Exhibit 10.4

 

EXECUTION COPY

 

Confidential Treatment Requested.

 

Confidential portions of this document have been redacted and have been
separately filed
with the Commission.

 

 

SECURITY AGREEMENT

 

Dated as of September 30, 2009

 

between

 

VERTEX PHARMACEUTICALS INCORPORATED

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Collateral Agent

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

TABLE OF CONTENTS

 

 

 

Page

ARTICLE I DEFINITIONS

1

 

 

 

Section 1.01

Definition of Terms Used Herein

1

Section 1.02

Definition of Certain Terms Used Herein

2

Section 1.03

Rules of Interpretation

4

 

 

ARTICLE II SECURITY INTEREST

4

 

 

 

Section 2.01

Security Interest

4

Section 2.02

No Assumption of Liability

5

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES

5

 

 

 

Section 3.01

Title and Authority

5

Section 3.02

Filings

5

Section 3.03

Validity and Perfection of Security Interest

5

Section 3.04

Absence of Other Liens

5

Section 3.05

UCC Representations and Warranties

5

 

 

ARTICLE IV COVENANTS

6

 

 

 

Section 4.01

Change of Name; Location of Collateral; Records; Place of Business

6

Section 4.02

Creation and Perfection of Liens Securing Collateral; Further Assurances

6

Section 4.03

Taxes; Encumbrances

7

Section 4.04

Assignment of Security Interest in Milestone Payments

7

Section 4.05

Limitation on Disposition of Collateral and Liens on Collateral

7

Section 4.06

Marking of Books and Records

8

 

 

ARTICLE V PAYMENTS

8

 

 

 

Section 5.01

Payment Direction; Payment Account

8

Section 5.02

Power of Attorney

9

 

 

ARTICLE VI REMEDIES

10

 

 

 

Section 6.01

Remedies Upon Default

10

Section 6.02

Application of Proceeds

11

 

 

ARTICLE VII MISCELLANEOUS

11

 

 

 

Section 7.01

Notices

11

Section 7.02

Security Interest Absolute

12

Section 7.03

Survival of Agreement

12

Section 7.04

Binding Effect

12

Section 7.05

Successors and Assigns

12

Section 7.06

Collateral Agent’s Fees and Expenses; Indemnification

12

Section 7.07

GOVERNING LAW

13

Section 7.08

Waivers; Amendment

13

 

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Information redacted pursuant to a confidential treatment request.  An
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of this exhibit has been filed separately with the Commission.

 

Section 7.09

WAIVER OF JURY TRIAL

14

Section 7.10

Severability

14

Section 7.11

Entire Agreement

14

Section 7.12

Counterparts

14

Section 7.13

Jurisdiction

14

Section 7.14

Termination

15

Section 7.15

Headings and Recitals

15

Section 7.16

Limitation on Duties of Collateral Agent

15

 

Exhibits:

 

Exhibit A:               Payment Direction

 

Schedules:

 

Schedule 3.05:       UCC Representations and Warranties

Schedule 5.01(c):  Trustee Account Information

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

SECURITY AGREEMENT (this “Agreement”) dated as of September 30, 2009, between
VERTEX PHARMACEUTICALS INCORPORATED (the “Company” or the “Grantor”), a
Massachusetts corporation, and U.S. Bank National Association, having its
principal corporate trust office at One Federal Street, Boston, Massachusetts
02110 (together with any successor or successors in such capacity, the
“Collateral Agent”) for the benefit of the Trustee (as defined below) and the
Holders (as defined below).

 

Reference is made to the Secured Notes due 2012 of the Company (as amended,
restated, supplemented or modified from time to time, the “Notes”), in the
original aggregate principal amount at maturity of $155,000,000 issued pursuant
to the Indenture, dated as of September 30, 2009 (as amended, restated, amended
and restated, modified or supplemented from time to time and including any
agreement extending the maturity of, refinancing or otherwise amending, amending
and restating or otherwise modifying or restructuring all or any portion of the
obligations of the Company under the Notes or such agreement or any successor
agreement, the “Indenture”) among the Company, the Collateral Agent and U.S.
Bank National Association, as trustee (together with any successor or successors
in such capacity, the “Trustee”).

 

The Company will materially benefit from the issuance of the Notes and it is a
condition to the issuance of the Notes that the Company execute and deliver this
Agreement.

 

The Indenture requires the Company to secure its obligations under the Notes and
the Indenture by a first priority security interest in the Collateral (as
hereinafter defined).

 

Accordingly, the Company and the Collateral Agent, on behalf of itself and each
Secured Party (and each of their respective successors or assigns), hereby agree
as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01         Definition of Terms Used Herein

 

Unless the context otherwise requires, all capitalized terms used but not
defined herein shall have the meanings set forth in the Indenture, all
references to the Uniform Commercial Code or “UCC” shall mean the Uniform
Commercial Code in effect in the State of New York as of the date hereof and any
uncapitalized terms used herein which are defined in the UCC have the respective
meanings provided in the UCC; provided, however, that if a term is defined in
Article 9 of the Uniform Commercial Code differently than in another
Article thereof, the term shall have the meaning set forth in Article 9, and
provided, further, that if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of the Security Interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy, as the case may be.

 

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Information redacted pursuant to a confidential treatment request.  An
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Section 1.02         Definition of Certain Terms Used Herein

 

As used herein, the following terms shall have the following meanings:

 

“Accounts” shall mean “accounts” as defined in the UCC, and all right, title and
interest of the Grantor to payment for goods and services sold or leased,
including any such right evidenced by Chattel Paper, whether due or to become
due, whether or not it has been earned by performance, and whether now or
hereafter acquired or arising in the future.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, 11 U.S.C.
Section 101 et seq., as amended from time to time.

 

“Books and Records” shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.

 

“Chattel Paper” shall have the meaning given that term in the UCC.

 

“Collateral” shall mean (i) the Pledged Interest and (ii) any and all Proceeds
of the Pledged Interest.

 

“Debtor Relief Laws” shall mean the Bankruptcy Code, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.

 

“Documents” shall have the meaning given that term in the UCC.

 

“Financing Statement” shall have the meaning given that term in the UCC.

 

“General Intangibles” shall mean “general intangibles” as defined in the UCC.

 

“Governmental Authority” shall mean any government, court, regulatory or
administrative agency or commission, or other governmental authority, agency or
instrumentality, whether foreign, federal, state or local (domestic or foreign).

 

“Holders” shall mean the holders from time to time of the Notes.

 

“Indemnitee” shall have the meaning given that term in Section 7.06(b) of this
Agreement.

 

“Indenture” shall have the meaning given to that term in the preliminary
statement of this Agreement.

 

“Instruments” shall have the meaning given that term in the UCC.

 

“Janssen” shall mean Janssen Pharmaceutica, N.V., a Belgium corporation,
including its successors and assigns.

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

“Janssen Agreement” shall mean the License, Development, Manufacturing and
Commercialization Agreement by and between the Grantor and Janssen effective as
of June 30, 2006, as such agreement is amended and in effect on the date hereof,
together with the Janssen Consent, as each may be amended and/or restated from
time to time after the date hereof in accordance with the terms of the Indenture
and any new, substitute or amended agreement by and between the Grantor and
Janssen relating to the Milestone Payments to be made after the date hereof in
accordance with the terms of the Indenture.

 

“Janssen Consent” shall have the meaning given that term in Section 2(k) of the
Note Purchase Agreement.

 

“Laws” shall mean, collectively, all international, foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with, any Governmental Authority, in each case
whether or not having the force of law.

 

[***].

 

[***].

 

[***].

 

[***].

 

“Milestone Payments” shall mean collectively [***] and (ii) (a) all additional
amounts added to any of the milestone payments described above in clauses
(i)(a) and (b) under any provision of the Janssen Agreement, including any
interest assessed in connection with a delay in the payment by Janssen of the
milestone payments described above in clauses (i)(a) and (b) pursuant to
Section 9.10 of the Janssen Agreement and (b) the Collateral Agent’s Pro Rata
Portion of all additional amounts added to the milestone payment described above
in clause (i)(c) under any provision of the Janssen Agreement, including any
interest assessed in connection with a delay in the payment by Janssen of the
milestone payment described above in clause (i)(c) pursuant to Section 9.10 of
the Janssen Agreement.

 

“Note Documents” shall mean the Indenture, the Notes and the Collateral
Documents, in each case including all exhibits and schedules thereto, and all
other agreements, documents and instruments relating to the Notes, in each case
as the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof.

 

“Obligations” shall mean the Note Obligations (as defined in the Indenture).

 

“Payment Account” shall have the meaning given that term in Section 5.01(c).

 

“Payment Direction” shall have the meaning given that term in Section 5.01(a).

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

“Payment Intangible” shall have the meaning given that term in the UCC.

 

“Person” shall mean an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization of any kind,
including a Governmental Authority.

 

“Pledged Interest” shall mean collectively (i) an undivided 100% interest in the
right to receive the Milestone Payments and (ii) the right to enforce directly
against Janssen the right to payment of all or any portion of the Milestone
Payments represented by the Pledged Interest when earned upon achievement of the
Milestone Events pursuant to the Janssen Agreement.

 

“Proceeds” shall mean “proceeds” as defined in the UCC.

 

“Pro Rata Portion” shall mean, with respect to the Collateral Agent[***] and,
with respect to the Grantor[***].

 

“Secured Parties” shall mean

 

(I)            THE COLLATERAL AGENT;

 

(II)           THE TRUSTEE;

 

(III)          THE HOLDERS; AND

 

(IV)          THE SUCCESSORS AND ASSIGNS OF EACH OF THE FOREGOING.

 

“Security Interest” shall have the meaning given that term in Section 2.01.

 

Section 1.03         Rules of Interpretation The rules of interpretation
specified in Section 1.03 of the Indenture shall be applicable to this
Agreement.

 

ARTICLE II
SECURITY INTEREST

 

Section 2.01         Security Interest As security for the payment or
performance, as the case may be, in full of the Obligations, the Grantor hereby
pledges to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in, all of the Grantor’s right, title and interest in, to and
under the Collateral (the “Security Interest”).  Without limiting the foregoing,
the Grantor hereby designates the Collateral Agent as the Grantor’s true and
lawful attorney, exercisable by the Collateral Agent or its nominee or custodian
whether or not an Event of Default exists, with full power of substitution, at
the Collateral Agent’s option, to file one or more Financing Statements and
continuation statements as it determines reasonably necessary for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by the Grantor, without the signature of the Grantor (the
Grantor hereby appointing the Collateral Agent as its attorney to sign its name
to any such Financing Statement or continuation statement, whether or not an

 

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of this exhibit has been filed separately with the Commission.

 

Event of Default exists), and naming the Grantor as debtor and the Collateral
Agent as secured party.

 

Section 2.02         No Assumption of Liability No Assumption of Liability.  The
Security Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or modify,
any obligation or liability of the Grantor with respect to or arising out of the
Collateral.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

The Grantor represents and warrants to the Collateral Agent and the Secured
Parties, as of the date of this Agreement, that:

 

Section 3.01         Title and Authority The Grantor has good and valid rights
in and title to the Collateral and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained and is in full force and effect.

 

Section 3.02         Filings A Financing Statement or other appropriate filings,
recordings or registrations containing a description of the Collateral have been
delivered to the Collateral Agent or its nominee or custodian for filing in the
central-filing office specified in Schedule 3.05 hereto, which Financing
Statement constitutes all the filings and recordings that are necessary to
establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral in which the security interest may be perfected by filing or
recording, and no further or subsequent filing, refiling, recording or
rerecording is necessary, except as provided under applicable law.

 

Section 3.03         Validity and Perfection of Security Interest The Security
Interest constitutes a legal and valid Lien (prior and superior in right and
interest to any other Person) in all the Collateral securing the payment and
performance of the Obligations, and, subject to the filings described in
Section 3.02 above, a perfected Lien (prior and superior in right and interest
to any other Person) in all Collateral in which a security interest may be
perfected by filing or recording a Financing Statement or analogous document
pursuant to the Uniform Commercial Code or other applicable Law.  No amounts
payable under or in connection with the Collateral are evidenced by any
Instrument or Chattel Paper.

 

Section 3.04         Absence of Other Liens To the extent that the Collateral
currently exists, the Collateral is owned by the Grantor free and clear of any
Lien.  The Grantor has not filed or consented to the filing of any Financing
Statement or analogous document under the Uniform Commercial Code or any other
applicable laws covering any Collateral.

 

Section 3.05         UCC Representations and Warranties The Grantor’s exact
legal name is, and for the immediately preceding ten (10) years has been,
“Vertex Pharmaceuticals Incorporated”.  The principal place of business and
chief executive office of the Grantor for the

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

immediately preceding ten (10) years and the office where it keeps its books and
records relating to the Collateral are located at the address(es) set forth on
Schedule 3.05 attached hereto.  The Grantor’s Massachusetts organizational
identification number and Federal Employer Identification Number are as set
forth on Schedule 3.05 attached hereto.

 

ARTICLE IV
COVENANTS

 

Section 4.01         Change of Name; Location of Collateral; Records; Place of
Business

 

(a)           The Grantor agrees to furnish to the Collateral Agent at least
thirty (30) days’ (or such shorter period of time as may be agreed to by the
Collateral Agent) prior written notice of any change (i) in its name, (ii) in
its organizational structure (including its status as a corporation incorporated
under the laws of The Commonwealth of Massachusetts) or (iii) in its Federal
Taxpayer Identification Number or state organizational number.  The Grantor
agrees not to effect or permit any change referred to above in this Section 4.01
unless all filings have been made under the Uniform Commercial Code or otherwise
that are required or advisable in order for the Collateral Agent to continue at
all times following such change to have a valid, legal and perfected Lien (prior
and superior in right and interest to any other Person) in all the Collateral.

 

(b)           The Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral as is consistent
with its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those in which
the Grantor is engaged, but in any event to include complete accounting records
with respect to any part of the Collateral.

 

Section 4.02         Creation and Perfection of Liens Securing Collateral;
Further Assurances

 

(a)           On or prior to the date of this Agreement, the Grantor shall have
granted, created and perfected the security interests and other Liens created or
intended to be created pursuant to this Agreement in the Collateral in favor of
the Collateral Agent.

 

(b)           The Grantor shall, and shall cause each of the Guarantors to,
execute any and all further documents, Financing Statements, agreements and
instruments, and take all further action that may be required under applicable
law, or that the Collateral Agent may reasonably request, in order to grant,
create, preserve, enforce, protect and perfect the validity and priority of the
security interests and other Liens created by this Agreement in the Collateral.

 

(c)           The Grantor shall, and shall cause each of the Guarantors to, do
or cause to be done all acts and things that may be required, or that the
Collateral Agent from time to time may reasonably request, to assure and confirm
that the Collateral Agent holds, for the benefit of the Secured Parties, duly
created and enforceable and perfected Liens upon the Collateral (including any
property or assets that are acquired or otherwise become Collateral after the
date of this Agreement), in each case, as contemplated by, and with the lien
priority required under, this Agreement.

 

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Information redacted pursuant to a confidential treatment request.  An
unredacted version
of this exhibit has been filed separately with the Commission.

 

(d)           Upon request of the Collateral Agent at any time after an Event of
Default has occurred and is continuing, the Grantor shall, and shall cause each
of the Guarantors to, and shall cause the Subsidiaries to, (i) permit the
Collateral Agent or any advisor, auditor, consultant, attorney or representative
acting for the Collateral Agent, upon reasonable notice to the Grantor and
during normal business hours, to make extracts from and copy the books and
records of the Grantor and its Subsidiaries relating to the Collateral, and to
discuss any matter pertaining to the Collateral with the officers and employees
of the Grantor and its Subsidiaries, and (ii) deliver to the Collateral Agent
such reports relating to any such property or any Lien thereon as the Collateral
Agent may reasonably request.  The Grantor shall promptly reimburse the
Collateral Agent for all reasonable costs and expenses incurred by the
Collateral Agent in connection therewith, including all reasonable fees and
charges of any advisors, auditors, consultants, attorneys or representatives
acting for the Collateral Agent.

 

(e)           The provisions of this Section 4.02 shall apply only to the
security interests and other Liens on the Collateral in favor of the Collateral
Agent, and shall not impose or be interpreted as imposing any duty on the
Grantor or any Guarantor to act in a manner that preserves the Collateral
(including without limitation Janssen’s obligation to make the Milestone
Payments or the amount of any Milestone Payment or the date on which a Milestone
Payment is due) or to refrain from acting in a manner that adversely impacts the
Collateral (including without limitation Janssen’s obligation to make the
Milestone Payments or the amount of any Milestone Payment or the date on which a
Milestone Payment is due); provided, however, that the foregoing provisions of
this sentence shall not limit the Grantor’s obligations under Section 4.12 of
the Indenture.

 

Section 4.03         Taxes; Encumbrances At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral and which
the Grantor is not diligently contesting by appropriate proceedings or actions,
and may pay for the preservation of the Collateral to the extent the Grantor
fails to do so as required by the Indenture or this Agreement, and the Grantor
agrees to reimburse the Collateral Agent on demand for any payment made or any
expense reasonably incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.03 shall be
interpreted as excusing the Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of the Grantor with respect to taxes, assessments,
charges, fees, Liens, security interests or other encumbrances and preservation
as set forth herein or in the other Note Documents.

 

Section 4.04         Assignment of Security Interest in Milestone Payments If at
any time the Grantor shall take a security interest in any property of Janssen
or any other Person to secure payment and performance of a Milestone Payment or
otherwise in respect of the Milestone Payments, the Grantor shall promptly
assign such security interest to the Collateral Agent.

 

Section 4.05         Limitation on Disposition of Collateral and Liens on
Collateral The Grantor shall not (i) directly or indirectly, sell, transfer,
assign, lease, license, sublicense, convey or otherwise directly or indirectly
dispose of any of the Collateral or any interest therein or (ii) except for the
Security Interest in the Collateral granted to the Collateral

 

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Agent for the benefit of the Secured Parties by this Agreement, cause or suffer
to exist or become effective any Lien of any kind on or with respect to any of
the Collateral or any interest therein, or, in each case, enter into any
agreement to do any of the foregoing, provided, however, that in no event shall
the termination of the Janssen Agreement for any reason be a violation or breach
of this Section 4.05 or any other term of this Agreement or the Indenture.

 

Section 4.06         Marking of Books and Records To the extent that the
Collateral Agent may reasonably request, in order to perfect the Security
Interest or to enable the Collateral Agent to exercise its rights and remedies
hereunder, the Grantor shall mark its Books and Records relating to the
Collateral and documents evidencing or pertaining thereto with an appropriate
reference to the fact that the Milestone Payments have been assigned to the
Collateral Agent for the benefit of the Secured Parties and that the Collateral
Agent has a security interest therein.

 

ARTICLE V
PAYMENTS

 

SECTION 5.01         PAYMENT DIRECTION; PAYMENT ACCOUNT

 

(A)           ON OR PRIOR TO THE DATE HEREOF, THE GRANTOR SHALL (I) DIRECT
JANSSEN TO PAY ALL MILESTONE PAYMENTS AND OTHER PAYMENTS ON ACCOUNT OF THE
PLEDGED INTEREST, IN EACH CASE WHEN DUE AND PAYABLE UNDER THE JANSSEN AGREEMENT,
TO THE PAYMENT ACCOUNT BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS IN
ACCORDANCE WITH THE PAYMENT DIRECTION; AND (II) DELIVER TO THE COLLATERAL AGENT
AND THE TRUSTEE AN EXECUTED COPY OF THE IRREVOCABLE DIRECTION ADDRESSED TO
JANSSEN TO PAY THE MILESTONE PAYMENTS EVIDENCED BY THE PLEDGED INTEREST DIRECTLY
TO THE PAYMENT ACCOUNT IN THE FORM ATTACHED AS EXHIBIT A HERETO (THE “PAYMENT
DIRECTION”).

 

(B)           NOTWITHSTANDING THE FOREGOING AND THE TERMS OF THE PAYMENT
DIRECTION, IF JANSSEN OR ANY OTHER PERSON MAKES ANY PAYMENT ON ACCOUNT OF THE
PLEDGED INTEREST TO THE GRANTOR OR ANY OF ITS SUBSIDIARIES OR AFFILIATES, THEN
THE GRANTOR PROMPTLY, AND IN ANY EVENT NO LATER THAN THREE (3) BUSINESS DAYS
FOLLOWING THE RECEIPT BY THE GRANTOR OR SUCH SUBSIDIARY OR AFFILIATE OF SUCH
PAYMENT, SHALL REMIT SUCH PAYMENT TO THE PAYMENT ACCOUNT PURSUANT TO
SECTION 5.01(C).  ALL PAYMENTS MADE TO THE GRANTOR (OR ANY OF ITS SUBSIDIARIES
OR AFFILIATES) ON ACCOUNT OF THE PLEDGED INTEREST SHALL BE HELD BY THE GRANTOR
(OR SUCH SUBSIDIARY OR AFFILIATE) IN TRUST FOR THE BENEFIT OF THE COLLATERAL
AGENT AND THE OTHER SECURED PARTIES UNTIL REMITTED TO THE PAYMENT ACCOUNT
PURSUANT TO SECTION 5.01(C) FOR APPLICATION PURSUANT TO THE TERMS OF THE NOTE
DOCUMENTS.

 

(C)           ALL PAYMENTS BY JANSSEN PURSUANT TO SECTION 5.01(A) AND THE
GRANTOR PURSUANT TO SECTION 5.01(B) OF THIS AGREEMENT SHALL BE MADE BY WIRE
TRANSFER OF IMMEDIATELY AVAILABLE FUNDS, WITHOUT SET-OFF, TO THE TRUSTEE AT THE
ACCOUNT SET FORTH ON SCHEDULE 5.01(C) HERETO (OR TO SUCH OTHER ACCOUNT AS THE
TRUSTEE SHALL SPECIFY BY WRITTEN NOTICE TO THE GRANTOR FROM TIME TO TIME) (THE
“PAYMENT ACCOUNT”).

 

(D)           IN THE EVENT THE GRANTOR REDEEMS NOTES PURSUANT TO CLAUSE (II) OF
SECTION 3.08(B) OF THE INDENTURE ON A DATE BEFORE JANSSEN DELIVERS THE
APPLICABLE MILESTONE PAYMENT TO THE TRUSTEE THAT OTHERWISE WOULD HAVE BEEN USED
BY THE TRUSTEE TO REDEEM SUCH NOTES, THE GRANTOR SHALL BE ENTITLED TO ANY
AMOUNTS SUBSEQUENTLY PAID BY JANSSEN WITH RESPECT TO SUCH

 

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MILESTONE PAYMENT AND, IN FURTHERANCE OF THE FOREGOING, (I) THE COLLATERAL AGENT
ON BEHALF OF THE TRUSTEE AND THE HOLDERS SHALL ASSIGN THEIR RESPECTIVE RIGHTS TO
RECEIVE SUCH MILESTONE PAYMENT FROM JANSSEN TO THE GRANTOR AND, NOTWITHSTANDING
THE TERMS OF SECTION 5.01(A) AND THE PAYMENT DIRECTION, SHALL INSTRUCT JANSSEN
IN WRITING TO PAY SUCH MILESTONE PAYMENT DIRECTLY TO THE GRANTOR, (II) SUCH
AMOUNT OWED OR PAID BY JANSSEN SHALL NOT BE USED BY THE TRUSTEE TO REDEEM ANY
PORTION OF THE NOTES UNDER SECTION 3.08 OF THE INDENTURE NOR SHALL SUCH AMOUNT
BE CONSIDERED COLLATERAL UNDER THIS AGREEMENT OR THE INDENTURE AND (III) IF
JANSSEN PAYS ANY SUCH AMOUNTS WITH RESPECT TO SUCH MILESTONE PAYMENT TO THE
TRUSTEE OR THE COLLATERAL AGENT PURSUANT TO SECTION 5.01(A) HEREOF AND THE
PAYMENT DIRECTION, THE TRUSTEE OR THE COLLATERAL AGENT SHALL PROMPTLY TURN OVER
SUCH AMOUNT TO THE GRANTOR BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS TO AN
ACCOUNT DESIGNATED BY THE GRANTOR.

 

Section 5.02         Power of Attorney The Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor’s true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for the Grantor and in the Grantor’s name
or otherwise, for the use and benefit of the Collateral Agent and the Secured
Parties, (i) at any time, whether or not a Default or Event of Default has
occurred, to take actions required to be taken by the Grantor under Section 2.01
of this Agreement, (ii) upon the occurrence and during the continuance of an
Event of Default, (A) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
comprising or evidencing the Collateral or any part thereof; (B) to demand,
collect, receive payment of, give receipt for and give discharges and releases
of all or any of the Collateral; (C) to sign the name of the Grantor on any
proof of claim in bankruptcy against Janssen; (D) to commence and prosecute any
and all suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or any of the
Collateral; and (E) to sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes, and (iii) to notify or to require the Grantor to
notify Janssen to make payment directly to the Collateral Agent (or its nominee
or custodian) in a manner other than as specified in the Payment Direction;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent or any Secured Party to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent or
any Secured Party, or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, and no action
taken or omitted to be taken by the Collateral Agent or any Secured Party with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Grantor or to any claim or action against
the Collateral Agent or any Secured Party other than arising out of the gross
negligence or willful misconduct of the Collateral Agent or any such Secured
Party (as determined by a court of competent jurisdiction by a final and
nonappealable judgment); and provided, further, however, that nothing contained
in this Section 5.02 shall entitle the Collateral Agent or any of the Secured
Parties to the rights of Grantor under the Janssen Agreement other than the
right to payment of the Collateral.  It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantor for the purposes set forth above is coupled with an interest and is
irrevocable.  The provisions of this Section shall in no event relieve the

 

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Grantor of any of its obligations hereunder or under any other Note Document
with respect to the Collateral or any part thereof or impose any obligation on
the Collateral Agent or any Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Collateral Agent or any Secured Party of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder, under any other Note Document, by law or otherwise.

 

ARTICLE VI
REMEDIES

 

Section 6.01         Remedies Upon Default Upon the occurrence and during the
continuance of an Event of Default, it is agreed that the Collateral Agent shall
have in any jurisdiction in which enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a secured party under
the UCC (whether or not in effect in the jurisdiction where such rights are
exercised) or other applicable Law.  The rights and remedies of the Collateral
Agent shall include, without limitation, the right to take any or all of the
following actions at the same or different times:

 

(A)           WITH RESPECT TO ANY COLLATERAL CONSISTING OF ACCOUNTS, GENERAL
INTANGIBLES (INCLUDING PAYMENT INTANGIBLES), INSTRUMENTS, CHATTEL PAPER, AND
DOCUMENTS, THE COLLATERAL AGENT MAY COLLECT THE COLLATERAL WITH OR WITHOUT THE
TAKING OF POSSESSION OF ANY OF THE COLLATERAL.

 

(B)           THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT,
SUBJECT TO APPLICABLE LAW, TO SELL OR OTHERWISE DISPOSE OF ALL OR ANY PART OF
THE COLLATERAL, AT PUBLIC OR PRIVATE SALE, FOR CASH, UPON CREDIT OR FOR FUTURE
DELIVERY AS THE COLLATERAL AGENT SHALL DEEM APPROPRIATE.  EACH PURCHASER AT ANY
SUCH SALE SHALL HOLD THE PROPERTY SOLD ABSOLUTELY, FREE FROM ANY CLAIM OR RIGHT
ON THE PART OF THE GRANTOR.

 

(C)           THE COLLATERAL AGENT SHALL GIVE THE GRANTOR 10 DAYS’ PRIOR WRITTEN
NOTICE, BY AUTHENTICATED RECORD, OF THE TIME AND PLACE OF ANY PROPOSED SALE. 
ANY SUCH NOTICE SHALL (I) IN THE CASE OF A PUBLIC SALE, STATE THE TIME AND PLACE
FIXED FOR SUCH SALE, (II) IN THE CASE OF A PRIVATE SALE, STATE THE DAY AFTER
WHICH SUCH SALE MAY BE CONSUMMATED, (III) CONTAIN THE INFORMATION SPECIFIED IN
SECTION 9-613 OF THE UCC, (IV) BE AUTHENTICATED AND (V) BE SENT TO THE PARTIES
REQUIRED TO BE NOTIFIED PURSUANT TO SECTION 9-611(C) OF THE UCC; PROVIDED THAT,
IF THE COLLATERAL AGENT FAILS TO COMPLY WITH THIS SENTENCE IN ANY RESPECT, ITS
LIABILITY FOR SUCH FAILURE SHALL BE LIMITED TO THE LIABILITY (IF ANY) IMPOSED ON
IT AS A MATTER OF LAW UNDER THE UCC.  THE GRANTOR AGREES THAT SUCH WRITTEN
NOTICE SHALL SATISFY ALL REQUIREMENTS FOR NOTICE TO THE GRANTOR WHICH ARE
IMPOSED UNDER THE UCC OR OTHER APPLICABLE LAW WITH RESPECT TO THE EXERCISE OF
THE COLLATERAL AGENT’S RIGHTS AND REMEDIES HEREUNDER UPON DEFAULT.  THE
COLLATERAL AGENT SHALL NOT BE OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF
ANY COLLATERAL IF IT SHALL DETERMINE NOT TO DO SO, REGARDLESS OF THE FACT THAT
NOTICE OF SALE OR OTHER DISPOSITION OF SUCH COLLATERAL SHALL HAVE BEEN GIVEN. 
THE COLLATERAL AGENT MAY, WITHOUT NOTICE OR PUBLICATION, ADJOURN ANY PUBLIC OR
PRIVATE SALE OR CAUSE THE SAME TO BE ADJOURNED FROM TIME TO TIME BY ANNOUNCEMENT
AT THE TIME AND PLACE FIXED FOR SALE, AND SUCH SALE MAY, WITHOUT FURTHER NOTICE,
BE MADE AT THE TIME AND PLACE TO WHICH THE SAME WAS SO ADJOURNED.

 

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(D)           ANY PUBLIC SALE SHALL BE HELD AT SUCH TIME OR TIMES WITHIN
ORDINARY BUSINESS HOURS AND AT SUCH PLACE OR PLACES AS THE COLLATERAL AGENT MAY
FIX AND STATE IN THE NOTICE OF SUCH SALE.  AT ANY SALE OR OTHER DISPOSITION, THE
COLLATERAL, OR PORTION THEREOF, TO BE SOLD MAY BE SOLD IN ONE LOT AS AN ENTIRETY
OR IN SEPARATE PARCELS, AS THE COLLATERAL AGENT MAY (IN ITS SOLE AND ABSOLUTE
DISCRETION) DETERMINE.  IF ANY OF THE COLLATERAL IS SOLD, LEASED, OR OTHERWISE
DISPOSED OF BY THE COLLATERAL AGENT ON CREDIT, THE OBLIGATIONS SHALL NOT BE
DEEMED TO HAVE BEEN REDUCED AS A RESULT THEREOF UNLESS AND UNTIL PAYMENT IN FULL
IS RECEIVED THEREON BY THE COLLATERAL AGENT.  IN THE EVENT THAT THE PURCHASER
FAILS TO PAY FOR THE COLLATERAL, THE COLLATERAL AGENT MAY RESELL THE COLLATERAL
AND APPLY THE PROCEEDS FROM SUCH RESALE IN ACCORDANCE WITH THE TERMS OF
SECTION 6.02 OF THIS AGREEMENT.

 

(E)           AT ANY PUBLIC (OR, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
PRIVATE) SALE MADE PURSUANT TO THIS SECTION 6.01, THE COLLATERAL AGENT, IF SO
DIRECTED BY THE HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE THEN
OUTSTANDING NOTES, SHALL, OR ANY OTHER SECURED PARTY MAY BID FOR OR PURCHASE,
FREE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) FROM ANY RIGHT OF REDEMPTION,
STAY, VALUATION OR APPRAISAL ON THE PART OF THE GRANTOR, THE COLLATERAL OR ANY
PART THEREOF OFFERED FOR SALE, AND THE COLLATERAL AGENT (BUT NOT ANY OTHER
SECURED PARTY UNLESS THE HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF
THE THEN OUTSTANDING NOTES SHALL OTHERWISE AGREE IN WRITING) MAY (OR SHALL, IF
SO DIRECTED BY THE HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE
THEN OUTSTANDING NOTES) MAKE PAYMENT ON ACCOUNT THEREOF BY USING ANY OR ALL OF
THE OBLIGATIONS (OR, IN THE CASE OF ANY SUCH BID OR PURCHASE BY ANY OTHER
SECURED PARTY, ANY OR ALL OF THE OBLIGATIONS THEN DUE AND PAYABLE TO SUCH OTHER
SECURED PARTY) AS A CREDIT AGAINST THE PURCHASE PRICE, AND THE COLLATERAL AGENT
OR SUCH OTHER SECURED PARTY MAY, UPON COMPLIANCE WITH THE TERMS OF SALE, HOLD,
RETAIN AND DISPOSE OF SUCH PROPERTY WITHOUT FURTHER ACCOUNTABILITY TO THE
GRANTOR THEREFOR.

 

(F)            AS AN ALTERNATIVE TO EXERCISING THE POWER OF SALE HEREIN
CONFERRED UPON IT, THE COLLATERAL AGENT MAY PROCEED BY A SUIT OR SUITS AT LAW OR
IN EQUITY TO FORECLOSE UPON THE COLLATERAL AND TO SELL THE COLLATERAL OR ANY
PORTION THEREOF PURSUANT TO A JUDGMENT OR DECREE OF A COURT OR COURTS HAVING
COMPETENT JURISDICTION OR PURSUANT TO A PROCEEDING BY A COURT-APPOINTED
RECEIVER.

 

(G)           TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GRANTOR HEREBY
WAIVES ALL RIGHTS OF DEMAND, REDEMPTION, STAY, VALUATION AND APPRAISAL WHICH THE
GRANTOR NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR
STATUTE NOW EXISTING OR HEREAFTER ENACTED.

 

Section 6.02         Application of Proceeds After the occurrence and during the
continuance of an Event of Default, the Collateral Agent shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, in accordance with the provisions of Section 6.10 of the
Indenture.

 

ARTICLE VII
MISCELLANEOUS

 

Section 7.01         Notices All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 13.02 of the Indenture.

 

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Section 7.02         Security Interest Absolute All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantor
hereunder shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Indenture, any other Note Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (ii) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Indenture, any other Note Document or any other agreement or instrument,
(iii) any exchange, release or non-perfection of any Lien on other collateral,
or any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, (iv) the
existence of any claim, set-off or other right which the Grantor may have at any
time against the Collateral Agent, any other Secured Party, or any other Person,
whether in connection herewith or any unrelated transaction; provided, that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim or (v) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Grantor in respect of
the Obligations or this Agreement.

 

Section 7.03         Survival of Agreement All covenants, agreements,
representations and warranties made by the Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Holders or other Secured Parties and shall survive the issuance of the Notes,
regardless of any investigation made by any of the Holders or on their behalf, 
and shall continue in full force and effect until this Agreement shall
terminate.

 

Section 7.04         Binding Effect This Agreement shall become effective as to
the Grantor when a counterpart hereof executed on behalf of the Grantor shall
have been delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be binding
upon the Grantor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of the Grantor, the Collateral Agent and
the other Secured Parties and their respective successors and assigns, except
that the Grantor shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement or the Indenture.

 

Section 7.05         Successors and Assigns Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.

 

SECTION 7.06         COLLATERAL AGENT’S FEES AND EXPENSES; INDEMNIFICATION

 

(A)           WITHOUT LIMITATION OF ITS INDEMNIFICATION OBLIGATIONS UNDER THE
OTHER NOTE DOCUMENTS, THE GRANTOR AGREES TO PAY UPON DEMAND TO THE COLLATERAL
AGENT THE AMOUNT OF ANY AND ALL REASONABLE EXPENSES, INCLUDING THE REASONABLE
FEES, DISBURSEMENTS AND OTHER CHARGES OF ITS COUNSEL AND OF ANY EXPERTS OR
AGENTS, WHICH THE COLLATERAL AGENT MAY INCUR IN CONNECTION WITH (I) THE
ADMINISTRATION OF THIS AGREEMENT (INCLUDING THE CUSTOMARY FEES AND CHARGES OF
THE COLLATERAL AGENT), (II) THE CUSTODY OR PRESERVATION OF, OR THE SALE OF,
COLLECTION FROM OR OTHER REALIZATION UPON ANY OF THE COLLATERAL, (III)

 

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THE EXERCISE, ENFORCEMENT OR PROTECTION OF ANY OF THE RIGHTS OF THE COLLATERAL
AGENT HEREUNDER OR (IV) THE FAILURE OF THE GRANTOR TO PERFORM OR OBSERVE ANY OF
THE PROVISIONS HEREOF.

 

(B)           WITHOUT LIMITATION OF ITS INDEMNIFICATION OBLIGATIONS UNDER THE
OTHER NOTE DOCUMENTS, THE GRANTOR AGREES TO INDEMNIFY THE COLLATERAL AGENT, ITS
PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND ADVISORS (EACH AN
“INDEMNITEE”) AGAINST, AND HOLD EACH OF THEM HARMLESS FROM, ANY AND ALL LOSSES,
CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING REASONABLE FEES,
DISBURSEMENTS AND OTHER CHARGES OF COUNSEL, ASSERTED AGAINST OR REASONABLY
INCURRED BY ANY OF THEM ARISING OUT OF, IN ANY WAY CONNECTED WITH, OR AS A
RESULT OF, THE EXECUTION, DELIVERY OR PERFORMANCE OF THIS AGREEMENT, THE OTHER
COLLATERAL DOCUMENTS, OR ANY CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING
RELATING HERETO, THERETO OR TO THE COLLATERAL, WHETHER OR NOT ANY INDEMNITEE IS
A PARTY THERETO; PROVIDED, THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE,
BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR
RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL
AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNITEE.

 

(C)           ANY SUCH AMOUNTS PAYABLE AS PROVIDED HEREUNDER SHALL BE ADDITIONAL
OBLIGATIONS SECURED HEREBY AND BY THE OTHER COLLATERAL DOCUMENTS.  THE
PROVISIONS OF THIS SECTION 7.06 SHALL REMAIN OPERATIVE AND IN FULL FORCE AND
EFFECT REGARDLESS OF THE TERMINATION OF THIS AGREEMENT, THE INDENTURE OR ANY
OTHER NOTE DOCUMENT, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY,
THE REPAYMENT OF ANY OF THE NOTES, THE INVALIDITY OR UNENFORCEABILITY OF ANY
TERM OR PROVISION OF THIS AGREEMENT, THE INDENTURE OR ANY OTHER NOTE DOCUMENT,
OR ANY INVESTIGATION MADE BY OR ON BEHALF OF THE COLLATERAL AGENT OR ANY
HOLDER.  ALL AMOUNTS DUE UNDER THIS SECTION 7.06 SHALL BE PAYABLE ON WRITTEN
DEMAND THEREFOR.

 

Section 7.07         GOVERNING LAW THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(EXCEPT FOR THE CONFLICT OF LAWS RULES THEREOF, BUT INCLUDING GENERAL
OBLIGATIONS LAW SECTIONS 5-1401 AND 5-1402).

 

Section 7.08         Waivers; Amendment         (a)  No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power.  The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Trustee, the Holders and the other Secured
Parties under the other Note Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have.  No waiver of any
provisions of this Agreement, the Indenture or any other Note Document or
consent to any departure by the Grantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.  No notice to or demand on the Grantor in any case
shall entitle the Grantor to any other or further notice or demand in similar or
other circumstances.

 

(B)           NEITHER THIS AGREEMENT NOR ANY PROVISION HEREOF MAY BE WAIVED,
AMENDED OR MODIFIED EXCEPT PURSUANT TO AN AGREEMENT OR AGREEMENTS IN WRITING
ENTERED INTO BY THE

 

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COLLATERAL AGENT AND THE GRANTOR, SUBJECT TO ANY CONSENT REQUIRED IN ACCORDANCE
WITH ARTICLE IX OF THE INDENTURE.

 

Section 7.09         WAIVER OF JURY TRIAL EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING IN WHICH THE GRANTOR AND THE COLLATERAL AGENT
ARE PARTIES AND WHICH, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THIS
AGREEMENT, ANY OTHER NOTE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY 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 AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

Section 7.10         Severability In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction).  The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

 

Section 7.11         Entire Agreement This Agreement, together with the Exhibits
hereto (which are incorporated herein by reference), and the other Transaction
Documents constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties
hereto with respect to the subject matter of this Agreement.  No representation,
inducement, promise, understanding, condition or warranty not set forth herein
(or in the Exhibits or other Transaction Documents) has been made or relied upon
by either party hereto.  Neither this Agreement, nor any provision hereof, is
intended to confer upon any Person other than the parties hereto and the Secured
Parties any rights or remedies hereunder.

 

Section 7.12         Counterparts This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 7.04.  Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.

 

Section 7.13         Jurisdiction    (a)      The Grantor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in

 

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any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Agreement
shall affect any right that the Collateral Agent, the Trustee, any Holder or any
other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement, the Indenture or any other Note Document against the
Grantor or its properties in the courts of any jurisdiction.

 

(B)           THE GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE INDENTURE OR ANY OTHER NOTE
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

Section 7.14         Termination This Agreement and the Security Interest shall
terminate when all the Obligations have been indefeasibly paid in full in
accordance with the terms and conditions of the Indenture (other than contingent
indemnification obligations with respect to then unasserted claims which,
pursuant to the terms of this Agreement or the other Note Documents survive the
termination of this Agreement or the other Note Documents), at which time the
Collateral Agent shall promptly deliver to the Grantor written authority to
terminate, at the Grantor’s request and expense, all Financing Statements and
similar documents which the Grantor shall reasonably request to evidence such
termination.  Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent.

 

Section 7.15         Headings and Recitals The recitals at the beginning of this
Agreement and the headings of the sections and subsections hereof are provided
for convenience only and shall not be construed as representations made by the
Grantor, and shall not in any way affect the meaning or construction of any
provision of this Agreement.

 

Section 7.16         Limitation on Duties of Collateral Agent Beyond the
exercise of reasonable care in the custody and preservation thereof, the
Collateral Agent will not have any duty as to any Collateral in its possession
or control or in the possession or control of any sub agent or bailee or any
income therefrom or as to the preservation of rights against prior parties or
any other rights pertaining thereto.  The Collateral Agent will be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession or control if such Collateral is accorded treatment
substantially equal to that which it accords its own property, and will not be
liable or responsible for any loss or damage to any Collateral, or for any
diminution in the value thereof, by reason of any act or omission of any sub
agent or bailee selected by the Collateral Agent in good faith or by reason of
any act or omission such sub-agent or bailee selected by the Collateral Agent
pursuant to instructions from the Collateral Agent, except to the extent that
such liability arises from the Collateral Agent’s gross negligence, bad

 

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faith or willful misconduct.  The Collateral Agent shall not be responsible for
the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Liens in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder, except to the extent such action or
omission constitutes gross negligence, bad faith or willful misconduct on the
part of the Collateral Agent, for the validity or sufficiency of the Collateral
or any agreement or assignment contained therein, for the validity of the title
of the Company to the Collateral, for insuring the Collateral or for the payment
of taxes, charges, assessments or Liens upon the Collateral or otherwise as to
the maintenance of the Collateral.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

 

VERTEX PHARMACEUTICALS

 

INCORPORATED

 

 

 

 

 

By:

/s/ Matthew W. Emmens

 

Name:

Matthew W. Emmens

 

Title:

 Chairman, President and CEO

 

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Collateral Agent

 

 

 

 

 

 

 

By:

/s/ Karen Beard

 

Name:

Karen Beard

 

Title:

Authorized Signatory

 

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