, due to the inherent uncertainties in estimating normal channel inventory at the distributors, and during which period the Company also provided extended payment terms and expanded return rights that allow distributors to return the product. As of December 31, 2013, the Company had deferred revenue of $0.9 million related to VIBATIV® shipments included in current liabilities in the combined balance sheet.

F-14

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

        Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. The Company reflects such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management's estimates that consider payer mix in target markets, industry benchmarks and experience to date. The Company monitors inventory levels in the distribution channel, as well as sales of VIBATIV® by distributors to healthcare providers, using product-specific data provided by the distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of the Company's agreements with customers, historical product returns of VIBATIV® experienced by Astellas, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. The Company updates its estimates and assumptions each quarter and if actual future results vary from the Company's estimates, the Company may adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment.

        Sales Discounts:    The Company offers cash discounts to its customers, generally 2% of the sales price, as an incentive for prompt payment. The Company expects its customers to comply with the prompt payment terms to earn the cash discount. The Company accounts for cash discounts by reducing accounts receivable by the full amount and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized.

        Chargebacks and Government Rebates:    For VIBATIV® sales in the U.S., the Company estimates reductions to product sales for qualifying federal and state government programs including discounted pricing offered to Public Health Service (PHS) as well as government-managed Medicaid programs. The Company's reduction for PHS is based on actual chargebacks that distributors have claimed for reduced pricing offered to such health care providers. The Company's accrual for Medicaid is based upon statutorily-defined discounts, estimated payer mix, expected sales to qualified healthcare providers, and the Company's expectation about future utilization. The Medicaid accrual and government rebates that are invoiced directly to the Company are recorded in other accrued liabilities on the combined balance sheet. For qualified programs that can purchase the Company's products through distributors at a lower contractual government price, the distributors charge back to the Company the difference between their acquisition cost and the lower contractual government price, which the Company records as an allowance against accounts receivable.

        Distribution Fees and Product Returns:    The Company has written contracts with its distributors that include terms for distribution-related fees. The Company records distribution-related fees based on a percentage of the product sales price. The Company offers its distributors a right to return product purchased directly from the Company, which is principally based upon the product's expiration date. Additionally, the Company has granted more expansive return rights to its distributors following its product launch of VIBATIV®. The Company will generally accept returns for expired product during the six months prior to and twelve months after the product expiration date on product that had been sold to the Company's distributors. Product returned is generally not resalable given the nature of the Company's products and method of administration. The Company has developed estimates for VIBATIV® product returns based upon historical VIBATIV® sales from the Company's former

F-15

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

collaborative partner, Astellas. The Company records distribution fees and product returns as an allowance against accounts receivable.

        Accounts Receivable Allowances:    The Company records allowances against accounts receivable for sales returns, cash discounts and government chargebacks. The following table presents the changes in the accounts receivable allowances balance:

	 	Year Ended
December 31,	 	
 
	 	2011	 	2012	 	2013	 	
 
	 	(In thousands)
	 	
Accounts receivable allowances, beginning balance	 	$	—	 	$	—	 	$	—	 	
Charged to provision for allowances	 	 	—	 	 	—	 	 	89	 	
Deductions	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	
Accounts receivable allowances, ending balance	 	$	—	 	$	—	 	$	89	 	
 	 	 	 	 	 	 	 	
        Allowance for Doubtful Accounts:    The Company maintains a policy to record allowances for potentially doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. As of December 31, 2013, there was no allowance for doubtful accounts.

        Royalties:    The Company recognizes royalty revenue on licensee net sales of its products in the period in which the royalties are earned and reported to the Company and collectability is reasonably assured.

Research and Development Costs

        Research and development costs are expensed in the period that services are rendered or goods are received. Research and development costs consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain research and development activities on behalf of the Company, net of certain external research and development costs reimbursed under the Company's collaborative arrangements.

Preclinical Study and Clinical Study Expenses

        A substantial portion of the Company's preclinical studies and all of its clinical studies have been performed by third-party contract research organizations ("CRO"). Some CROs bill monthly for services performed, while others bill based upon milestones achieved. The Company reviews the activities performed under the significant contracts each quarter. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical study expenses, the significant factors used in estimating accruals include the number of patients enrolled and percentage of work completed to date. Vendor confirmations are obtained for contracts with longer duration when necessary to validate the Company's estimate of expenses. The Company's estimates are highly dependent upon the timeliness and accuracy of the data provided by its CROs regarding the status of each program and total program spending and adjustments are made when deemed necessary.

F-16

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Advertising Expenses

        Advertising costs, including promotional expenses, are expensed as incurred and were not material for any period presented.

Fair Value of Stock-Based Compensation Awards

        As of December 31, 2013, the Company has not issued any Theravance Biopharma stock-based awards to its employees. However, the Company's employees have in the past received Theravance stock-based compensation awards.

        The following disclosures pertain to stock-based compensation that has been allocated to Theravance Biopharma related to Theravance stock-based equity awards.

        Theravance equity awards were made to the Company's employees while they were employees of Theravance and Theravance used the Black-Scholes-Merton option pricing model to estimate the fair value of options granted under its equity incentive plans and rights to acquire stock granted under its employee stock purchase plan (ESPP). The Black-Scholes-Merton option valuation model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. Theravance used the "simplified" method as described in Staff Accounting Bulletin No. 107, "Share-Based Payment", for the expected option term because the usage of Theravance's historical option exercise data was limited due to post-IPO exercise restrictions. Beginning April 1, 2011, Theravance used its historical volatility to estimate expected stock price volatility. Prior to April 1, 2011, Theravance used its peer company price volatility to estimate expected stock price volatility due to its limited historical common stock price volatility since its initial public offering in 2004.

        Theravance estimated the fair value of Restricted Stock Units ("RSUs") and Restricted Stock Awards ("RSAs") based on the fair market values of the underlying Theravance stock on the dates of grant.

        Stock-based compensation expense was calculated based on awards ultimately expected to vest and was reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. Theravance estimated annual forfeiture rates for stock options, RSUs and RSAs based on its historical forfeiture experience.

        The estimated fair value of RSUs and RSAs is expensed on a straight-line basis over the expected term of the grant and the estimated fair value of performance-contingent RSUs and RSAs is expensed using an accelerated method over the term of the award once Theravance determines that it is probable that those performance milestones will be achieved. Compensation expense for RSUs and RSAs that contain performance conditions is based on the grant date fair value of the award. Compensation expense is recorded over the requisite service period based on management's best estimate as to whether it is probable that the shares awarded are expected to vest. The Company assesses the probability of the performance indicators being met on a continuous basis.

        The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to employee stock-based compensation expense as a result of the full valuation allowance on its deferred tax assets including deferred tax assets related to its net operating loss carry forwards.

F-17

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Income Taxes

        The Company accounts for income on a separate tax return basis although Theravance Biopharma's operations have historically been included in the tax returns filed by Theravance of which Theravance Biopharma is a part of. In the future, as a stand-alone entity, Theravance Biopharma will file tax returns on its own behalf and its deferred taxes and effective income tax rate may differ from those in the historical periods indicated herein.

Related Party

        Robert V. Gunderson, Jr. is a director of Theravance. Theravance has engaged Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, of which Mr. Gunderson is a partner, as its primary legal counsel. Fees incurred in the ordinary course of business related to Theravance Biopharma matters were $0.1 million in 2011, $0.4 million in 2012 and $1.4 million in 2013.

3. Collaborative Arrangements

Revenue from Collaborative Arrangements

        The Company has recognized revenue from its collaborative arrangements as follows:

	 	Year Ended December 31,	 	
(In thousands)	 	2011	 	2012	 	2013	 	
Astellas	 	$	14,854	 	$	125,788	 	$	—	 	
Merck	 	 	—	 	 	4,357	 	 	226	 	
 	 	 	 	 	 	 	 	
Total revenue	 	$	14,854	 	$	130,145	 	$	226	 	
 	 	 	 	 	 	 	 	
Reimbursement of Research and Development (R&D) Costs

        Under the Merck, Alfa Wasserman, Astellas and R-Pharm collaboration arrangements, the Company is entitled to reimbursement of certain R&D costs. The Company's policy is to account for the reimbursement payments by its collaboration partners as reductions to R&D expense.

        The following table summarizes the reductions to R&D expenses related to the reimbursement payments:

	 	Year Ended December 31,	 	
(In thousands)	 	2011	 	2012	 	2013	 	
Merck	 	$	—	 	$	756	 	$	4,937	 	
Alfa Wassermann	 	 	—	 	 	185	 	 	1,500	 	
Astellas	 	 	390	 	 	—	 	 	—	 	
R-Pharm	 	 	—	 	 	—	 	 	86	 	
 	 	 	 	 	 	 	 	
Total reduction to R&D expense	 	$	390	 	$	941	 	$	6,523	 	
 	 	 	 	 	 	 	 	
F-18

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

3. Collaborative Arrangements (Continued)

Merck

Research Collaboration and License Agreement

        In October 2012, Theravance entered into a research collaboration and license agreement (the "Research Collaboration and License Agreement") with Merck, known as MSD outside the United States and Canada, to discover, develop and commercialize novel small molecule therapeutics directed towards a target being investigated for the treatment of hypertension and heart failure. Under the agreement, Theravance granted Merck a worldwide, exclusive license to Theravance's therapeutic candidates. Theravance received a $5.0 million upfront payment in November 2012. Also, Theravance received funding for research and was eligible for potential future contingent payments totaling up to $148.0 million for the first indication and royalties on worldwide annual net sales of any products derived from the collaboration. The initial research term was twelve months, with optional extensions by mutual agreement. Merck had the right to terminate the agreement at any time, and provided Theravance with notice of termination in September 2013. The agreement was terminated in December 2013.

        Under the Research Collaboration and License Agreement, the significant deliverables were determined to be the license, research services and committee participation. Theravance determined that the license represents a separate unit of accounting because the license has standalone value. The license, which includes rights to Theravance's underlying technologies for its therapeutic candidates, permitted Merck to perform all efforts necessary to use Theravance's technologies to bring a therapeutic candidate through development and upon regulatory approval, commercialization. Theravance based the best estimate of selling price on potential future cash flows under the arrangement over the estimated development period. Theravance determined that the research services represent a separate unit of accounting and based the best estimate of selling price on the nature and timing of the services to be performed. Theravance determined that the committee participation represents a separate unit of accounting as Merck could negotiate for and/or acquire these services from other third parties and Theravance based the best estimate of selling price on the nature and timing of the services to be performed.

        The $5.0 million upfront payment received by Theravance in November 2012 was allocated to the three units of accounting based on the relative selling price method as follows: $4.4 million to the license, $0.4 million to the research services and $0.2 million to the committee participation. Theravance recognized revenue of $4.4 million from the license in 2012 as the technical transfer activities were complete and the associated unit of accounting was deemed delivered. The amount of the upfront payment allocated to the research services was deferred and is being recognized as a reduction of research and development expense as the underlying services are performed, since the nature of the research services is more appropriately characterized as research and development expense consistent with the research reimbursements being received. The amount of the upfront payment allocated to the committee participation was deferred and recognized as revenue over the estimated performance period.

        Due to the notice of termination, the Company revised the estimated performance period resulting in an increase in revenue of $206,000 in 2013. Revenue recognized from Merck under the collaboration agreement was $226,000 in 2013.

F-19

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

3. Collaborative Arrangements (Continued)

Clinigen Group

Commercialization Agreement

        In March 2013, Theravance entered into a commercialization agreement (the "Clinigen Commercialization Agreement") with Clinigen Group plc ("Clinigen") to commercialize VIBATIV® for the treatment of hospital acquired nosocomial pneumonia, including ventilator-associated pneumonia, known or suspected to be caused by methicillin resistant Staphylococcus aureus  (MRSA) when other alternatives are not suitable. Under the agreement, Theravance granted Clinigen exclusive commercialization rights in the European Union and certain other European countries (including Switzerland and Norway). Theravance received a $5.0 million upfront payment in March 2013. After the spin-off, the Company will be eligible to receive tiered royalty payments on net sales of VIBATIV®, ranging from 20% to 30%. The Company is responsible, either directly or through its vendors or contractors, for supplying at Clinigen's expense both API and finished drug product for Clinigen's commercialization activities. The agreement has a term of at least 15 years, with an option to extend exercisable by Clinigen. However, Clinigen may terminate the agreement at any time after it has initiated commercialization upon 12 months' advance notice.

        Under the Clinigen Commercialization Agreement, the significant deliverables were determined to be the license, committee participation and manufacturing supply. Theravance determined that the license represents a separate unit of accounting as the license, which includes rights to Theravance's underlying technologies for VIBATIV®, has standalone value because the rights conveyed permit Clinigen to perform all efforts necessary to use Theravance's technologies to bring the compound through commercialization and based the best estimate of selling price for the license on potential future cash flows under the arrangement over the estimated commercialization period. Theravance determined that the committee participation represents a separate unit of accounting as Clinigen could negotiate for and/or acquire these services from other third parties, and it based the best estimate of selling price on the nature and timing of the services to be performed. Theravance based the best estimate of selling price for the manufacturing supply on a fully burdened cost to purchase and transfer the underlying API and finished goods from Theravance's third party contract manufacturer.

        The $5.0 million upfront payment received by Theravance in 2013 was allocated to two units of accounting based on the relative selling price method as follows: $4.9 million to the license and $0.1 million to the committee participation. The amount allocated to the license was deferred and will be recognized as revenue upon completion of technical transfer for the underlying license. The amount of the upfront payment allocated to the committee participation was deferred and will be recognized as revenue over the estimated performance period. Amounts received under a future separate supply agreement for API and finished goods, which will be manufactured by the Company's third party contract manufacturers, will be recognized as revenue to the extent of future API and finished goods inventory sales.

R-Pharm CJSC

Development and Commercialization Agreements

        In October 2012, Theravance entered into two development and commercialization agreements with R-Pharm CJSC ("R-Pharm"): one to develop and commercialize VIBATIV® (the "VIBATIV®

F-20

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

3. Collaborative Arrangements (Continued)

Development and Commercialization Agreement") and the other to develop and commercialize TD-1792 (the "TD-1792 Development and Commercialization Agreement"), one of Theravance's investigational glycopeptide-cephalosporin heterodimer antibiotics for the treatment of Gram-positive infections. Under each agreement, Theravance granted R-Pharm exclusive development and commercialization rights in Russia, Ukraine, other member countries of the Commonwealth of Independent States, and Georgia. Theravance received $1.1 million in upfront payments for each agreement. Following the spin-off, the Company will be eligible to receive potential future contingent payments totaling up to $10.0 million for both agreements and royalties on net sales by R-Pharm of 15% from TD-1792 and 25% from VIBATIV®. The contingent payments are not deemed substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to R-Pharm's performance of future development and commercialization activities.

TD-1792

        Under the TD-1792 Development and Commercialization Agreement, the significant deliverables were determined to be the license, committee participation and a contingent obligation to supply R-Pharm with API compound at R-Pharm's expense, either directly or through Theravance's contract manufacturer. Theravance determined that the license represents a separate unit of accounting as the license, which includes rights to Theravance's underlying technologies for TD-1792, has standalone value because the rights conveyed permit R-Pharm to perform all efforts necessary to use Theravance's technologies to bring the compounds through development and, upon regulatory approval, commercialization. Also, Theravance determined that the committee participation represents a separate unit of accounting as R-Pharm could negotiate for and/or acquire these services from other third parties and Theravance based the best estimate of selling price on the nature and timing of the services to be performed. In March 2013, Theravance entered into a supply agreement for TD-1792 API compound under which Theravance will sell its existing API compound to R-Pharm. Upon execution of this supply agreement, Theravance determined that the supply agreement represents a separate unit of accounting under the development and commercialization arrangement and based the best estimate of selling price for the supply agreement on Theravance's fully burdened cost to manufacture the underlying API.

        The $1.1 million upfront payment for the TD-1792 agreement received by Theravance was allocated to two units of accounting based on the relative selling price method as follows: $0.9 million to the license and $0.1 million to the committee participation. The amount allocated to the license was deferred and will be recognized as revenue upon completion of technical transfer for the underlying license. The amount allocated to committee participation was deferred and will be recognized as revenue over the estimated performance period. Amounts to be received under the supply agreement described above will be recognized as revenue to the extent R-Pharm purchases API compound from Theravance and upon completion of technical transfer.

VIBATIV®

        Under the VIBATIV® Development and Commercialization Agreement, the significant deliverables were determined to be the license, committee participation and a contingent obligation to supply R-Pharm with API compound at R-Pharm's expense, subject to entering into a future supply agreement. Theravance determined that the license represents a separate unit of accounting as the

F-21

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

3. Collaborative Arrangements (Continued)

license, which includes rights to Theravance's underlying technologies for VIBATIV®, has standalone value because the rights conveyed permit R-Pharm to perform all efforts necessary to use Theravance's technologies to bring the compounds through development and, upon regulatory approval, commercialization and Theravance based the best estimate of selling price for the license based on potential future cash flows under the arrangement over the estimated performance period. Theravance determined that the committee participation represents a separate unit of accounting as R-Pharm could negotiate for and/or acquire these services from other third parties and Theravance based the best estimate of selling price on the nature and timing of the services to be performed.

        The $1.1 million upfront payment received by Theravance for the VIBATIV® agreement was allocated to two units of accounting based on the relative selling price method as follows: $1.0 million to the license and $33,000 to the committee participation. The amount allocated to the license was deferred and will be recognized as revenue upon completion of technical transfer. The amount allocated to committee participation was deferred and will be recognized as revenue over the estimated performance period.

Hikma Pharmaceuticals LLC

Commercialization Agreement

        In May 2013, Theravance entered into a commercialization agreement with Hikma Pharmaceuticals LLC (Hikma) providing Hikma with the right to commercialize telavancin for the treatment of Gram-positive bacterial infections, including MRSA (the "Hikma Commercialization Agreement"). Under the agreement, Theravance granted Hikma exclusive commercialization rights in the Middle East and North Africa (MENA) region to register, and upon regulatory approval, market and distribute telavancin in 16 countries across MENA. Theravance received a $0.5 million upfront payment in June 2013. Also, Theravance is eligible to receive contingent payments of up to $0.5 million related to the successful commercialization of telavancin. Theravance is responsible, either directly or through its vendors or contractors, for supplying drug product for Hikma's commercialization activities for 15 years.

        Under the Hikma Commercialization Agreement, the significant deliverables were determined to be the license and manufacturing supply. Theravance determined that the license and manufacturing supply together represent a single unit of accounting. The license, which includes rights to Theravance's underlying technologies for telavancin, does not have standalone value because the rights conveyed do not permit Hikma to perform all efforts necessary to use Theravance's technologies to bring the compound through commercialization. Theravance deferred the upfront payment and will recognize revenue over the term of the manufacturing supply period, which is 15 years, on a straight-line basis. Future contingent payments will be deferred and recognized over the remaining term of the agreement on a straight-line basis. Revenue will be recognized from the sale of drug product upon delivery to Hikma.

F-22

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

3. Collaborative Arrangements (Continued)

Alfa Wassermann

Development and Collaboration Arrangement

        In October 2012, Theravance entered into a development and collaboration arrangement with Alfa Wassermann società per azioni (S.p.A.) ("Alfa Wassermann") for velusetrag under which the parties agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal). Alfa Wassermann has an exclusive option to develop and commercialize velusetrag in the European Union, Russia, China, Mexico and certain other countries, while the Company will retain full rights to velusetrag in the United States, Canada, Japan and certain other countries. The Company is entitled to receive funding for the Phase 2a study and a subsequent Phase 2b study if the parties agree to proceed. If Alfa Wassermann exercises its license option at the completion of the Phase 2 program, then the Company is entitled to receive a $10.0 million option fee. If velusetrag is successfully developed and commercialized, the Company is entitled to receive potential future contingent payments totaling up to $53.5 million, and royalties on net sales by Alfa Wassermann ranging from the low teens to 20%.

Former Collaboration Arrangement with Astellas

License, Development and Commercialization Agreement

        In November 2005, Theravance entered into a global collaboration arrangement with Astellas for the license, development and commercialization of VIBATIV®. Under this agreement, Astellas paid Theravance non-refundable cash payments totaling $191.0 million. In January 2012, Astellas exercised its right to terminate the collaboration agreement. The rights previously granted to Astellas ceased upon termination of the agreement and Astellas stopped all promotional sales efforts. Pursuant to the terms of the agreement, Astellas is entitled to a ten-year, 2% royalty on future net sales of VIBATIV®. As such, the Company recognized into revenue $125.8 million of deferred revenue related to Astellas in the first quarter of 2012, and the Company is no longer eligible to receive any further milestone payments from Astellas.

        Net revenue recognized under this collaboration agreement was as follows (in thousands):

	 	Year Ended December 31,	 	
 
	 	2011	 	2012	 	2013	 	
Recognition of deferred revenue	 	$	—	 	$	125,819	 	$	—	 	
Amortization of deferred revenue	 	 	12,975	 	 	—	 	 	—	 	
Royalties from net sales of VIBATIV®	 	 	2,422	 	 	—	 	 	—	 	
Proceeds from VIBATIV® delivered to Astellas	 	 	1,171	 	 	—	 	 	—	 	
Cost of VIBATIV® delivered to Astellas	 	 	(1,177	)	 	—	 	 	—	 	
Cost of unrealizable VIBATIV® inventories	 	 	(537	)	 	—	 	 	—	 	
Astellas-labeled product sales allowance	 	 	—	 	 	(31	)	 	—	 	
 	 	 	 	 	 	 	 	
Total net revenue	 	$	14,854	 	$	125,788	 	$	—	 	
 	 	 	 	 	 	 	 	
F-23

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

4. Property and Equipment

        Property and equipment consists of the following (in thousands):

	 	December 31,	 	
 
	 	2012	 	2013	 	
Computer equipment	 	$	3,027	 	$	3,084	 	
Software	 	 	5,073	 	 	5,391	 	
Furniture and fixtures	 	 	3,829	 	 	3,890	 	
Laboratory equipment	 	 	29,229	 	 	31,910	 	
Leasehold improvements	 	 	17,416	 	 	17,769	 	
 	 	 	 	 	 	
Property and equipment, gross	 	 	58,574	 	 	62,044	 	
Less: accumulated depreciation and amortization	 	 	(49,420	)	 	(51,806	)	
 	 	 	 	 	 	
Property and equipment, net	 	$	9,154	 	$	10,238	 	
 	 	 	 	 	 	
        Depreciation expense was $3.8 million, $3.3 million and $2.7 million for the years ended December 31, 2011, 2012 and 2013, respectively. The change in accumulated depreciation is net of asset retirements. In 2012, the Company recognized a write-off of $0.2 million related to assets that could no longer be used in operations.

5. Share-Based Compensation

        As of December 31, 2013, Theravance Biopharma has not issued any share-based awards to its employees. However, our employees have in the past received Theravance share-based compensation awards, and therefore, the following disclosures pertain to share-based compensation that has been allocated to Theravance Biopharma related to Theravance stock-based equity awards. Accordingly, the amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that Theravance Biopharma would have experienced as an independent, publicly-traded company for the periods presented.

Equity Incentive Plans

        In May 2012, Theravance adopted the 2012 Equity Incentive Plan ("2012 Plan"). The number of shares of Theravance's common stock available for issuance under the 2012 Plan is equal to 6,500,000 shares plus up to 12,667,411 additional shares that may be added to the 2012 Plan in connection with the forfeiture, repurchase, cash settlement or termination of awards outstanding under the 2004 Equity Incentive Plan ("2004 Plan"), the 2008 New Employee Equity Incentive Plan, the 1997 Stock Plan and the Long-Term Stock Option Plan (collectively, the "Prior Plans") as of December 31, 2011. While a maximum of 12,667,411 shares could be added to the 2012 Plan from the Prior Plans, this assumes that all the awards outstanding on December 31, 2011 will be forfeited, repurchased, cash settled or terminated. Therefore, the actual number that may be added to the 2012 Plan share reserve will likely be lower. No additional awards have been or will be made after May 15, 2012 under the 2004 Plan. Stock options and stock appreciation rights ("SARs") will reduce the 2012 Plan reserve by one share for every share granted, and stock awards other than options and SARs granted will reduce the 2012 Plan share reserve by 1.45 shares for every share granted. The 2012 Plan share reserve was also reduced by the number of stock awards granted under the 2004 Plan on or after January 1, 2012, using

F-24

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

5. Share-Based Compensation (Continued)

the same ratios described. As of December 31, 2013, total shares remaining available for issuance under the 2012 Plan were 3,152,390.

        The 2012 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, stock unit awards and SARs to employees, non-employee directors and consultants of Theravance. Stock options may be granted with an exercise price not less than the fair market value of the common stock on the grant date. Stock options granted to employees generally have a maximum term of 10 years and vest over a four year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. Theravance may grant options with different vesting terms from time to time. Unless an employee's termination of service is due to disability or death, upon termination of service, any unexercised vested options will be forfeited at the end of three months or the expiration of the option, whichever is earlier.

Employee Stock Purchase Plan

        Under the 2004 Employee Stock Purchase Plan ("ESPP"), Theravance's non-officer employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The ESPP provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period composed of four consecutive six-month purchase periods. The purchase periods end on either May 15 th  or November 15 th . ESPP contributions are limited to a maximum of 15% of an employee's eligible compensation.

        Theravance's ESPP plan also includes a feature that provides for a new offering period to begin when the fair market value of the Theravance's common stock on any purchase date during an offering period falls below the fair market value of Theravance's common stock on the first day of such offering period. This feature is called a reset. Theravance had resets for new twenty-four month offering periods starting on May 16, 2008, November 16, 2008, May 16, 2010, November 16, 2011, May 16, 2012 and November 16, 2012. Theravance applied modification accounting to determine the incremental fair value associated with the ESPP resets and recognized the related incremental stock-based compensation expense.

        As of December 31, 2013, a total of 2,025,000 shares of common stock were approved and authorized for issuance under the ESPP, and 284,139 shares were available for further issuance. Through December 31, 2013, Theravance had issued 1,740,861 shares under the ESPP at an average price of $11.29 per share. As a result of Theravance's announcement that its Board of Directors had approved plans to separate the Company's businesses into two independent publicly traded companies, all monies remaining after the purchase on November 15, 2013 were refunded to employees. It was also determined that ESPP shares relating to purchase periods ending after November 15, 2013 were not probable of vesting. Therefore, $0.7 million of compensation expense relating to purchase periods ending after November 15, 2013 was reversed in the fourth quarter of 2013, and any remaining unamortized compensation expense relating to these purchase periods will not be recognized. ESPP was suspended after the November 15, 2013 purchase period.

F-25

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

5. Share-Based Compensation (Continued)

Performance-Contingent Restricted Stock Awards

        Over the past three years, the Compensation Committee of Theravance's Board of Directors (the "Compensation Committee") has approved grants of performance-contingent RSAs to senior management and a non-executive officer. Generally, these awards have dual triggers of vesting based upon the achievement of certain performance goals by a pre-specified date, as well as a requirement for continued employment. When the performance goals are deemed achieved for these types of awards, time-based vesting and, as a result, recognition of stock-based compensation expense commence.

        Included in these performance-contingent RSAs is the grant of 1,290,000 special long-term retention and incentive performance-contingent RSAs to senior management approved by the Compensation Committee in 2011. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. The maximum potential expense associated with this program is $28.2 million related to stock-based compensation expense, which would be recognized in increments based on achievement of the performance conditions. As of December 31, 2013, Theravance determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. If sufficient performance conditions are achieved prior to the spin-off, which is expected in the second quarter of 2014, then the Company would recognize up to $6.7 million in stock-based compensation expense associated with these RSAs.

Performance-Contingent Restricted Stock Units

        In 2010, the Compensation Committee of Theravance's board of directors approved the grant of 210,000 performance-contingent RSUs to senior management. These awards have dual triggers of vesting based upon the successful achievement of certain corporate operating milestones during 2010 and 2011, as well as a requirement for continued employment through early 2014. In the first quarter of 2011 both performance milestones were deemed achieved, and time-based vesting commenced with respect to all of the performance-contingent RSU shares. As a result, compensation expense was $1.3 million, $0.3 million and $63,000, for the years ended December 31, 2011, 2012 and 2013, and the remaining unrecognized expense will be recognized over the remaining vesting period through early-2014 using the graded vesting expense attribution method.

Director Compensation Program

        Non-employee directors of Theravance receive compensation for services provided as a director. Each member of Theravance's board of directors who is not an employee receives an annual retainer as well as a fee for each board and committee meeting attended. Commencing on April 27, 2011, chairpersons of the various committees of the board of directors, the Audit Committee, the Compensation Committee, Nominating/Corporate Governance Committee and the Science and Technology Advisory Committee receives a fixed retainer. The lead independent director also receives a fixed retainer.

        Each of Theravance's independent directors receives periodic automatic grants of equity awards under a program implemented under the 2012 Plan. These grants are non-discretionary. Only independent directors of Theravance or affiliates of such directors are eligible to receive automatic

F-26

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

5. Share-Based Compensation (Continued)

grants under the 2012 Plan. Under the program, as amended in July 2010, each individual who first becomes an independent director will, on the date such individual joins the board of directors, automatically be granted (i) a one-time grant of RSUs covering 6,000 shares of Theravance's common stock and (ii) a one-time nonstatutory stock option grant covering 6,000 shares of Theravance's common stock.

        These initial equity grants vest monthly over the director's first two years of service. In addition, on the date of joining the board of directors, the new director will also receive the standard annual equity awards (if joining on the date of Theravance's Annual Meeting of Stockholders) or pro-rated annual equity awards (if joining on any other date). The pro-ration is based upon the number of months of service the new board member will provide during the 12-month period ending on the one-year anniversary of the most recent annual meeting of stockholders. Annually, upon his or her re-election to the board of directors at the Annual Meeting of Stockholders, each independent director is automatically granted both an RSU covering 6,000 shares of Theravance's common stock and a nonstatutory stock option covering 6,000 shares of Theravance's common stock. These standard annual equity awards vest monthly over the twelve month period of service following the date of grant. In addition, all automatic equity awards vest in full if Theravance is subject to a change in control or the board member dies while in service.

Stock-Based Compensation Expense

        The allocation of stock-based compensation expense included in the combined statements of operations and comprehensive loss was as follows (in thousands):

	 	Year Ended
December 31,	 	
(in thousands)
	 	2011	 	2012	 	2013	 	
Research and development	 	$	12,696	 	$	13,192	 	$	15,444	 	
Selling, general and administrative	 	 	8,767	 	 	8,131	 	 	7,032	 	
 	 	 	 	 	 	 	 	
Total stock-based compensation	 	$	21,463	 	$	21,323	 	$	22,476	 	
 	 	 	 	 	 	 	 	
        Total stock-based compensation expense capitalized to inventory was $0, $0.4 million and $0.2 million for the years ended December 31, 2011, 2012 and 2013, respectively.

F-27

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

5. Share-Based Compensation (Continued)

Valuation Assumptions

        The range of weighted-average assumptions Theravance used to estimate the fair value of stock options granted was as follows:

	 	Year Ended December 31,	
 
	 	2011	 	2012	 	2013	
Employee Stock Options:	 	 	 	 	 	 	
Risk-free interest rate	 	1.10 - 2.57%	 	0.74% - 1.17%	 	0.76% - 2.02%	
Expected life (in years)	 	5 - 6	 	5 - 6	 	5 - 6	
Expected volatility	 	49% - 55%	 	55% - 60%	 	58% - 60%	
Dividend yield	 	—	 	—	 	—	
Weighted-average estimated fair value of stock options granted	 	$11.11	 	$11.50	 	$19.96	
        The range of weighted-average assumptions Theravance used to estimate the fair value of employee stock purchase plan issuances was as follows:

	 	Year Ended December 31,	
 
	 	2011	 	2012	 	2013	
Employee Stock Purchase Plan Issuances:	 	 	 	 	 	 	
Risk-free interest rate	 	0.05% - 0.54%	 	0.14% - 0.29%	 	0.09% - 0.26%	
Expected life (in years)	 	0.5 - 2.0	 	0.5 - 2.0	 	0.5 - 2.0	
Expected volatility	 	48% - 59%	 	51% - 64%	 	56% - 61%	
Dividend yield	 	—	 	—	 	—	
Weighted-average estimated fair value of ESPP issuances	 	$9.46	 	$8.07	 	$16.44	
6. Income Taxes

        Theravance Biopharma accounts for income taxes on a separate tax return basis although Theravance Biopharma's operations have historically been included in the tax returns filed by Theravance. Due to ongoing operating losses and the inability to recognize any income tax benefit, there is no provision for income taxes for any periods presented.

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

        These deferred tax assets are hypothetical amounts that would have existed if Theravance Biopharma had operated as a separate company. The actual deferred tax assets after the separation is

F-28

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

6. Income Taxes (Continued)

completed will not equal these amounts. The significant, hypothetical deferred tax assets and liabilities for Theravance Biopharma are as follows (in thousands):

	 	December 31,
2012	 	December 31,
2013	 	
Deferred tax assets:	 	 	 	 	 	 	 	
Net operating loss carryforwards	 	$	85,319	 	$	140,851	 	
Deferred revenues	 	 	520	 	 	3,016	 	
Capitalized research and development expenditures	 	 	9,729	 	 	202	 	
Research and development tax credit carryforwards	 	 	4,768	 	 	11,019	 	
Fixed assets and acquired intangible assets	 	 	4,702	 	 	3,820	 	
Deferred compensation	 	 	22,916	 	 	18,837	 	
Accruals	 	 	5,046	 	 	4,944	 	
 	 	 	 	 	 	
Gross deferred tax assets	 	 	133,000	 	 	182,689	 	
Valuation allowance	 	 	(133,000	)	 	(182,689	)	
 	 	 	 	 	 	
Net deferred tax assets	 	$	—	 	$	—	 	
 	 	 	 	 	 	
        The differences between the U.S. Federal statutory income tax rate to Theravance Biopharma's effective tax are as follows (in thousands):

	 	Year ended December 31,	 	
 
	 	2011	 	2012	 	2013	 	
U.S. federal statutory income tax rate	 	 	34.00	%	 	34.00	%	 	34.00	%	
State income taxes, net of federal benefit	 	 	—	 	 	(0.04	)	 	—	 	
Stock-based compensation	 	 	(0.33	)	 	(2.63	)	 	0.31	 	
Non-deductible executive compensation	 	 	(0.74	)	 	(10.09	)	 	(0.06	)	
Federal research credits	 	 	1.64	 	 	—	 	 	2.87	 	
Meals & entertainment	 	 	(0.12	)	 	(0.60	)	 	(0.04	)	
Change in valuation allowance	 	 	(34.53	)	 	(20.68	)	 	(35.89	)	
Other	 	 	0.08	 	 	0.04	 	 	(1.19	)	
 	 	 	 	 	 	 	 	
Effective tax rate	 	 	(0.00	)%	 	(0.00	)%	 	(0.00	)%	
 	 	 	 	 	 	 	 	
        Due to Theravance Biopharma's lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $3.6 million from 2011 to 2012 and $49.7 million from 2012 to 2013.

        Federal and state net operating loss, research and other credit carryforwards for Theravance Biopharma have been determined assuming the business began on January 1, 2011. None of Theravance's net operating loss and credit carry forwards will be transferred to Theravance Biopharma upon the separation as Theravance Biopharma will be a new company with no net operating loss or credit carry-forwards.

        If Theravance Biopharma had operated as a separate entity, it would have had federal and state net operating loss carry forwards of $458 million and $198 million, respectively, and Federal and

F-29

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

6. Income Taxes (Continued)

California research and other tax credit carry forwards of $12.9 million and $14.8 million, respectively, as of December 31, 2013.

        Theravance Biopharma federal net operating loss carryforwards will expire from 2031 through 2033, federal research and development tax credit carryforwards will expire in 2031. Theravance Biopharma state net operating loss carryforwards will begin expiring in the years 2031 through 2033 and state research tax credits of approximately will not expire.

        In addition, the net operating loss deferred tax asset balances for Theravance Biopharma as of December 31, 2012 and December 31, 2013 do not include excess tax benefits from stock option exercises.

Uncertain Tax Positions

        Theravance Biopharma's policy is to recognize interest and/or penalties related to uncertain tax positions in income tax expense. As of December 31, 2012 and 2013, Theravance Biopharma had no accrued interest or penalties due to having net operating losses available to offset any tax adjustment.

        A reconciliation of total unrecognized tax benefits is as follows (in thousands):
 	 	 	 	 	
Balance as of December 31, 2011	 	$	4,043	 	
Increases related to 2012 tax positions	 	 	2,598	 	
 	 	 	 	
Balance as of December 31, 2012	 	 	6,641	 	
Increases related to 2013 tax positions	 	 	7,552	 	
 	 	 	 	
Balance as of December 31, 2013	 	$	14,193	 	
 	 	 	 	
        If Theravance Biopharma eventually is able to recognize these uncertain tax benefits, most of the $14.2 million would reduce the effective tax rate, except for excess tax benefits related to stock based payments. Theravance Biopharma currently has a full valuation allowance against its deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain positions be favorably settled in the future. Theravance Biopharma does not believe it is reasonably possible that its unrecognized tax benefits will significantly change within the next 12 months.

7. Commitments and Contingencies

Operating Leases and Subleases

        Theravance leases approximately 150,000 square feet of office and laboratory space in two buildings in South San Francisco, California, under two non-cancelable operating leases that expire in May 2020. Theravance may extend the terms of these leases for two additional five-year periods each.

F-30

Table of Contents
THERAVANCE BIOPHARMA, INC.
(the Drug Discovery and Development Business of Theravance, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

7. Commitments and Contingencies (Continued)

        Future minimum lease payments under these leases, exclusive of executory costs, as of December 31, 2013, were as follows (in thousands):
 	 	 	 	 	
Years Ending December 31:	 	Future Minimum
Lease Payments	 	
2014	 	$	4,859	 	
2015	 	 	5,770	 	
2016	 	 	5,943	 	
2017	 	 	6,121	 	
2018	 	 	6,305	 	
Thereafter	 	 	9,253	 	
 	 	 	 	
Total future minimum lease payments	 	$	38,251	 	
 	 	 	 	
        Expenses and income associated with operating leases were as follows (in thousands):

	 	Year Ended
December 31,	 	
 
	 	2011	 	2012	 	2013	 	
Rent expense	 	$	6,400	 	$	5,469	 	$	5,763	 	
Sublease income	 	 	(637	)	 	(160	)	 	—	 	
Purchase Obligations

        As of December 31, 2013, Theravance had outstanding purchase obligations on commercially reasonable terms, primarily for services under contract research, development and clinical and commercial supply agreements totaling $0.8 million.

Special Long-Term Retention and Incentive Equity Awards Program

        In 2011, Theravance granted special long-term retention and incentive cash bonus awards to certain employees. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. The maximum potential cash bonus expense associated with this program is $38.2 million, which would be recognized in increments based on the probable achievement of the performance conditions. As of December 31, 2013, Theravance's management determined that the achievement of the requisite performance conditions was not probable and, as a result, no bonus expense has been recognized. If sufficient performance conditions are achieved prior to the spin-off, which is expected in the second quarter of 2014, then Theravance would recognize up to $9.5 million of cash bonus expense in the period Theravance determined that the achievement of the requisite performance conditions was probable.

Guarantees and Indemnifications

        The Company indemnifies its officers and directors for certain events or occurrences, subject to certain limits. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recognized any liabilities relating to these agreements as of December 31, 2013.

F-31