SEPARATION AGREEMENT

WHEREAS, the Company and Tarnoff acknowledge that the employment relationship between them was at-will; and

WHEREAS, on September 1, 2006 Tarnoff announced his intent to resign from service with the Company; and

WHEREAS, Tarnoff’s resignation will be effective as of September 15, 2006 (the "Resignation Date"); and

WHEREAS, Tarnoff and the Company desire to resolve and settle any and all claims that Tarnoff has or may have against the Company, including claims arising from any aspect of Tarnoff’s employment with the Company or Tarnoff’s separation from employment by the Company;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations contained herein, Tarnoff and the Company, each intending to be legally held bound, agree as follows:

1. Consideration. Tarnoff acknowledges that but for this Agreement, he would have no legal right or entitlement to any of the consideration described in this Agreement. In consideration of the covenants, agreements and releases set forth in this Agreement:

a. Provided that Tarnoff has not revoked this Agreement as described in Section 12 below, the Company shall, in lieu of any payment under the ViroPharma Incorporated Severance Pay Plan or any other formal or informal severance pay plan, program or arrangement that may now or may have ever been maintained by the Company (collectively, the "Severance Plan"):

(i) pay Tarnoff a total of $105,000, payable in installments in accordance with ViroPharma’s standard payroll schedule, at the rate per pay period equal to Tarnoff’s rate per pay period as of the Resignation Date, subject to required tax withholdings, but without deduction for health insurance premiums.

(ii) following Tarnoff’s termination of employment, (A) for the period beginning on the Resignation Date and ending on May 31, 2007 (the "Initial Period"), arrange to provide Tarnoff with health insurance benefits substantially similar to those which Tarnoff is receiving immediately prior to the Resignation Date; and (B) if, following the expiration of the Initial Period, Tarnoff elects coverage under the Comprehensive Omnibus Reconciliation Act ("COBRA"), continue to pay medical insurance premiums on the same basis in effect

immediately before the expiration of the Initial Period for the period beginning on June 1, 2007 and continuing until the first anniversary of the Resignation Date; provided that the Company’s obligations under this Section 1(a)(ii) shall sooner terminate if, and on the date that, Tarnoff obtains (A) comparable health care insurance coverage under his spouse’s insurance policy or (B) employment with a third party which provides Tarnoff health care insurance comparable in quality and cost to that which he last received from the Company prior to his resignation; and

(iii) not to exceed $10,000 to cover the costs of documented outplacement assistance services; and

(iv) effective as of the Resignation Date, accelerate the vesting of options to purchase 30,000 shares of the Company’s Common Stock, par value $.002 per share, having an exercise price of $2.44 per share granted pursuant to the terms of the Incentive Stock Option Agreement dated August 25, 2004.

b. Notwithstanding any other provision in this Agreement: (i) no payment or contribution described in this Agreement shall be due until after the expiration of the Revocation Period described in Section 12 below without a revocation of this Agreement by Tarnoff, and (ii) the Company’s obligation to make such payments or reimbursements shall terminate immediately, and Tarnoff shall be obligated to promptly return to the Company all payments received by him or paid by the Company on him behalf pursuant to Section 1 above, if at any time Tarnoff is in breach of any of his obligations hereunder after the Company gave Tarnoff written notice of his breach and afforded him reasonable opportunity (at least 30 days) to cure such breach.

c. During the period ending upon the earlier of the first anniversary of the Resignation Date or the date that Tarnoff obtains employment with a third party (the "Consulting Period"), Tarnoff shall make himself reasonably available from time to time to undertake projects given to him by the Company in accordance with the terms of the Consulting Agreement attached hereto as Exhibit A.

2. Release. Tarnoff hereby generally releases and discharges the Company and its predecessors, successors (by merger or otherwise), parents, subsidiaries, affiliates and assigns, together with each and every of their present, past and future officers, directors, stockholders, general partners, limited partners, employees and agents, and the heirs, executors, successors and assigns of same (herein collectively referred to as the "Company Group"), from any and all suits, causes of action, complaints, charges, obligations, demands, or claims of any kind, whether in law or in equity, direct or indirect, known or unknown, which Tarnoff ever had or now has against the Company, the Company Group, or any one of them arising out of or relating to any matter, thing or event occurring up to and including the date of this Agreement. This release specifically includes, but is not limited to:

i. except in respect of the payments and acceleration of vesting of stock options expressly described in Section 1 above, any and all claims for wages and benefits

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including, without limitation, salary, unvested stock options, stock, commissions, royalties, license fees, health and welfare benefits, settlement pay, vacation pay, bonuses and claims under the Severance Plan; and claims under the Pennsylvania Wage Payment and Collection Act, as amended, 43 P.S. 260.1, et seq.

ii. any and all claims for wrongful discharge, breach of contract, whether express or implied, and claims for breach of implied covenants of good faith and fair dealing;

iii. any and all claims for alleged employment discrimination on the basis of race, color, religion, sex, age, national origin, veteran status, disability and/or handicap, in violation of any federal, state or local statute, ordinance, judicial precedent or executive order, including but not limited to claims for discrimination under the following statutes: Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq.; the Civil Rights Act of 1866, 42 U.S.C. §1981; the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as amended, 29 U.S.C. §621 et seq.; the Older Workers Benefit Protection Act 29 U.S.C. §§ 623, 626 and 630; the Rehabilitation Act of 1972, as amended, 29 U.S.C. §701 et seq.; the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.; the Family and Medical Leave Act of 1993, 29 U.S.C. §2601, et seq.; the Fair Labor Standards Act, as amended, 29 U.S.C. §201, et seq.; the Fair Credit Reporting Act, as amended, 15 U.S.C. §1681, et seq.; and the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §1000, et seq. ("ERISA");

iv. any and all claims under any federal or state statute relating to employee benefits or pensions; but it is understood that notwithstanding his resignation from the Company, nothing set forth herein will be construed as a waiver of any right Tarnoff may have under ERISA to any benefits under any qualified retirement plans maintained by the Company in which he is a participant;

v. any and all claims in tort, including but not limited to, any claims for misrepresentation, defamation, interference with contract or prospective economic advantage, intentional or negligent infliction of emotional distress, duress, loss of consortium, invasion of privacy and negligence; and

vi. any and all claims for attorneys’ fees and costs, except to the extent that the Company is specifically obligated to pay such attorneys’ fees and costs pursuant to that certain Indemnification Agreement dated as of August 25, 2004 between the Company and Tarnoff.

3. Acknowledgment. Each of Tarnoff and the Company understands that the release set forth in Section 2 extends to all of the aforementioned claims and potential claims which arose on or before the date of this Agreement, whether now known or unknown, suspected or unsuspected, and that this constitutes an essential term of this Agreement. Each of Tarnoff and the Company understands and acknowledges the significance and consequence of this Agreement and of each specific release and waiver, and expressly consents that this Agreement

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shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands, obligations, and causes of action, if any, as well as those relating to any other claims, demands, obligations or causes of action herein above-specified.

4. Non-Disclosure and Confidentiality Obligations.

a. Provided that the Company has not breached its obligations to make the payments and benefits to Tarnoff described in Section 1 above, Tarnoff shall not, without the prior written consent of the Company in its sole discretion, for any reason or for any purpose, either directly or indirectly, divulge to any third-party or use for his own direct or indirect benefit, any Company Information (as defined below) revealed to or obtained by Tarnoff at any time during the course of his employment with the Company (whether developed by Tarnoff or any other person or entity on behalf of the Company). "Company Information" generally means all of the Company’s confidential, proprietary, business and technical information, trade secrets or other information or materials that have not been made available to the general public by the Company, and shall include, but shall not be limited to: the Company’s relationship, conversations, correspondence and course of dealing with state, federal and local governmental and regulatory authorities, including but not limited to the United States Food and Drug Administration; all information relating to the Company’s existing or proposed discovery, pre-clinical, clinical research and development and business development efforts; business or products; intangible personal property, the Company’s relationship with, the terms of contracts and agreements with, the needs and requirements of, and the Company’s course of dealing with, the Company’s actual collaborators, clinical investigators, contract research organizations, suppliers of bulk drug substance or finished drug product, and other contractors and suppliers; any other materials prepared by Tarnoff in the course of his employment by the Company containing Company Information, or prepared by any other employee or contractor of the Company for the Company containing Company Information; Company know-how; business studies; business procedures; finances; marketing and sales plans, data, methods and activities; personnel information; and customer and vendor credit information. Nothing contained herein shall restrict Tarnoff from divulging or using for his own benefit or for any other purpose any Company Information that is readily available to the general public so long as such information did not become available to the general public as a direct or indirect result of a breach of this Section 4 by Tarnoff. Failure by the Company to mark any of the Company Information as confidential or proprietary shall not affect its status as Company Information under the terms of this Agreement. Tarnoff shall provide to the Company written notice of any written or oral request, including but not limited to, telephone inquiries, written requests or subpoenas, by any person, entity, governmental agency or regulatory authority seeking Company Information within three (3) business days of receiving such request. It is understood that Tarnoff will comply with all subpoenas which are served on him unless directed otherwise by a court of competent jurisdiction. Notwithstanding the foregoing, this Section 4.a. is not intended to prevent Tarnoff from providing consulting services to any third party, or from engaging or otherwise entering into a business relationship with any of the Company’s collaborators, clinical investigators, contract research organizations, suppliers or contactors, provided that Tarnoff does not use or disclose any Company Information in connection with the performance of such Services.

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b. Tarnoff shall refrain from initiating any contact with any person, entity or government agency with respect to any investigation or inquiry into any aspect of the Company’s business operations or employment practices, except as provided by or required by law and subject to the second and third to last sentences of Section 4.a. above.

c. Neither party shall disclose or publicize the terms of this Agreement, directly or indirectly, to any person or entity; provided that Tarnoff and the Company may disclose that the parties have resolved any differences between them pursuant to the terms of a confidential settlement agreement; and provided further that the Company and Tarnoff may disclose the terms, and/or fact of this Agreement to their respective accountants, attorneys, actual and potential investors and creditors, provided that each of the foregoing agrees to keep the terms of this Agreement confidential (each, a "Permitted Recipient"), and to others as required by law, rule or regulation. Tarnoff acknowledges that the Company will disclose this Agreement or certain information relating to this Agreement in its filings with the Securities and Exchange Commission. Any breach of this Section 4.c. by a Permitted Recipient shall be deemed a breach of this Agreement by the party hereto that disclosed the terms of this Agreement to such Permitted Recipient.

5. Return of Property. On or prior to the Resignation Date, Tarnoff shall return to the Company all Company Property in his direct or indirect possession or subject to him direct or indirect control. "Company Property" shall include, but shall not be limited to: all notes, memoranda, reports (including all drafts thereof), correspondence, telephone contact reports and other writings made in connection with Tarnoff’s employment with the Company, whether in paper or electronic form; software provided by the Company; research material purchased by the Company; cellular phones, calculators, computers, computer accessories and other equipment provided by the Company; clinical protocols; computer CD’s, tapes and diskettes or other portable media containing any of the information described in this Section 5; copies of all agreements to which the Company is a party (other than copies of agreements between the Company and Tarnoff); credit cards and phone cards supplied by the Company; Company forms, files, manuals, and personnel data; business development information and analyses; marketing and sales plans and projections; Company brochures; product samples; and all keys and card entry devices to the Company’s facility and offices (the "Company Property").

6. No Disparagement. The Company agrees that during the term of this Agreement and thereafter that neither it nor any of its officers, directors or representatives will disparage or deprecate, directly or indirectly, the actions, plans, reputation, professionalism, character, competence, integrity or motives of Tarnoff or any legal representative or family member. Tarnoff agrees that during the term of this Agreement and thereafter that he will not disparage or deprecate, directly or indirectly, the actions, plans, reputation, professionalism, character, competence, integrity or motives of the Company or any of its employees, officers, directors or representatives.

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7. No Admissions. Neither the execution of this Agreement by the Company or Tarnoff, nor the terms hereof constitute an admission by any party, or by any agent or employee of any party, of liability with respect to any possible claim which was or could have been made by an adverse party hereto.

8. Employment Termination Acknowledgment; Notice of New Employment. Tarnoff confirms that his employment with the Company will terminate effective on the Resignation Date, and that the Company has settled all obligations to him (except for the Company’s obligations under this Agreement, and the Company’s obligation for salary and benefits accruing from the date of this Agreement through the Resignation Date). During the 12 month period commencing with the Resignation Date, Tarnoff shall promptly notify the Company if he obtains health care insurance coverage under his spouse’s insurance policy