Document:

Exhibit 10.18

June
1, 2006

Jeremy
Helfand

Dear
Jeremy,

This letter sets forth the terms and conditions of your employment with
United Online, Inc. (the “Company”).

1.             Position.  You will serve as
Executive Vice President, Sales and Chief Sales Officer of the Company.  You will report to me as the Chief Executive
Officer of the Company and you agree to devote your full-time attention, skill
and efforts to the performance of your duties for the Company.  Your
employment with the Company will commence on a date (the “Commencement Date”)
to be determined by you, which date will be no later than July 1, 2006.

2.             Salary and Benefits.  You will be paid a salary at the annual rate
of $350,000, payable in bi-weekly installments in accordance with the Company’s
standard payroll practices, subject to any increases as determined by the Board
of Directors of the Company (the “Board of Directors”) from time to time.  You will be eligible to participate in the
Company’s employee benefits plans, including its 401(k) plan.  In addition, you will be entitled to
participate in the Company’s Exec-U-Care Medical Reimbursement Insurance Plan
so long as such plan is made generally available to the Company’s senior
executives.  You will be entitled to a
minimum of 4 weeks of paid vacation each year or such greater amount as
determined in accordance with the Company’s standard vacation policy.  The Company will reimburse you (or pay) for
certain relocation expenses as set forth in Exhibit A attached hereto.

3.             Bonus.

a.             Signing Bonus.  Within seven (7) days following the Commencement Date, you will receive
a signing bonus (the “Signing Bonus”) equal to $100,000.  In the event your employment with the Company
is terminated prior to the one (1)-year anniversary of the Commencement Date (i)
by the Company “for cause” (as defined below) or (ii) by you other than as a
result of death, “Disability” or for “good reason” (each term as defined
below), you will pay the Company the full amount of the Signing Bonus within
fourteen (14) days following the date of termination (it being understood that
you will only have to pay the net amount of the Signing Bonus (i.e., the full amount of the Signing Bonus
less the amount of tax
withholdings) if such termination occurs in the same tax year as the payment of
the Signing Bonus and the applicable governmental authorities return to the
Company the amount of such tax withholdings previously paid thereto).

b.             Annual Bonus.  For
fiscal year 2006, you will receive a bonus equal to no less than $175,000.  The bonus amount will be determined by the
Compensation Committee of the Board of Directors, and the bonus will be payable
no later than March 31, 2007, concurrently with the Company’s payment of
fiscal year 2006 bonuses to its other executive officers, provided that you
continue to be employed by the Company when such bonuses are paid.  For fiscal years 2007 and 2008, you will be
eligible to participate in a bonus program with eligibility for up to 100% of
your annual base salary.  The criteria
for a bonus for fiscal years 2007 and 2008 and the amounts of such bonuses will
be determined by the Board of Directors or a committee thereof.

4.             Restricted Stock
Units.  On August 15, 2006,
you will be awarded restricted stock units covering 130,000 shares of the
Company’s common stock (the “Restricted Stock Units”).  The Restricted Stock Units will be subject to
the standard terms and conditions set forth in the applicable stock plan and 

 1
 

 

the Company’s standard form
restricted stock unit agreement for employees. 
The Restricted Stock Units will contain the following four (4)-year
vesting schedule based on your continued employment with the Company: 25% of
the underlying shares of the Company’s common stock will vest on each one
(1)-year anniversary of August 15, 2006 such that 100% will have vested by the
four (4)-year anniversary of such date. 
As more fully addressed in the restricted stock unit agreement,
outstanding restricted stock units are entitled to receive regularly-scheduled
cash dividends the Company declares on its common stock.  Dividends paid on restricted stock units are
treated as ordinary income for tax purposes.

Upon the termination of your employment
by the Company “without cause” or by you for “good reason” (each term as
defined below) prior to December 31, 2008, the vesting of your outstanding
Restricted Stock Units will be accelerated by the additional number of shares
in which you would have been vested at the time of such termination if you had
completed an additional twelve (12) months of service (calculated as if such
units vest on a monthly basis).  Such
vesting acceleration will be contingent upon your signing the Release referred
to in Section 7(b) below.  The standard provisions
of the stock plan(s) and related documents applicable to the Restricted Stock
Units will provide for certain vesting acceleration in the event of the
termination of your employment within the twelve (12)-month period following a
change of control of the Company.  In the
event all other executives’ employment agreements are modified to provide for
vesting acceleration benefits of their existing Restricted Stock Units in
anticipation of a change of control (as opposed to only following a change of
control), you will be provided with a similar benefit with respect to the Restricted
Stock Units referred to herein.  Upon the
termination of your employment as a result of death or Disability (as defined
below) prior to December 31, 2008, the vesting of your outstanding Restricted
Stock Units will be accelerated by the additional number of shares in which you
would have been vested at the time of such termination if you had completed an
additional twelve (12) months of service (calculated as if such units vest on a
monthly basis).  In the event of an
inconsistency between the terms set forth in this paragraph and the terms set
forth in the applicable stock plan and/or restricted stock unit agreement, the
terms set forth in this letter will control; provided, however, that the
foregoing will not be construed to diminish the rights that you have under the
applicable stock plan and/or restricted stock unit agreement. The provisions of
this paragraph will only apply to the Restricted Stock Units referred to
herein, although future equity awards may also be covered by this paragraph if
so stated in a resolution of the Board of Directors or a committee thereof.

5.             Policies; Procedures;
Proprietary Information and Inventions Agreement.  As an employee of the Company, you will be
expected to abide by all of the Company’s policies and procedures, including,
without limitation, the terms of the Proprietary Information and Inventions
Agreement between you and the Company, the Insider Trading Policy, the Code of
Ethics and the Employee Handbook, and you agree to execute the foregoing upon
commencement of your employment.

6.             At Will Employment.  Notwithstanding anything to the contrary
contained herein, your employment with the Company will be “at will” and will
not be for any specified term, meaning that either you or the Company will be
entitled to terminate your employment at any time and for any reason, with or
without cause.  Any contrary
representations that may have been made to you are superseded by the terms set
forth in this letter.  This is the full
and complete agreement between you and the Company on this subject.  Although your job duties, title, compensation
and benefits, as well as the Company’s personnel policies and procedures, may
change from time to time, the “at will” nature of your employment may only be
changed in an express written agreement signed by you and the Chief Executive
Officer of the Company.

 2
 

 

7.             Termination
of Employment

a.             Termination
by You.  If you terminate your employment with the
Company for any reason, other than as a result of death or Disability or for “good
reason” as defined below, all obligations of the Company as set forth in this
letter will cease, other than the obligation to pay you for services rendered
through the date of termination, to pay you for any accrued but unused vacation
days as of the date of termination, and to fulfill its obligations  in accordance with the terms of the
applicable stock plan and restricted stock unit agreement.  If you terminate your employment with the
Company for “good reason,” as defined below, in addition to the foregoing, the
Company will pay you the Separation Payment (as defined below) subject to the
conditions set forth in Section 7(b) below, and you will be entitled to the
acceleration of vesting provided in Section 4 above.  However, and notwithstanding the termination
of your employment by you, you will continue to be obligated to comply with the
terms of the Proprietary Information and Inventions Agreement and if
applicable, the noncompetition provisions set forth in Section 9 below.

b.             Termination
by the Company.  If your employment is terminated by the
Company “without cause” as defined below, and subject to the signing of a
release, the form of which is attached hereto as Exhibit B (the “Release”),
the Company will pay you a separation payment (the “Separation Payment”)
calculated as follows: (i) in the event the termination date is on or prior to
the one (1) year anniversary of the Commencement Date, the Separation Payment
will be an amount equal to one (1) year of your then current annual base salary
(and, for the purpose of clarity, the Company acknowledges that you will not be
obligated to pay back the Signing Bonus); or (ii) in the event the termination
date is between the first anniversary of the Commencement Date and December 31,
2008, the Separation Payment will be an amount equal to one (1) year of your
then current annual base salary  plus the Annual Bonus (as defined
herein).  For purposes of the immediately
preceding sentence, “Annual Bonus” means your then current annual base salary multiplied by the bonus percentage used to
calculate the bonus awarded to you for the immediately preceding year and prorated based on the elapsed time between
December 31 of the immediately preceding year and the termination date.  Subject to the Code Section 409A deferral period
described in Section 7(e) below, if applicable, this Separation Payment will be
payable monthly on a pro rata basis over twelve (12) months after such
termination.  Payment of this Separation
Payment will be contingent on your signing the Release and your compliance with
the terms of the Proprietary Information and Inventions Agreement and the
noncompetition provisions set forth in Section 9 below.  Upon termination of your employment “without
cause,” other than the obligations set forth in the first sentence of Section
7(a) above and the acceleration of vesting provided in Section 4 above, the
Company will have no further obligation to you except pursuant to this
paragraph.

If your employment is terminated by the Company “with cause” as defined
below, the Company will have no further obligation to you under the terms of
this letter, other than the obligations set forth in the first sentence of
Section 7(a) above.  However, and
notwithstanding the termination of your employment by the Company “with cause”
or “without cause,” or by you for “good reason,” you will continue to be
obligated to comply with the terms of the Proprietary Information and
Inventions Agreement and if applicable, the noncompetition provisions set forth
in Section 9 below.

You have the right decline to receive a portion of the benefits set
forth under Sections 4 and 7 in the event that you determine that the provision
of such benefits to you would result in a “parachute payment” as such term is
defined in Section 280(G)(b)(2) of the Internal Revenue Code of 1986.

c.             Termination
by Death or Disability.  If
your employment is terminated as a result of your death, the Company will be
obligated to pay your estate or beneficiaries (as the case may be) for services
rendered by you for the Company through the date of your death.  If your employment is terminated as a result
of your Disability, as defined below, the Company will be obligated to pay you
for 

 3
 

 

services
rendered by you for the Company through the date of your termination.  In the event of termination of your
employment due to death or Disability, you, your estate or your beneficiaries,
as appropriate, will be entitled to the acceleration benefits set forth in
Section 4.  The provisions of this
Section 7(c) will not affect or change the rights or benefits to which you are
otherwise entitled under the Company’s benefits plans or otherwise.

d.             Definitions.

For
purposes of this letter, “good reason” means:

(i)                   a reduction in your base salary without your
prior written consent;

(ii)                a material reduction in your position, duties
or responsibilities, without your prior written consent;

(iii)             a change in your place of employment which is
not within a 50-mile radius of the following address, without your prior
written consent: 21301 Burbank Boulevard, Woodland Hills, CA 91367, or

(iv)          any material breach by the Company of the terms of this letter which is
not cured by the Company within fifteen (15) days following receipt of written
notice thereof.

For purposes of this letter, “with cause” means the
extreme cases in which you commit, or fail to perform, of any one or more of
the following acts:

(i)               willfully
damaging of the property, business, business relationships, reputation or
goodwill of the Company or its subsidiaries;

(ii)                commission of a felony or a misdemeanor
involving moral turpitude;

(iii)             theft, dishonesty, fraud or embezzlement;

(iv)            willfully violating any rules or regulations
of any governmental or regulatory body that is or is reasonably expected to be
injurious to the Company or its subsidiaries;

(v)               the use of alcohol, narcotics or other
controlled substances to the extent that it prevents you from efficiently
performing services for the Company or its subsidiaries;

(vi)            willfully injuring any other employee of the
Company or its subsidiaries;

(vii)         willfully injuring any person in the course of performance of services
for the Company or its subsidiaries;

(viii)      disclosing to a competitor or other unauthorized persons confidential
or proprietary information or secrets of the Company or its subsidiaries;

(ix)              solicitation of business on behalf of a
competitor or a potential competitor of the Company or its subsidiaries;

(x)                 harassment of any other employee of the
Company or its subsidiaries or the commission of any act which otherwise
creates an offensive work environment for other employees of the Company or its
subsidiaries;

(xi)              failure for any reason within fifteen
(15)  days after receipt by you of
written notice thereof from the Company, to (a) use your good faith best efforts
to correct, cease or otherwise alter any insubordination, failure to comply
with instructions, inattention to or neglect of important  duties to be performed by you or other act or
omission to act that does or may adversely affect the business or operations of
the Company or its subsidiaries or (b) otherwise use your best efforts to
follow the reasonable and good faith written direction of the Board of
Directors consistent with the scope of your duties;

(xii)           breach of any material term of this letter and failure to cure within
fifteen (15) days of written notice; or

(xiii)        any other act of gross misconduct, which may include, without
limitation, the violation of an important Company policy, that is determined to
constitute “cause” in the good faith discretion of the Board of Directors.

 4
 

 

For purposes of this letter, “without cause” means any reason not
within the scope of the definition of the term “with cause.”

For purposes of this letter, “Disability” means your inability to
engage in any substantial gainful activity necessary to perform your duties as
Chief Sales Officer 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 twelve (12)
months.

e.             Code Section
409A Deferral Period. 
Notwithstanding any provision to the contrary in this letter, no payment
or distribution under this letter which constitutes an item of deferred
compensation under Section 409A of the Internal Revenue Code (the “Code”) and
becomes payable by reason of your termination of employment with the Company
will be made to you prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of your “separation from service” (as
such term is defined in Treasury Regulations issued under Code Section 409A) or
(ii) the date of your death, if you are deemed at the time of such separation
from service to be a “key employee” within the meaning of that term under Code
Section 416(i) and such delayed commencement is otherwise required in order to
avoid a prohibited distribution under Code Section 409A(a)(2).  Upon the expiration of the applicable Code
Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant
to this Section 7(e) (whether they would have otherwise been payable in a
single sum or in installments in the absence of such deferral) shall be paid or
reimbursed to you in a lump sum, and any remaining payments due under this
letter will be paid in accordance with the normal payment dates specified for
them herein.

8.             Withholding Taxes.  All forms of compensation referred to in this
letter are subject to reduction to reflect applicable withholding and payroll
taxes.

9.             Noncompetition Covenants.  Until one (1) year after termination of your
employment with the Company for any reason, so long as you are receiving the
Separation Payment, you will not, at any place in any county, city or other
political subdivision of the United States in which the Company or its
subsidiaries is engaged in business or providing its services:

a.             directly or indirectly design,
develop, manufacture, market or sell any product or service which is in
competition with the products or services of the Company or its subsidiaries;
or

b.             directly
or indirectly own any interest in, control, be employed by or associated with
or render advisory, consulting or other services (including but not limited to
services in research) to any person or entity, or subsidiary, subdivision,
division or joint venture of such entity in connection with the design,
development, manufacture, marketing or sale of a product or service which is in
competition with the products or services of the Company or its subsidiaries;
provided, however, that nothing in this letter will prohibit you from owning
less than one percent (1%) of the equity interests of any publicly held entity.

10.           Entire Agreement.  This letter, together with the Proprietary
Information and Inventions Agreement, any Company handbooks and policies in
effect from time to time and the applicable stock option plan and restricted
stock unit agreement, contains all of the terms of your employment with the
Company and supersedes any prior understandings or agreements, whether oral or
written, between you and the Company.  If
any provision of this letter is held by an arbitrator or a court of competent
jurisdiction to conflict with any federal, state or local law, or to be
otherwise invalid or unenforceable, such provision shall be construed in a manner
so as to maximize its enforceability while giving the greatest effect as
possible to the parties’ intent.  To the
extent any provision cannot be construed to be 

 5
 

 

enforceable, such provision
will be deemed to be eliminated from this letter and of no force or effect and
the remainder of this letter will otherwise remain in full force and effect and
be construed as if such portion had not been included in this letter.  This letter is not assignable by you.  This letter may be assigned by the Company to
its subsidiaries or to successors in interest to the Company or its lines of
business.

11.           Amendment and Governing
Law.  This letter may not be
amended or modified except by an express written agreement signed by you and
the Chief Executive Officer of the Company. 
The terms of this letter and the resolution of any disputes will be
governed by California law, and venue for any disputes will be in Los Angeles,
California.

12.           Term.  This letter will expire on December 31, 2008,
except Sections 6, 9, 10, 11, and 12 will survive such expiration.  The expiration of this letter will not affect
any right to Separation Payments or benefits based on an event which occurred
on or before December 31, 2008. 
Following the expiration of this letter, your employment with the
Company will continue to be “at will.”

We look forward to working with you. 
You may indicate your agreement with these terms by signing and dating
this letter.  This letter is contingent
upon the successful completion of a background investigation.

If you have any questions, please call the undersigned.

	
  

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  UNITED ONLINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARK R. GOLDSTON

  
	
   

  	
  Name:

  	
  Mark R. Goldston

  
	
   

  	
  Title:

  	
  Chairman & Chief Executive Officer

  

 

I have read the foregoing
and accept the terms set forth in this letter:

	
  /s/ JEREMY HELFAND

  	
   

  	
   

  
	
  Jeremy Helfand

  
	
   

  
	
  Dated: June 1,
  2006

  

 

 6
 

 

Exhibit A

RELOCATION PACKAGE

The
Company will reimburse you (or pay) for reasonable expenses incurred in moving
your household goods from Baltimore, Maryland to the greater Los Angeles,
California area, including up to two vehicles, storage (if necessary), packing
and unpacking.  The Company will also
reimburse you (or pay) for reasonable expenses incurred in connection with up
to four (4) house-hunting trips taken by you and your immediate family to the
greater Los Angeles, California area, including tours of specific areas, costs
of hotels, and meals.  In addition, the
Company will reimburse you (or pay) for three (3) months of temporary furnished
housing (and up to three (3) additional months if your current house in
Baltimore, Maryland has not sold by the end of the initial three (3)-month
period) and up to two (2) points on a mortgage loan for the purchase of a home
in the greater Los Angeles, California area. 
In addition, the Company will reimburse you for realtor sales
commissions paid by you in connection with the sale of your current house in
Baltimore, Maryland.  To the extent
possible, the Company will structure such reimbursement and payments to
minimize the tax ramifications to you, if any. 
To the extent you are taxed for any of such matters, the Company will
pay you such amounts as are necessary to cover such taxes.

The
Company, in its sole discretion, may determine the reasonableness of any
particular item or service, and may decline to reimburse or pay for expenses it
finds unreasonable.  The Company will not
pay for relocation costs incurred more than six (6) months after the Commencement
Date.

 7
 

 

Exhibit B

RELEASE

[to be attached]

 

 8

 

EXHIBIT B

[FORM OF]

RELEASE AND WAIVER OF CLAIMS

In consideration of the
severance payments and other benefits to which I have become entitled, pursuant
to that certain letter agreement between United Online, Inc., a Delaware
corporation (the “Company”), and myself
dated       ,       (the
“Employment  Agreement”), in connection
with the termination of my employment on this date, I,           hereby
furnish the Company with the following release and waiver (“Release and Waiver”).

I hereby release and
forever discharge the Company, its officers, directors, agents, employees,
stockholders, successors, assigns and affiliates from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorney fees,
damages, indemnities and obligations of every kind and nature, in law, equity
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising from or relating to my employment with the Company and the
termination of that employment, including (without limitation) claims of
wrongful discharge, emotional distress, defamation, fraud, breach of contract,
breach of the covenant of good faith and fair dealing, discrimination claims
based on sex, age, race, national origin, disability or any other basis under
Title VII of the Civil Rights Act of 1964, as amended, the California Fair
Employment and Housing Act, the Federal Age Discrimination in Employment Act of
1967, as amended (“ADEA”),  the Americans
with Disability Act,  contract claims,
tort claims, and wage or benefit claims, including but not limited to, claims
for salary, bonuses, commissions, stock grants, stock options, vesting
acceleration, vacation pay, fringe benefits, severance pay or any other form of
compensation (other than the payments, rights, benefits and indemnification to
which I am entitled under the express provisions of the Employment Agreement,
my vested rights under the Company’s Code Section 401(k) Plan and any workers’
compensation benefits under any Company workers’ compensation insurance policy
or fund).

In releasing claims
unknown to me at present, I am waiving all rights and benefits under Section
1542 of the California Civil Code, and any law or legal principle of similar
effect in any jurisdiction:  “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.”

I understand and agree
that the Company has no obligation to provide me with any severance benefits
under my Employment Agreement unless I execute the Release.  I also understand that I have received or
will receive, regardless of the execution of the Release, all wages owed to me
together with any accrued but unused vacation pay, less applicable withholdings
and deductions, earned through my termination date.

This Release and Waiver
does not pertain to any claims which may subsequently arise in connection with
the Company’s default in any of its severance payment or indemnification
obligations under the Employment Agreement. 
I also understand that nothing in the Release shall prohibit me from
exercising legal rights that are, as a matter of law, not subject to waiver
such as: (a) my rights under applicable workers’ compensation laws; (b) my
right, if any, to seek unemployment benefits; and (c) my right to file a charge
with the Equal Opportunity Commission (EEOC) challenging the validity of my
waiver of claims under the ADEA.

 

Any controversy or any
claim arising out of or relating to the interpretation, enforceability or
breach of the Release shall be settled by arbitration in accordance with the
employment arbitration rules of the American Arbitration Association or any
successor hereto; provided, however, that the arbitrator shall not be empowered
to add to, subtract from, or modify, alter or amend the terms of the Release,
and the cost of such arbitration shall be borne by the Company.

I acknowledge that, among
other rights subject to his Release and Waiver, I am hereby waiving and
releasing any rights I may have under ADEA, that this release and waiver is
knowing and voluntary, and that the consideration given for this release and
waiver is in addition to anything of value to which I was already entitled as
an executive of the Company.  I further
acknowledge that I have been advised, as required by the Older Workers Benefit
Protection Act, that:  (a) the release
and waiver granted herein does not relate to claims which may arise after this
release and waiver is executed; (b) I have the right to consult with an
attorney prior to executing this release and waiver (although I may choose
voluntarily not to do so); and if I am over 40 years old upon execution of this
(c) I have twenty-one (21) days from the date of termination of my employment
with the Company in which to consider this release and waiver (although I may
choose voluntarily to execute this release and waiver earlier); (d) I have
seven (7) days following the execution of this release and waiver to revoke my
consent to this release and waiver; and (e) this release and waiver shall not
be effective until the seven (7)-day revocation period has expired.

	
  

  	
   

  
	
  Date:        ,
  20     

  	
   

  
	
   

  	
  EXECUTIVEExhibit 10.1

 

Execution Copy

 

Confidential Treatment Requested. Confidential
portions of this document have been redacted

and have been separately filed with the Commission.

 

 

LICENSE, DEVELOPMENT, MANUFACTURING AND
COMMERCIALIZATION AGREEMENT

 

by and between

 

Vertex Pharmaceuticals Incorporated

 

and

 

Janssen Pharmaceutica, N.V.

 

CONFIDENTIAL TREATMENT REQUESTED

 

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

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  
	
  Article 1

  	
  Definitions

  	
   

  
	
  1.1

  	
  Intentionally
  Left Blank

  	
  1

  
	
  1.2

  	
  “Additional
  Development Activities”

  	
  1

  
	
  1.3

  	
  “Affiliate”

  	
  1

  
	
  1.4

  	
  “API”

  	
  1

  
	
  1.5

  	
  [***]

  	
  1

  
	
  1.6

  	
  “Business
  Day”

  	
  1

  
	
  1.7

  	
  “Calendar
  Quarter”

  	
  2

  
	
  1.8

  	
  “Calendar
  Year”

  	
  2

  
	
  1.9

  	
  “Change
  of Control”

  	
  2

  
	
  1.10

  	
  “Clinical
  Trial”

  	
  2

  
	
  1.11

  	
  “Code”

  	
  2

  
	
  1.12

  	
  “Combination
  Product”

  	
  2

  
	
  1.13

  	
  “Commercialization”
  or “Commercialize”

  	
  2

  
	
  1.14

  	
  “Committees”

  	
  3

  
	
  1.15

  	
  (Intentionally
  left blank)

  	
  3

  
	
  1.16

  	
  “Compound”

  	
  3

  
	
  1.17

  	
  “Control”
  or “Controlled by”

  	
  3

  
	
  1.18

  	
  “Desired
  Label”

  	
  3

  
	
  1.19

  	
  “Development”
  or “Develop”

  	
  3

  
	
  1.20

  	
  “Development
  Program”

  	
  3

  
	
  1.21

  	
  [***]

  	
  3

  
	
  1.22

  	
  [***]

  	
  3

  
	
  1.23

  	
  “Diligent
  Efforts”

  	
  3

  
	
  1.24

  	
  “Effective
  Date”

  	
  3

  
	
  1.25

  	
  “EMEA”

  	
  4

  
	
  1.26

  	
  “European
  Union” or “EU”

  	
  4

  
	
  1.27

  	
  “Excluded
  Claim”

  	
  4

  
	
  1.28

  	
  “Excluded
  Territory”

  	
  4

  
	
  1.29

  	
  “Exclusivity
  Period”

  	
  4

  
	
  1.30

  	
  “Executive
  Officers”

  	
  4

  
	
  1.31

  	
  “Existing
  Third Party Agreements”

  	
  4

  
	
  1.32

  	
  “Far
  East”

  	
  4

  
	
  1.33

  	
  “FDA”

  	
  4

  
	
  1.34

  	
  “Field”

  	
  4

  
	
  1.35

  	
  “First
  Commercial Sale”

  	
  4

  
	
  1.36

  	
  “FTE”

  	
  4

  
	
  1.37

  	
  “FTE
  Rate”

  	
  4

  
	
  1.38

  	
  “GAAP”

  	
  5

  
	
  1.39

  	
  “Generic Version”

  	
  5

  
	
  1.40

  	
  “Global
  Development Costs”

  	
  5

  
	
  1.41

  	
  “Global
  Development Plan” or “GDP”

  	
  5

  
	
  1.42

  	
  “Good
  Clinical Practice” or “GCP”

  	
  6

  

 

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

 

i

 

	
  1.43

  	
  “Good
  Laboratory Practice” or “GLP”

  	
  6

  
	
  1.44

  	
  “Good
  Manufacturing Practice” or “GMP”

  	
  6

  
	
  1.45

  	
  “HCV
  Infection”

  	
  6

  
	
  1.46

  	
  “Improvement”

  	
  6

  
	
  1.47

  	
  “IND”

  	
  6

  
	
  1.48

  	
  “Indemnitee”

  	
  6

  
	
  1.49

  	
  “Indemnitor”

  	
  6

  
	
  1.50

  	
  “Information”

  	
  6

  
	
  1.51

  	
  “Initiation”

  	
  7

  
	
  1.52

  	
  “Invention”

  	
  7

  
	
  1.53

  	
  “Investigator-Initiated
  Clinical Study”

  	
  7

  
	
  1.54

  	
  “Janssen
  Know-How”

  	
  7

  
	
  1.55

  	
  “Janssen
  Patent Rights”

  	
  7

  
	
  1.56

  	
  “Joint
  Commercialization Committee” and “JCC”

  	
  7

  
	
  1.57

  	
  “Joint
  Development Committee” and “JDC”

  	
  8

  
	
  1.58

  	
  “Joint
  Information and Inventions”

  	
  8

  
	
  1.59

  	
  “Joint
  Manufacturing Committee” and “JMC”

  	
  8

  
	
  1.60

  	
  “Joint
  Patent Rights”

  	
  8

  
	
  1.61

  	
  “Joint
  Philanthropic Committee” and “JPC”

  	
  8

  
	
  1.62

  	
  “Joint
  Steering Committee” and “JSC”

  	
  8

  
	
  1.63

  	
  “Key
  Country”

  	
  8

  
	
  1.64

  	
  “Key
  Opinion Leaders” or “KOLs”

  	
  8

  
	
  1.65

  	
  “MAA”

  	
  8

  
	
  1.66

  	
  “Major
  Market Countries”

  	
  8

  
	
  1.67

  	
  “Manufacturing”
  or “Manufacture”

  	
  8

  
	
  1.68

  	
  “Manufacturing
  Cost”

  	
  9

  
	
  1.69

  	
  (Intentionally
  left blank)

  	
  9

  
	
  1.70

  	
  “Marketing
  Authorization”

  	
  9

  
	
  1.71

  	
  “Material
  Adverse Effect”

  	
  9

  
	
  1.72

  	
  “Medical
  Science Liaisons” or “MSL”

  	
  9

  
	
  1.73

  	
  “Milestone
  Event”

  	
  9

  
	
  1.74

  	
  “Milestone
  Payment”

  	
  9

  
	
  1.75

  	
  “NDA”

  	
  9

  
	
  1.76

  	
  [***]

  	
  9

  
	
  1.77

  	
  “Net
  Sales”

  	
  9

  
	
  1.78

  	
  “Non-Incurred
  Amount”

  	
  11

  
	
  1.79

  	
  “Non-Publishing
  Party”

  	
  11

  
	
  1.80

  	
  [***]

  	
  11

  
	
  1.81

  	
  “North
  America”

  	
  11

  
	
  1.82

  	
  [***]

  	
  11

  
	
  1.83

  	
  “Packaging”

  	
  11

  
	
  1.84

  	
  “Packaging
  Regulatory Approval”

  	
  11

  
	
  1.85

  	
  “Party”

  	
  11

  
	
  1.86

  	
  “Patent
  Costs”

  	
  11

  
	
  1.87

  	
  “Permitted
  Sublicensee”

  	
  12

  
	
  1.88

  	
  “Person”

  	
  12

  

 

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

 

ii

 

	
  1.89

  	
  “Phase
  I Clinical Trial”

  	
  12

  
	
  1.90

  	
  “Phase
  II Clinical Trial”

  	
  12

  
	
  1.91

  	
  “Phase
  III Clinical Trial”

  	
  12

  
	
  1.92

  	
  “Phase
  IV Clinical Trial”

  	
  12

  
	
  1.93

  	
  “Philanthropic
  Funds”

  	
  12

  
	
  1.94

  	
  “Pivotal
  Clinical Trial”

  	
  12

  
	
  1.95

  	
  “Primary
  Detail”

  	
  13

  
	
  1.96

  	
  “Product”

  	
  13

  
	
  1.97

  	
  “Product
  Candidate”

  	
  13

  
	
  1.98

  	
  “Publishing
  Party”

  	
  13

  
	
  1.99

  	
  “Regulatory
  Approval”

  	
  13

  
	
  1.100

  	
  “Regulatory
  Authority”

  	
  13

  
	
  1.101

  	
  “Related
  Party”

  	
  13

  
	
  1.102

  	
  “Results”

  	
  13

  
	
  1.103

  	
  “Sales
  Call”

  	
  13

  
	
  1.104

  	
  “Sales
  Representative”

  	
  13

  
	
  1.105

  	
  “Specifications”

  	
  14

  
	
  1.106

  	
  “Supply
  Agreement”

  	
  14

  
	
  1.107

  	
  “Tablet”

  	
  14

  
	
  1.108

  	
  “Territory”

  	
  14

  
	
  1.109

  	
  “Territory
  Product Materials”

  	
  14

  
	
  1.110

  	
  “Third
  Party”

  	
  14

  
	
  1.111

  	
  “Third
  Party Product”

  	
  14

  
	
  1.112

  	
  “Trademark”

  	
  14

  
	
  1.113

  	
  “U.S.”
  and United States” and “United States of America”

  	
  14

  
	
  1.114

  	
  “Valid
  Patent Claim”

  	
  14

  
	
  1.115

  	
  “Vertex
  Know-How”

  	
  14

  
	
  1.116

  	
  “Vertex
  Patent Rights”

  	
  14

  
	
  1.117

  	
  “VX-950”

  	
  15

  
	
   

  	
   

  	
   

  
	
  Article 2

  	
  Collaboration Scope and Governance

  	
  15

  
	
  2.1

  	
  Purposes
  of the Collaboration

  	
  15

  
	
  2.2

  	
  Joint
  Steering Committee

  	
  15

  
	
  2.3

  	
  Committee
  Governance

  	
  16

  
	
  2.4

  	
  Alliance
  Managers

  	
  17

  
	
   

  	
   

  	
   

  
	
  Article 3

  	
  Global Development of Product Candidate

  	
  17

  
	
  3.1

  	
  Current
  Status

  	
  17

  
	
  3.2

  	
  Development
  Program

  	
  17

  
	
  3.3

  	
  Joint
  Development Committee

  	
  18

  
	
  3.4

  	
  Global
  Development Plan

  	
  18

  
	
  3.5

  	
  Additional
  Development Activities

  	
  19

  
	
  3.6

  	
  Development
  Efforts; Manner of Performance; Reports

  	
  20

  
	
  3.7

  	
  Regulatory
  Submissions and Regulatory Approvals

  	
  21

  
	
   

  	
   

  	
   

  
	
  Article 4

  	
  Manufacture and Supply

  	
  23

  

 

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

 

iii

 

	
  4.1.

  	
  General
  Background

  	
  23

  
	
  4.2

  	
  Joint
  Manufacturing Committee

  	
  24

  
	
  4.3

  	
  Manufacturing
  Director

  	
  24

  
	
  4.4

  	
  Initial
  Forecast

  	
  24

  
	
  4.5

  	
  Supply
  of Product

  	
  24

  
	
  4.6

  	
  Packaging

  	
  26

  
	
  4.7

  	
  Support
  for Establishment of Supply Capabilities

  	
  26

  
	
   

  	
   

  	
   

  
	
  Article 5

  	
  Commercialization in the Territory

  	
  27

  
	
  5.1

  	
  Janssen
  Commercialization Efforts.

  	
  27

  
	
  5.2

  	
  Joint
  Commercialization Committee

  	
  27

  
	
  5.3

  	
  Commercialization
  Plans

  	
  28

  
	
  5.4

  	
  Scientific
  Meetings; [***]

  	
  29

  
	
  5.5

  	
  Advertising
  and Promotional Materials

  	
  29

  
	
  5.6

  	
  Referral
  of Orders; Returns

  	
  30

  
	
  5.7

  	
  Adverse
  Event and Product Complaint Reporting Procedures

  	
  30

  
	
  5.8

  	
  Commercial
  Information

  	
  31

  
	
  5.9

  	
  [***]

  	
  31

  
	
  5.10

  	
  Recalls,
  Market Withdrawals or Corrective Actions

  	
  31

  
	
  5.11

  	
  Medical
  Inquiries

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 6

  	
  Philanthropic Program

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 7

  	
  License Grants

  	
  33

  
	
  7.1

  	
  Development
  License

  	
  33

  
	
  7.2

  	
  Commercialization
  License

  	
  33

  
	
  7.3

  	
  Know-How
  License

  	
  33

  
	
  7.4

  	
  Licenses
  from Janssen

  	
  34

  
	
  7.5

  	
  Manufacturing
  License

  	
  34

  
	
  7.6

  	
  License
  of Trademarks

  	
  34

  
	
  7.7

  	
  Right
  to Sublicense

  	
  34

  
	
  7.8

  	
  Vertex
  Retained Rights

  	
  35

  
	
  7.9

  	
  No
  Implied Licenses

  	
  35

  
	
  7.10

  	
  [***]

  	
  35

  
	
  7.11

  	
  [***]

  	
  35

  
	
   

  	
   

  	
   

  
	
  Article 8

  	
  (Intentionally
  left blank)

  	
  36

  
	
   

  	
   

  	
   

  
	
  Article 9

  	
  Financial Provisions

  	
  36

  
	
  9.1

  	
  Upfront
  License Fee

  	
  36

  
	
  9.2

  	
  Milestones

  	
  36

  
	
  9.3

  	
  Development
  Cost Reimbursement

  	
  37

  
	
  9.4

  	
  Royalties

  	
  38

  
	
  9.5

  	
  Third
  Party Licenses

  	
  40

  
	
  9.6

  	
  Reports;
  Payment of Royalty

  	
  40

  
	
  9.7

  	
  Audits

  	
  41

  

 

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

 

iv

 

	
  9.8

  	
  Payments

  	
  41

  
	
  9.9

  	
  Income
  Tax Withholding

  	
  42

  
	
  9.10

  	
  Interest
  Penalty

  	
  42

  
	
  9.11

  	
  [***]

  	
  42

  
	
   

  	
   

  	
   

  
	
  Article 10

  	
  Intellectual Property Ownership, Protection and Related
  Matters

  	
  42

  
	
  10.1

  	
  Filing,
  Prosecution and Maintenance of Vertex Patent Rights

  	
  42

  
	
  10.2

  	
  Filing,
  Prosecution and Maintenance of Joint Patent Rights

  	
  43

  
	
  10.3

  	
  Option
  to Prosecute and Maintain Patents

  	
  43

  
	
  10.4

  	
  Interference,
  Opposition, Re-examination and Re-issue

  	
  44

  
	
  10.5

  	
  Enforcement
  and Defense

  	
  44

  
	
  10.6

  	
  Patent
  Term Restoration

  	
  46

  
	
  10.7

  	
  Third
  Party Claims

  	
  46

  
	
  10.8

  	
  Trademarks

  	
  47

  
	
   

  	
   

  	
   

  
	
  Article 11

  	
  Confidentiality, Publication and Publicity

  	
  47

  
	
  11.1

  	
  Nondisclosure
  Obligation

  	
  47

  
	
  11.2

  	
  Employee,
  Consultant and Advisor Obligations

  	
  48

  
	
  11.3

  	
  Publication

  	
  49

  
	
  11.4

  	
  Publicity/Use
  of Names

  	
  50

  
	
   

  	
   

  	
   

  
	
  Article 12

  	
  Representations and Warranties: Indemnification

  	
  50

  
	
  12.1

  	
  Representations
  and Warranties of Vertex

  	
  50

  
	
  12.2

  	
  Representations
  and Warranties of Janssen

  	
  52

  
	
  12.3

  	
  Indemnification

  	
  53

  
	
   

  	
   

  	
   

  
	
  Article 13

  	
  Term and Termination

  	
  54

  
	
  13.1

  	
  Term
  and Expiration

  	
  54

  
	
  13.2

  	
  Termination
  by Janssen Without Cause

  	
  54

  
	
  13.3

  	
  Termination
  for Cause

  	
  55

  
	
  13.4

  	
  Effect
  on License of Termination by Janssen for Cause

  	
  55

  
	
  13.5

  	
  Effect
  of Termination by Vertex for Cause or by Janssen Without Cause

  	
  56

  
	
  13.6

  	
  [***]

  	
  58

  
	
  13.7

  	
  Survival

  	
  58

  
	
  13.8

  	
  Non-exclusive
  Remedies

  	
  59

  
	
   

  	
   

  	
   

  
	
  Article 14

  	
  Governing Law and Dispute Resolution

  	
  59

  
	
  14.1

  	
  Governing
  Law

  	
  59

  
	
  14.2

  	
  Referral
  to Executive Officers

  	
  59

  
	
  14.3

  	
  Final
  Decision-Making Authority

  	
  59

  
	
  14.4

  	
  Decision
  to Terminate or Suspend a Study Based on Safety Concerns

  	
  60

  
	
  14.5

  	
  Dispute
  Resolution

  	
  60

  
	
   

  	
   

  	
   

  
	
  Article 15

  	
  Miscellaneous

  	
  63

  
	
  15.1

  	
  Force
  Majeure

  	
  63

  

 

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

 

v

 

	
  15.2

  	
  Assignment

  	
  63

  
	
  15.3

  	
  Severability

  	
  64

  
	
  15.4

  	
  Notices

  	
  64

  
	
  15.5

  	
  Entire
  Agreement; Amendments

  	
  65

  
	
  15.6

  	
  Headings

  	
  65

  
	
  15.7

  	
  Independent
  Contractors

  	
  65

  
	
  15.8

  	
  Waiver

  	
  65

  
	
  15.9

  	
  Cumulative
  Remedies

  	
  65

  
	
  15.10

  	
  Waiver
  of Rule of Construction

  	
  65

  
	
  15.11

  	
  Certain
  Conventions

  	
  66

  
	
  15.12

  	
  Counterparts

  	
  66

  
	
  15.13

  	
  Performance
  by Affiliates

  	
  66

  
	
  15.14

  	
  Standstill

  	
  66

  
	
  15.15

  	
  Export
  Controls

  	
  67

  

 

	
  Schedules

  	
   

  
	
  Schedule 1.7

  	
  Janssen
  Universal Calendar

  
	
  Schedule 1.19

  	
  [***]

  
	
  Schedule 1.31

  	
  Existing
  Third Party Agreements

  
	
  Schedule 1.32

  	
  Far
  East

  
	
  Schedule 1.55

  	
  Janssen
  Patent Rights

  
	
  Schedule 1.116

  	
  Vertex
  Patent Rights

  
	
  Schedule 1.117

  	
  VX-950

  
	
  [***]

  	
   

  

 

	
  Exhibits

  
	
   

  	
   

  
	
  Exhibit 4.5(a)

  	
  Supply
  Agreement Key Elements

  

 

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

 

vi

 

License, Development, Manufacturing and
Commercialization Agreement

 

This
License, Development, Manufacturing and Commercialization Agreement (this “Agreement”)
is effective as of June 30, 2006 (the “Effective Date”) and is entered
into by and between Vertex Pharmaceuticals Incorporated, a Massachusetts
corporation with corporate offices at 130 Waverly Street, Cambridge, MA
02139-4242, United States of America (“Vertex”) and Janssen
Pharmaceutica, N.V., a Belgium corporation with corporate offices at 30,
Turnhoutsesteenweg, B-2340 Beerse, Belgium (“Janssen”).

 

Background

 

WHEREAS,
Vertex is developing VX-950, a novel inhibitor of the NS3/4A hepatitis C viral
protease, under a global development plan; and

 

WHEREAS,
Vertex and Janssen would like Janssen to assist in the development of, and to
commercialize, VX-950 in the Territory (as defined below).

 

NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows.

 

Article 1 - Definitions

 

1.1       (Intentionally left blank)

 

1.2       “Additional
Development Activities” shall have the meaning set forth in Section
3.5.

 

1.3       “Affiliate”
shall mean, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by or is under direct or indirect common
control with, such Person. For purposes of this Section 1.3, the term “control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Control of any Person
by another Person will be presumed if fifty percent (50%) or more of the
securities or other ownership interests representing the equity, the voting
stock or general partnership interest of the first Person are owned, controlled
or held, directly or indirectly, by the other Person, or by an Affiliate of the
other Person.

 

1.4       “API”
means the active pharmaceutical ingredient that is intended to be used in the
manufacture of a Product Candidate or a Product.

 

1.5       [***]

 

1.6       “Business
Day” means a day in which banking institutions in Boston,
Massachusetts are open for business.

 

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

 

1

 

1.7       “Calendar
Quarter” shall mean a calendar quarter during any Calendar Year
based on the Janssen Universal Calendar for that year, a copy of which, for
2006, is attached hereto as Schedule 1.7, and which shall be updated by
Janssen for each Calendar Year during the term of this Agreement consistent
with the Janssen Universal Calendar used for Janssen’s internal business
purposes; provided, however, that the first Calendar Quarter under this
Agreement shall extend from the Effective Date to the end of the then-current
Calendar Quarter and the last Calendar Quarter under this Agreement shall
extend from the first day of such Calendar Quarter until the effective date of
the termination or expiration of the Agreement.

 

1.8       “Calendar
Year” shall mean a calendar year during the term of this Agreement
based on the Janssen Universal Calendar for that year, a copy of which, for
2006, is attached hereto as Schedule 1.7, and which shall be updated by
Janssen for each Calendar Year during the term of this Agreement consistent
with the Janssen Universal Calendar used for Janssen’s internal business
purposes. For the first Calendar Year, the Calendar Year shall begin on the
Effective Date and the last day shall be December 31, 2006. The last Calendar
Year of the term of this Agreement shall begin on the first day of the Janssen
Universal Calendar Year for the year during which termination or expiration of
the Agreement will occur, and the last day of such Calendar Year shall be the
effective date of such termination or expiration.

 

1.9       “Change of
Control” means a transaction or series of related transactions that
results in (a) the holders of outstanding voting securities of a Party
immediately prior to such transaction ceasing to represent at least [***] of the combined outstanding voting
power of that Party, or if the surviving entity (or its parent) into which that
Party may have merged or been combined, immediately after such transaction or
series of transactions; (b) any Third Party (other than a trustee or other
fiduciary holding securities under an employee benefit plan) becoming the
beneficial owner of [***] of the
combined voting power of the outstanding securities of a Party, including as a
single Third Party all Third Parties who act together as a “group” for purposes
of acquiring shares of a Party, as referenced in Section 13(d) of the
Securities Act of 1934; or (c) a sale or other disposition to a Third Party of
all or substantially all of a Party’s assets or business.

 

1.10     “Clinical
Trial” means a Phase I Clinical Trial, a Phase II Clinical Trial, a
Phase III Clinical Trial or a Pivotal Clinical Trial.

 

1.11     “Code”
shall have the meaning set forth in Section 13.4.2.

 

1.12     “Combination
Product” means a single product that includes one or more
therapeutically active ingredients other than a Product Candidate or a Product,
in combination with a Product Candidate or Product. All references to Product
in this Agreement shall be deemed to include a Combination Product unless
otherwise specifically noted.

 

1.13     “Commercialization”
or “Commercialize” means to take
any action directed to marketing, promoting, distributing, importing or selling
a Product, or obtaining pricing and reimbursement approvals for that Product.
Commercialization shall also include post-approval Investigator-Initiated
Clinical Studies and Phase IV Clinical Trials.

 

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

 

2

 

1.14     “Committees”
shall have the meaning set forth in Section 2.3.

 

1.15     Intentionally left blank.

 

1.16     “Compound”
means VX-950, [***], and all of
its or their prodrugs and metabolites, its or their stereoisomers and
tautomers, and all of the esters, salts, hydrates, solvates, inclusion
complexes and polymorphs of any of the foregoing.

 

1.17     “Control”
or “Controlled by” means the
ownership or other legal authority or right of a Party to grant a license or
sublicense of intellectual property to another Party without breaching the
terms of any agreement with a Third Party, infringing the intellectual property
rights of a Third Party, or misappropriating the proprietary or trade secret
information of a Third Party.

 

1.18     “Desired Label” shall have the meaning set forth in Section
1.41.

 

1.19     “Development”
or “Develop” means any
non-clinical and clinical drug development activities that are customarily
undertaken after a compound has been designated as a development candidate [***] including but not limited to [***]

 

1.20     “Development
Program” means all activities associated with the Development of
Product Candidates pursuant to the Global Development Plan and all Additional
Development Activities.

 

1.21     [***]

 

1.22     [***]

 

1.23     “Diligent
Efforts” means, with respect to each Party’s obligations related to
Developing, Manufacturing and Commercializing Product Candidates and Products,
the carrying out of those obligations [***]

 

1.24     “Effective
Date” shall have the meaning set forth in the preamble to this
Agreement.

 

1.25     “EMEA”
means the European Medicines Evaluation Agency or any successor EU agency that
is responsible for approving the sale of pharmaceuticals in the EU.

 

1.26     “European
Union” or “EU” means
the countries of the European Union, as the European Union is constituted as of
the Effective Date and as it may be expanded from time to time, [***]

 

1.27     “Excluded
Claim” shall have the meaning set forth in Section 14.5.7.

 

1.28     “Excluded
Territory” means the Far East and North America.

 

1.29     “Exclusivity
Period” means the [***] beginning
on the Effective Date.

 

1.30     “Executive
Officers” means the Chief Executive Officer of Vertex and the World
Wide Chairman, Pharmaceuticals Group of Johnson & Johnson.

 

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

 

3

 

1.31     “Existing
Third Party Agreements” means the agreements between Vertex and
Third Parties listed on Schedule 1.31 hereto.

 

1.32     “Far East”
means the countries listed on Schedule 1.32 hereto.

 

1.33     “FDA”
means the United States Food and Drug Administration, or any successor U.S.
governmental agency that is responsible for approving the sale of
pharmaceuticals in the United States.

 

1.34     “Field”
means all human and animal therapeutic and/or prophylactic uses of Product
Candidates and Products.

 

1.35     “First
Commercial Sale” means, with respect to any Product, the first arm’s-length
sale of that Product to a Third Party in a country of the Territory for use or
consumption by the general public in such country (rather than, e.g., in a Phase IV Clinical Trial) after
Marketing Authorization for such Product has been obtained in such country. For
the avoidance of doubt, a sale in a particular country prior to receipt of all
marketing approvals necessary to commence regular commercial sales in that
country, such as so-called “treatment IND sales,” “named patient sales” and “compassionate
use sales,” shall not be construed as a First Commercial Sale in that country.
Any such sale shall however constitute a part of Net Sales.

 

1.36     “FTE”
means the equivalent in time of the work of one scientist or other professional
conducting activities hereunder on a full time basis for a Calendar Year, [***]

 

1.37     “FTE Rate”
means, for 2006, [***] per FTE;
provided that effective January 1 of each Calendar Year, commencing with
January 1, 2007, the FTE Rate applicable to each Party’s FTE’s will be the
amount obtained by multiplying the FTE Rate applicable on December 31 of the
immediately preceding Calendar Year by 1 + ((CPIx – CIPy) / CPIy), where CPIx
is the Consumer Price Index for All Urban Consumers in the Boston Metropolitan
Area published by the Bureau of Labor Statistics of the United States
Department of Labor for December of the immediately preceding Calendar Year and
CPIy is the Consumer Price Index for All Urban Consumers in the Boston
Metropolitan Area published by the Bureau of Labor Statistics of the United
States Department of Labor for the month immediately preceding the Effective
Date, [***]  Any such increase shall be rounded to the
nearest [***].

 

1.38     “GAAP” means accounting principles generally
accepted in the United States, applied on a consistent basis.

 

1.39     “Generic
Version” shall have the meaning set forth in Section 9.4.2.

 

1.40     “Global
Development Costs” [***]

 

[***]

 

[***]

 

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

 

4

 

[***]

 

[***]

 

[***]

 

1.41     “Global
Development Plan” or “GDP”
means the initial plan outlining the Parties’ intended program to Develop
Product Candidates or Products in North America and the Territory, including a
general description of all related activities therefor, all as reflected in the
Global Development Plan, with associated budgets, discussed by the Parties
immediately prior to the Effective Date and to which the Parties have agreed.
The Parties have designed the Global Development Plan to support certain
anticipated Product indications and label claims and related necessary label
information (the “Desired Label”), and the Development activities listed in the
Global Development Plan are considered critical to obtaining Regulatory
Approval in both the United States and the EU for the Desired Label. Other
Development activities that are critical to obtaining Regulatory Approval for
the Desired Label in the United States or the EU, or that are required by a
Regulatory Authority in either the United States or the EU for the Desired
Label, may be added to the Global Development Plan from time to time by
amendment as provided herein. Development activities that are not critical to
obtaining Regulatory Approval in the United States or the EU for the Desired
Label shall be considered Additional Development Activities, unless the Parties
mutually agree to include such activities in the Global Development Plan. The
Global Development Plan as amended from time to time in accordance with the
terms of this Agreement shall constitute, as so amended, the Global Development
Plan.

 

1.42     “Good
Clinical Practice” or “GCP”
means the current good clinical practice applicable to the clinical Development
of the Product under applicable law including without limitation the ICH
guidelines, or in the event such standards are less stringent than the current
U.S. Good Clinical Practice, then “Good Clinical Practice” or “GCP” shall mean
current U.S. Good Clinical Practice.

 

1.43     “Good
Laboratory Practice” or “GLP”
means the current good laboratory practice applicable to the Development of the
Product under applicable law, including without limitation 21 C.F.R. Part 58,
or in the event such standards are less stringent than the current U.S. Good
Laboratory Practice, then “Good Laboratory Practice” or “GLP” shall mean
current U.S. Good Laboratory Practice.

 

1.44     “Good
Manufacturing Practice” or “GMP” means the current good manufacturing
practice applicable to the Manufacturing of the Product under applicable law,
including without limitation 21 C.F.R. parts 210 and 211 (as the same may be
amended) and all applicable FDA rules, regulations, orders and guidances.

 

1.45     “HCV
Infection” means human infection with the hepatitis C virus.

 

1.46     “Improvement”
means any enhancement, whether or not patentable, in the formulation, use,
preparation, presentation, means of delivery, or dosage of a Product Candidate
or Product.

 

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

 

5

 

1.47     “IND”
shall mean an Investigational New Drug Application filed with FDA or a similar
application filed with an applicable Regulatory Authority outside of the United
States, such as a clinical trial application (CTA) or a clinical trial
exemption (CTX).

 

1.48     “Indemnitee”
shall have the meaning set forth in Section 12.3.3.

 

1.49     “Indemnitor”
shall have the meaning set forth in Section 12.3.3.

 

1.50     “Information”
means any and all information and data, including all scientific, pre-clinical,
clinical, regulatory, manufacturing, marketing, financial and commercial
information or data, whether communicated in writing, electronically or orally
or by any other method, which is provided by one Party to the other Party in
connection with this Agreement.

 

1.51     “Initiation”
means, with respect to a particular Clinical Trial, the administration of the [***] dose of a Product Candidate to the [***] patient in that Clinical Trial.

 

1.52     “Invention”
means any process, method, use, composition of matter, article of manufacture,
discovery or finding that is conceived or reduced to practice (whether or not
patentable).

 

1.53     “Investigator-Initiated
Clinical Study” means a human clinical trial or study of the Product
that is sponsored and conducted by a Third Party who is a health-care
professional, under an agreement with a Party pursuant to which that Party
provides clinical supplies of the Product and/or funding for the clinical trial
or study.

 

1.54     “Janssen
Know-How” means all information, materials, discoveries,
Improvements, processes, methods, protocols, formulas, data, Inventions and trade
secrets, patentable or otherwise, that do not fall within Janssen Patent
Rights, and (i) that are Controlled by Janssen or any of its Affiliates as of
the Effective Date or (ii) are discovered, created or developed, and
Controlled, by Janssen or its Affiliates in the course of Janssen’s performance
of the Development Program, or of Manufacturing activities, under this
Agreement or any supply agreement under which Janssen or any of its Affiliates
supplies Compounds, Product Candidates or Products to Vertex, or during studies
of a Compound, Product Candidate or Product undertaken after the end of the
Development Program, or as part of the Commercialization of a Compound, Product
Candidate or Product, and (iii) that are related to the Development, utilization,
Manufacture or Commercialization of any Compound, Product Candidate or Product.

 

1.55     “Janssen
Patent Rights” means all patents and patent applications that
generically or specifically claim (a) (i) a Compound, a Product Candidate or a
Product, (ii) a process for manufacturing a Compound, a Product Candidate or a
Product, or an Intermediate used in such process; or (iii) a use of the
Compound, a Product Candidate or a Product, and that are Controlled by Janssen
or any of its Affiliates as of the Effective Date, or (b) Inventions Controlled
by Janssen or any of its Affiliates that are conceived or reduced to practice
in the course of Janssen’s performance of the Development Program, or of
Manufacturing activities, under this Agreement or any supply agreement under
which Janssen or any of its Affiliates supplies Product Candidates or Products
to Vertex, or during studies of a Product

 

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

 

6

 

Candidate
or Product undertaken after the end of the Development Program, or as part of
the Commercialization of a Product Candidate or Product, and that are related
to the Development, utilization, Manufacture or Commercialization of the
Compound or any Product Candidate or Product. Included within the definition of
Janssen Patent Rights are all continuations, continuations-in-part, divisions,
patents of addition, reissues, renewals or extensions, substitutions,
re-examinations or restorations, registrations and revalidations thereof, and
all supplementary protection certificates and the like. Schedule 1.55
lists all patent applications and patents encompassed within Janssen Patent
Rights on the Effective Date.

 

1.56     “Joint
Commercialization Committee” and “JCC” have the meaning set forth in Section 5.2.

 

1.57     “Joint
Development Committee” and “JDC”
have the meaning set forth in Section 3.1.

 

1.58     “Joint
Know-How” means all information, Improvements and Inventions
created, developed or invented jointly by employees of Janssen and Vertex or
their Affiliates, or by others acting on behalf of Janssen and Vertex, in the
course of activities undertaken under this Agreement.

 

1.59     “Joint
Manufacturing Committee” and
“JMC” have the meaning set forth in Section 4.2.

 

1.60     “Joint
Patent Rights” means all national, regional and international
patents and patent applications, certificates of invention and applications for
certificates of invention, including divisions, continuations,
continuations-in-part, additions, reissues, renewals, extensions,
substitutions, re-examinations or restorations, registrations and
revalidations, and supplementary protection certificates or the like or any of the
foregoing and all foreign equivalents thereof, that, when granted, recite a
claim directed to Joint Know-How.

 

1.61     “Joint
Philanthropic Committee” and “JPC”
shall have the meaning set forth in Article 6.

 

1.62     “Joint
Steering Committee” and “JSC”
have the meaning set forth in Section 2.2.

 

1.63     “Key
Countries” means at the time of measurement the Major Market
Countries, and to the extent not included as a Major Market Country, the [***] in the Territory with respect to all
pharmaceutical sales as reported by IMS, or by another independent Third Party
source of market data selected by the Parties by mutual agreement.

 

1.64     “Key
Opinion Leaders” or “KOLs” means scientific or health care
professionals who are recognized experts in the relevant scientific or health
care field, which in the context of this Agreement is the investigation and
treatment of HCV Infection.

 

1.65     “MAA”
means a Marketing Authorization Application, or similar application or
submission for Marketing Authorization, that is filed to obtain marketing
approval for a Product Candidate or Product in the EU.

 

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

 

7

 

1.66     “Major
Market Countries” means [***]

 

1.67     “Manufacturing”
or “Manufacture” means all of the activities relating to
production of a Product Candidate or Product, including without limitation,
purchasing raw materials and Intermediates, production of API, [***], tableting, and all related quality
control and quality assurance and all storage, shipping and handling.
Manufacturing also includes Packaging and manufacturing technical transfer
activities. “Intermediate” as used
herein means [***].

 

1.68     “Manufacturing
Cost” means the cost of [***]

 

1.69     Intentionally left blank.

 

1.70     “Marketing
Authorization” means all approvals from the relevant Regulatory
Authority necessary to market and sell a Product in a particular country. For
countries where governmental approval is required for pricing or reimbursement
for the Product, “Marketing Authorization” shall not be deemed to occur until
such pricing or reimbursement approval is obtained.

 

1.71     “Material
Adverse Effect” means, with respect to any action by a Party or its
Related Parties, [***]

 

1.72     “Medical
Science Liaisons” or “MSL”
shall have the meaning set forth in Section 5.11.

 

1.73     “Milestone
Event” shall have the meaning set forth in Section 9.2.1.

 

1.74     “Milestone
Payment” shall have the meaning set forth in Section 9.2.1.

 

1.75     “NDA”
means a New Drug Application or similar application or submission for Marketing
Authorization that is filed with the FDA to obtain marketing approval for a
Product Candidate or Product in the United States.

 

1.76     [***]

 

1.77     “Net Sales”
means the gross amount billed or invoiced by Janssen or its Related Parties on
arms-length sales of Product Candidates and Products (for purposes of this
definition, Product Candidates and Products are referred to collectively as “Products”
or a “Product”) to a Third Party other than a Related Party, less Permitted
Deductions. “Permitted Deductions” for any Product includes only the following,
to the extent permitted by applicable law and specifically related to the gross
amount billed or invoiced:

 

(i)            customary transportation charges relating to
the Product, including handling charges and insurance premiums relating
thereto;

 

(ii)           sales taxes, excise taxes and duties paid by
and not refunded to the selling party and directly related to sale of the
Product, and any other equivalent governmental charges imposed upon the
importation, use or sale of the Product, but excluding income and similar
taxes;

 

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

 

8

 

(iii)         government-mandated rebates;

 

(iv)          customary trade, quantity and prompt payment
discounts allowed on the Product;

 

(v)            allowances or credits to customers on account
of retrospective price reductions affecting the Product; and

 

(vi)          customary Product rebates and Product
wholesaler charge-backs including those customarily granted to managed care
entities

 

(vii)         [***]

 

[***]

 

For
the purposes of determining royalty rates and the royalties payable on
Combination Products, Net Sales of a Product shall be calculated as follows: [***]

 

For
purposes of clarity, no permitted deduction to Net Sales will be counted more
than once or, with the exception of [***],
adjusted more than [***] following
the calculation of Net Sales for a given month.

 

Solely
for the purposes of this Section 1.77, a Related Party of Janssen or of any of
its Affiliates shall include a distributor acting as an actual or constructive
sublicensee of rights granted hereunder with respect to sales of a Product in a
particular country in the Territory, as evidenced by the fact that the
distributor holds (A) sales and distribution rights for the Product in that
country, coupled with (B) pricing authority or government pricing negotiation
authority with respect to wholesalers or sub-distributors in that country.

 

If
Janssen or any of its Related Parties makes any transfer of a Product to a
Third Party as part of a multiproduct transaction, Net Sales of each unit of
the Product transferred will be determined on a country-by-country basis, and
will be equal to [***]

 

1.78     “Non-Incurred
Amount” shall have the meaning set forth in Section 3.4.3.

 

1.79     “Non-Publishing
Party” shall have the meaning set forth in Section 11.3.

 

1.80     [***]

 

1.81     (a)  “North America” means the United States,
Canada and Mexico, and the territories and possessions of each of them.

 

(b)  “North America
Product Materials” shall
have the meaning set forth in Section 5.5(a).

 

1.82     [***]

 

1.83     “Packaging”
means importation, quality control, testing, primary and secondary packaging
(including all labeling), qualified person release, storage and shipping and
handling.

 

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

 

9

 

1.84     “Packaging
Regulatory Approval” means all requisite approvals of applicable
Regulatory Authorities necessary for the Packaging of a Product.

 

1.85     “Party”
means Janssen or Vertex, and “Parties”
means Janssen and Vertex.

 

1.86     “Patent
Costs” shall mean all reasonable costs and expenses incurred by
Vertex in preparing, filing, prosecuting and/or maintaining Vertex Patent
Rights, including, without limitation, out-of-pocket costs and reasonable time
spent by Vertex’s professional personnel in patent preparation and prosecution,
measured at the FTE Rate then in effect.

 

1.87     “Permitted
Sublicensee” means a
sublicensee of either Party under a sublicense permitted under Article 7 of
this Agreement.

 

1.88     “Person”
means any individual, corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.

 

1.89     “Phase I
Clinical Trial” means a human clinical trial for a Product Candidate
or Product, in any country, that would satisfy the requirements of 21 CFR
§312.21(a).

 

1.90     “Phase II
Clinical Trial” means a human clinical trial in any country that
would satisfy the requirements of 21 CFR §312.21(b) and is intended to explore
one or more doses, dose response, and duration of effect, and to generate
initial evidence of clinical activity and safety, for a Product Candidate or
Product in the target patient population

 

1.91     “Phase III Clinical Trial” means a human clinical trial in any country
that would satisfy the requirements of 21 CFR §312.21(c) and is intended to
confirm with statistical significance the efficacy and safety of the Product
Candidate or Product, and is performed to obtain Regulatory Approval.

 

1.92     “Phase IV Clinical Trial” means a study or data collection effort for
the Product that is initiated after receipt of Regulatory Approval for the
Product and is not principally intended to support or maintain a Regulatory
Approval, maintain a label or otherwise obtain a labeling change. Phase IV
Clinical Trials shall include, without limitation, studies related to the
Product that are sponsored by a Third Party but supported by a Party (either
through financial support or through the provision of study drugs). Phase IV
Clinical Trials may also include a human clinical trial of the Product that is
required by the Regulatory Authority in a country to be conducted following
Regulatory Approval of the Product in that country, as an explicit condition of
that Regulatory Approval.

 

1.93     “Philanthropic
Funds” shall have the meaning set forth in Article 6.

 

1.94     “Pivotal
Clinical Trial” means a Phase III Clinical Trial or, under the
following circumstances, a Phase II Clinical Trial. A Phase II Clinical Trial
shall be considered a Pivotal Clinical Trial if and when (a) in the United
States, the protocol for that Phase II Clinical Trial shall have been reviewed
by the FDA under its current Special Protocol Assessment Guidelines (or
equivalent guidelines issued in the future), and any comments from the FDA on
that protocol are incorporated in the final protocol for that Phase II

 

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

 

10

 

Clinical
Trial or are resolved to the FDA’s satisfaction as evidenced by further written
communications from the FDA; [***]

 

1.95     “Primary
Detail” means a Sales Call for the Product in which the Product
receives the predominant portion of emphasis and time during the Sales Call
(i.e., no other product or service receives more emphasis or time during the
Sales Call, where such calculation of emphasis and time is conducted and
measured in accordance with Janssen’s standard operating procedures for its own
products to the target physician group for the Product.

 

1.96     “Product”
means any pharmaceutical preparation in final commercial form containing the
Product Candidate, for sale by prescription, over-the-counter or any other
method. Product includes without limitation any Combination Product.

 

1.97     “Product
Candidate” means a pharmaceutical composition containing a Compound
as an active ingredient.

 

1.98     “Publishing
Party” shall have the meaning set forth in Section 11.3.

 

1.99     “Regulatory
Approval” means, with respect to any country or region, all
authorizations by the appropriate governmental entity or entities necessary for
commercial sale of a Product in that country or region (not including pricing
or reimbursement approval). “Regulatory Approval” in the United States shall
mean final approval of an NDA pursuant to 21 CFR §314 (or any successor
regulation having the same purpose or effect), permitting marketing of a
Product in interstate commerce in the United States. “Regulatory Approval” in
the European Union shall mean final approval of a MAA pursuant to Council
Directive 75/319/EEC, as amended, or Council Regulation 2309/93/EEC, as
amended, or pursuant to any successor regulation having the same purpose or
effect.

 

1.100  “Regulatory
Authority” shall mean any applicable government regulatory authority
involved in granting approvals for the manufacturing, marketing and sale of a
Product.

 

1.101  “Related
Party” shall mean each of a Party’s Affiliates and any Permitted
Sublicensees, and “Related Parties”
means all of a Party’s Affiliates and Permitted Licensees.

 

1.102  “Results” shall have the meaning set forth in
Section 11.3.

 

1.103  “Sales Call” means face-to-face contact (or other
contact which in the future is employed to substitute, in whole or in part, for
face-to-face contact) of a Sales Representative with a health care professional
with prescribing authority during which scientific and/or medical information
is discussed about the use of a Product for the treatment of indications for
which the Product has received Regulatory Approval.

 

1.104  “Sales
Representative” means an individual who engages in or manages Sales
Calls and other promotional efforts with respect to a Product and who is
employed by a Party or its Related Parties. For purposes of clarity, an MSL is
not a Sales Representative.

 

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

 

11

 

1.105  “Specifications” means the manufacturing specifications for
the Product to be filed with the FDA in the NDA.

 

1.106  “Supply
Agreement” shall have the meaning set forth in Section 4.5.

 

1.107  “Tablet”
means the form of the Product or Product Candidate that is ready for Packaging.

 

1.108  “Territory”
means all of the countries in the world, and their territories and possessions,
outside of the Excluded Territory.

 

1.109  “Territory
Product Materials” shall have the
meaning set forth in Section 5.5.

 

1.110  “Third
Party” means an entity other than a Party or any of its Related
Parties.

 

1.111  “Third
Party Product” shall have the meaning set forth in Section 9.4.2.

 

1.112  “Trademark”
shall mean the mark or marks used to promote and sell the Product.

 

1.113  “U.S.”
and “United States” and “United States of America” shall mean the
United States of America and its territories and possessions.

 

1.114  “Valid
Patent Claim” means a claim of an issued and unexpired patent
included within the Vertex Patent Rights or Joint Patent Rights that (a) claims
(i) the Compound, a Product Candidate or a Product as a composition of matter,
or (ii) the formulation, method of manufacture or use of the Compound, a
Product Candidate or a Product; (b) has not been revoked or held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency
of competent jurisdiction (which decision is not appealable or has not been
appealed within the time allowed for appeal); and (c) has not been disclaimed,
denied or admitted to be invalid or unenforceable through reissue,
re-examination or disclaimer or otherwise.

 

1.115  “Vertex
Know-How” means all information, materials, discoveries,
Improvements, processes, methods, protocols, formulas, data, Inventions and
trade secrets, patentable or otherwise, that do not fall within the Vertex
Patent Rights, and (i) that are Controlled by Vertex or any of its Affiliates
as of the Effective Date or (ii) are discovered, created or developed, and
Controlled, by Vertex or its Affiliates in the course of Vertex’s performance
of the Development Program or Additional Development Activities, or of
Manufacturing activities, under this Agreement or the Supply Agreement, or
during studies of a Compound, Product Candidate or Product undertaken after the
end of the Development Program, or as part of the Commercialization of a
Compound, Product Candidate or Product, and (iii) that are related to the
Development, utilization, Manufacture or Commercialization of any Compound,
Product Candidate or Product; provided, however, that the term “Vertex Know-How”
shall not apply to Vertex’s general drug design technology whether in hardware
or software form, tangible or intangible.

 

1.116  “Vertex
Patent Rights” means all patents and patent applications that
generically or specifically claim (a) (i) a Compound, a Product Candidate or a
Product; (ii) a process for manufacturing a Compound, a Product Candidate or a
Product, or an Intermediate used in

 

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

 

12

 

such
process; or (iii) a use of the Compound, a Product Candidate or a Product, and
that are Controlled by Vertex or any of its Affiliates as of the Effective
Date, or (b) inventions Controlled by Vertex or any of its Affiliates that are
conceived or reduced to practice in the course of either Vertex’s performance
of the Development Program or Additional Development Activities, or of
Manufacturing activities, under this Agreement or the Supply Agreement, or
during studies of a Compound, Product Candidate or Product undertaken after the
end of the Development Program, or as part of the Commercialization of a
Compound, Product Candidate or Product and that are related to the Development,
utilization, Manufacture or Commercialization of a Compound or any Product
Candidate or Product. Included within the definition of Vertex Patent Rights
are all continuations, continuations-in-part, divisions, patents of addition,
reissues, renewals or extensions, substitutions, re-examinations or
restorations, registrations and revalidations thereof, and all supplementary
protection certificates and the like. Schedule 1.116 lists all patent
applications and patents encompassed within Vertex Patent Rights as of the
Effective Date.

 

1.117  “VX-950” means the chemical compound referred to by
Vertex as VX-950 and having the chemical structure referenced on Schedule
1.117.

 

Article 2 - Collaboration Scope and Governance

 

2.1       Purposes of the
Collaboration. The purpose
of the collaboration between Vertex and Janssen established under this
Agreement is to advance the Development and Commercialization of Product
Candidates and Products as rapidly as reasonably practicable, for the treatment
of Hepatitis C Infection in North America and the Territory.

 

2.2       Joint Steering Committee. Promptly after the Effective Date, the
Parties will establish a Joint Steering Committee (the “Joint Steering
Committee” or “JSC”), as more fully described in this Section 2.2,
to review all Development, Manufacturing, Commercialization and philanthropic
activities being conducted by the Parties under this Agreement. Each Party will
keep the Joint Steering Committee, and other relevant committees referenced in
Section 2.3 below, [***] of its
progress and activities under this Agreement. The Joint Steering Committee
shall have no authority to amend this Agreement.

 

2.2.1       Membership. The Joint Steering Committee shall be
comprised of [***]  The exact number of such representatives [***] or such other number as the Parties
may agree. Each Party shall provide the other with a list of its initial
members of the Joint Steering Committee within [***]. Each Party will use all reasonable efforts to maintain
the continuity of its representation, although each Party may nevertheless
replace or substitute any or all of its representatives at any time. On an
annual basis, the JSC shall meet [***]
with [***] meetings being in
person. Either Party may request that the JSC meet at any time upon [***] notice to the other Party, for any
purpose properly addressed by the JSC pursuant to this Agreement, and the
Parties shall use best efforts to ensure that a meeting occurs within [***] period or as soon thereafter as
practicable.

 

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

 

13

 

2.2.2       Responsibilities. The JSC shall oversee the collaborative
relationship between Janssen and Vertex. To that end, the JSC shall also be
responsible, without limitation, for the following:

 

2.2.2.1    oversight of the Development Program and
Manufacturing activities undertaken with respect to any Product Candidate or
Product hereunder;

 

2.2.2.2    reviewing matters referred to it by the other
Committees (as defined below);

 

2.2.2.3    ensuring the exchange of relevant information
and materials on a timely basis as required under this Agreement;

 

2.2.2.4    reviewing and approving substantive
amendments and updates to the Global Development Plan, and to any Additional
Development Activities, consistent with this Agreement; and

 

2.2.2.5    such other responsibilities as may be
assigned to the Joint Steering Committee pursuant to this Agreement or as may
be agreed upon by the Parties in writing from time to time.

 

2.3       Committee Governance. In addition to the JSC, the Parties will
participate in the collaboration created by this Agreement through a number of
other committees, including a Joint Development Committee (“JDC”), a Joint
Manufacturing Committee (“JMC”), a Joint Commercialization Committee (“JCC”)
and a Joint Philanthropic Committee (“JPC”) (each, including the JSC, a “Committee”
and together, the “Committees”). Each Committee shall meet [***] or as otherwise agreed by the
Committee. Meetings will be held either in person or by teleconference or video
conference, on such dates, and at such places and times, as provided herein or
as the Parties shall agree. Meetings of each Committee that are held in person
shall alternate between the offices of the Parties, or shall be conducted at
such other place as the Parties may agree. Either Party may propose matters to
the Committee Chair for inclusion on the Committee agenda for an upcoming
meeting. Each Party shall initially have [***]
members on each Committee, or such other number as the Parties may agree with
respect to any particular Committee. Each Party will provide the other with a
list of its initial members of each Committee [***]  Each Party may thereafter replace any or all
of its representatives at any time. A Committee meeting shall have a quorum if
there are [***] of each of Janssen
and Vertex in attendance. The Chair of each Committee shall be responsible for
scheduling each meeting, and for issuing appropriate minutes of each meeting of
that Committee within [***] of the
date of such meeting. The minutes shall be considered as accepted by a Party
if, [***], none of that Party’s
Committee members have objected to the draft of such minutes in writing or by
email to the Chair. [***] Where
decisions are required of a Committee, the members of that Committee will
attempt in good faith to reach consensus with respect to the matter at hand. If
agreement cannot be reached after a good faith discussion among the members of [***] 
Any decision required or permitted to be taken by any Committee may be
taken without a meeting in person taking place, if (i) a consent in writing,
setting forth the decision so taken, is signed by all designated members of
that Committee; or (ii) by mutual

 

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

 

14

 

agreement
of the Parties, the meeting is conducted by teleconference or videoconference;
provided, however, that a Party that has requested a JSC meeting on [***] may not object to the conduct of that
meeting by teleconference or videoconference. Each Party may, in its reasonable
discretion, invite non-member representatives of such Party to attend meetings
of a Committee; provided, however that (i) the attendance by any such
non-member representative shall be reasonably acceptable to both Parties and
(ii) the requirements of Section 11.2 of this Agreement with respect to
obligations of confidentiality and non-use shall have been satisfied with
respect to any such non-member representative. Each Party will be responsible
for its representatives’ expenses incurred in attending Committee meetings.

 

2.4       Alliance Managers. Promptly after the Effective Date, each
Party may appoint an individual(s) to act as the alliance manager(s) for such
Party (the “Alliance Managers”). Each Alliance Manager who is not
otherwise a member shall thereafter be permitted to attend meetings of the
Committees. The Alliance Managers, if appointed, shall be a significant point
of contact for the Parties regarding the administration of this Agreement.

 

Article 3 - Global Development of Product Candidate

 

3.1       Current Status. Prior to the Effective Date, Vertex
independently initiated Phase II Clinical Studies of VX-950 in North America
and the EU, and has conducted or is conducting other clinical and non-clinical
studies in support of the overall Development of VX-950. The Parties have
agreed to continue the Development of Product Candidates under the Development
Program and in accordance with the terms of this Agreement.

 

3.2       Development Program. Product Candidates will be Developed in the
Territory and in North America pursuant to a Global Development Plan and in
connection with any Additional Development Activities that may be undertaken by
either Party. The Global Development Plan and any such Additional Development
Activities together constitute the Development Program for a Product Candidate.
The Global Development Plan identifies the type and timing of all planned
Development activities to be undertaken in the Territory and in North America
with the goal of securing Regulatory Approvals for the sale of Products in
North America and the Territory with the Desired Label. The Global Development
Plan also includes preliminary budgets covering all Development activities
included in the Plan and allocates responsibilities for Development activities
between the Parties.

 

3.3       Joint Development Committee. The Parties shall establish a JDC promptly
after the Effective Date. The JDC shall be led by [***]. Subject to oversight by the JSC, the JDC shall
coordinate the Development of Product Candidates with the objective of
obtaining Regulatory Approvals in North America and the Territory as soon as
practicable, for each Product Candidate. The JDC may establish sub teams having
representatives from both Parties for important functional areas, including but
not limited to clinical trial teams, regulatory teams and the like. Each Party
will keep the JDC reasonably informed of its Development activities and its
progress in executing its responsibilities under the

 

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

 

15

 

Development
Program. The JDC’s responsibilities shall include, without limitation, the
following:

 

3.3.1       consider and discuss strategies for the
Development of Product Candidates; and

 

3.3.2       at least [***],
review and discuss the Global Development Plan and related budgets and
allocation of responsibilities between the Parties and, from time to time,
present to the JSC for review and approval (i) proposed substantive amendments
to the Global Development Plan in accordance with Section 3.4.3, and (ii)
Additional Development Activities in accordance with Section 3.5.

 

3.4       Global Development Plan.

 

3.4.1       Global Development. The Development of Product Candidates in
North America and the Territory shall be governed by the Global Development
Plan, and the Parties agree that all Development activities relating to Product
Candidates shall be conducted in accordance with the Global Development Plan, except
for those activities that are specifically included within Additional
Development Activities undertaken in accordance with Section 3.5. Each Party
will contribute to the operational execution of the Global Development Plan,
and will make best use of each Party’s established technological and process
excellence for the optimal execution of the Global Development Plan. The JDC
shall review the Global Development Plan not less frequently than [***] and shall develop detailed and
specific Global Development Plan updates, which shall include annual
Development budgets and allocation of responsibilities between the Parties, for
each Calendar Year under the Global Development Plan. The JDC shall submit all
such updates to the JSC for review and approval such that JSC preliminary
approval of the plan and budget for any Calendar Year would occur [***]. Updates with the JSC’s preliminary
approval shall be submitted to each Party for its internal budgeting process
with a target for final approval by the JSC [***],
at which time any updates will be appended to the Global Development Plan.

 

3.4.2       Conduct of Activities under
the Global Development Plan.
Each Party will initially be responsible for conducting the Development
activities assigned to it under the Global Development Plan. The allocation of
responsibilities will be periodically reviewed by the JDC after the Effective
Date, and may be supplemented or adjusted as determined by the JDC to be in the
best interests of the collaboration, subject to review and approval by the JSC.

 

3.4.3       Amendments to the Global
Development Plan. The JDC
may develop and submit to the JSC from time to time proposed substantive
amendments (which shall include necessary budget and allocation of
responsibility updates) to the Global Development Plan as may be necessary or
appropriate in its judgment to reflect changing circumstances. The JSC shall
review any such proposed amendments presented by the JDC and may approve those
proposed amendments and/or any other amendments proposed from time to time by
members of the JDC and, upon approval of any such proposals by the JSC, the
Global Development Plan shall be amended accordingly (provided that the JSC
shall not be empowered to amend this Agreement). Amendments

 

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

 

16

 

to
the Global Development Plan, associated budgets and allocation of responsibilities
shall not be effective without the approval of the JSC. Except as provided
below, disagreements that cannot be resolved within the JDC concerning any
proposed amendment shall be submitted for resolution to the JSC. Disagreements
that cannot be resolved by the JSC shall be submitted for resolution as
Unresolved Matters under the provisions of Sections 14.2 and 14.3.
Notwithstanding the foregoing, mutual agreement among the Parties’
representatives on the JSC shall be required for any proposed amendment to the
Global Development Plan that would: (i) increase the aggregate amount of Global
Development Costs [***]  In the event that during any Calendar Year
any Development activity expressly provided for in the approved Global
Development Plan budget to be completed during that year is not completed, and
therefore the full expense budgeted for that activity for that year is not
incurred (to the extent not incurred, a “Non-Incurred Amount”), then to
the extent that the incomplete activity is scheduled for the next succeeding
Calendar Year, the Non-Incurred Amount shall be included in the Global
Development Plan budget for the succeeding Calendar Year.

 

3.5       Additional Development
Activities.

 

If
the JDC is unable to reach agreement on the inclusion in the Global Development
Plan of (i) additional Development activities relating to the Development of a
Product Candidate that are not critical to obtaining Regulatory Approval for
the Desired Label, or (ii) that constitute an Out-of-Budget Proposal (“Additional
Development Activities”), then the Party wishing to conduct those
activities may do so at its own expense, but only after review and approval of
the Additional Development Activities with the JSC and, failing approval by the
JSC, subject to the provisions of Sections 14.2 and 14.3 hereof. If the results
of any such activities are included by the other Party in a filing with a
Regulatory Authority (other than a required submission for safety purposes) to
support a label claim or a change in an approved label in that other Party’s
territory, then the other Party using that data [***]

 

3.5.1          [***]

 

[***]

 

[***]

 

3.6       Development Efforts; Manner
of Performance; Reports

 

3.6.1       Standards for Conduct of
Development Program. Each of
Vertex and Janssen shall use Diligent Efforts to execute and to perform, or
cause to be performed, the activities for which it is responsible under the
Global Development Plan and to cooperate with and comply with all reasonable
requests of the other Party in carrying out the Global Development Plan, in
each case in good scientific manner and in compliance with applicable law, Good
Clinical Practice and Good Laboratory Practice. Janssen shall use Diligent
Efforts to seek Regulatory Approval to market the Product in the Territory
including in each of the Key Countries. [***]

 

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

 

17

 

3.6.2       Development Progress Reports. The minutes of the Committees will serve as
Development Progress Reports.

 

3.6.3       Coordination of Certain
Activities. The Parties will
use reasonable efforts to coordinate their Development activities to effect the
most efficient and reasonable contacts and [***]

 

3.6.4       Drug Supply for Non-Clinical
and Clinical Trials. During
the Development Program prior to the First Commercial Sale, Vertex shall use
Diligent Efforts to supply clinical trial material of the Product Candidate for
use in clinical studies conducted in accordance with the Global Development
Plan and, if applicable, for Additional Development Activities. [***] 
With respect to supply for any Additional Development Activities prior
to the First Commercial Sale, Vertex shall use Diligent Efforts to provide
clinical trial material, subject to the primary commitment to supply clinical
trial material for the Global Development Plan. Clinical trial material for
Additional Development Activities conducted by Janssen shall be supplied to
Janssen by Vertex [***], and
otherwise as further described in a Development Supply Agreement to be executed
by the Parties in advance of Janssen’s need for such clinical trial material.
In the event that Janssen conducts one or more clinical trials under the Global
Development Plan, or as Additional Development Activities, Vertex shall supply
the Product Candidate in bulk Tablet form, and Janssen will be responsible for
Packaging and distribution, unless Vertex, after discussion at the JMC, elects
in its sole discretion to take on that responsibility. Notwithstanding the
foregoing, in the event Janssen is unable to perform Packaging due to
regulatory requirements, Vertex will use commercially reasonable efforts to
perform Packaging, consistent with Vertex’s current capabilities, upon Janssen
request.

 

3.7       Regulatory Submissions and
Regulatory Approvals

 

3.7.1       Regulatory Submissions. Vertex shall be solely and exclusively
responsible for obtaining all Regulatory Approvals for Products in North
America and shall own all regulatory submissions, including all applications
for and dossiers relating to Regulatory Approval made by or at its direction
under this Agreement. Janssen shall be solely and exclusively responsible for
obtaining Regulatory Approvals for Products in the countries in the Territory,
and shall own all regulatory submissions directed toward Regulatory Approval,
including all applications for and dossiers relating to Regulatory Approval
made by or at its direction under this Agreement. All activities conducted by
each Party in their territory in connection with the preparation, filing and
prosecution of applications for Regulatory Approval of a Product Candidate or
Product, or with respect to pricing or reimbursement activities, shall be at
each Party’s sole cost and expense. Each Party shall provide the other Party
documentation to support the regulatory submissions of the other Party.

 

3.7.2       Discussions with Regulatory
Authorities. Each Party will
have the right to participate as an observer in all material meetings and other
material contacts with Regulatory Authorities pertaining to the Development of
a Product Candidate for Regulatory Approval in the territory of the other Party
(excluding the Far East) to the

 

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

 

18

 

extent
not prohibited by law. Each Party shall provide the other Party with reasonable
advance notice of all such meetings and other contacts, and to the extent
practicable will supply advance copies of all related documents and other
relevant information sufficiently in advance of any such meetings or other
contacts as may provide the receiving Party with a reasonable opportunity to
comment on the substance of the documents or correspondence. Material
submissions made by a Party to, or correspondence with, Regulatory Authorities
in such Party’s territory [***],
will be provided to the other Party sufficiently in advance to enable
translation, if any such submissions or correspondence are not available in
English. Janssen and Vertex shall discuss any material documents or other
material correspondence [***] that
either Party is planning to submit in connection with Regulatory Approvals, and
each Party will consider the other Party’s comments in good faith.

 

3.7.3       Labeling. The Parties will use reasonable efforts to
establish and maintain a core label for each Product. [***] 
Each Party shall promptly provide to the other Party copies of all
initially proposed labeling, Packaging and package inserts for a Product, in
each case sufficiently in advance of submission to FDA and EMEA so that the
other Party may review and have a reasonable opportunity to comment on the
substance of such submissions. In addition, each Party shall promptly provide
to the other Party copies of all initially proposed labeling, Packaging and
package inserts for a Product that are materially different from the core label,
in each case sufficiently in advance of submission to Regulatory Authorities,
so that the other Party may review and have a reasonable opportunity to comment
on the substance of such submissions. Thereafter, each Party will use
reasonable efforts to provide the other Party with advance copies of any
material changes to (i) the label, (ii) Packaging and (iii) package insert for
review and comment. Vertex shall promptly provide to Janssen copies of any
documents or correspondence pertaining to labeling received by Vertex or its
Related Parties from the FDA. Janssen shall promptly provide to Vertex copies
of any documents or correspondence pertaining to labeling received by Janssen
or its Related Parties from EMEA or Regulatory Authorities in the Major Market
Countries, and in addition, any such documents or correspondence, irrespective
of the country to which the documents or correspondence relate, which address
material issues concerning the label. Upon Vertex’s reasonable request, Janssen
shall provide Vertex with any English translations of the documents and
correspondence described in the preceding sentence that are produced for
Janssen’s own use. Neither Party shall have the right to approve the proposed
labeling for the Product in any country in the other Party’s territory.
However, each Party shall have the right to object to the labeling to be
initially submitted (or resubmitted following receipt of comments from, or
negotiations with, Regulatory Authorities) for the Product in any country in
the other Party’s territory or to any proposed variations or modifications to
any labeling that has received Regulatory Approval, but in each case solely on
the grounds that such labeling could in such Party’s’s reasonable judgment have
a Material Adverse Effect; and provided, further, that such Party shall not be
entitled to object to any variations or modifications to any labeling required
by law or by any Regulatory Authority. Any objection or response to the other
Party’s label or proposed label shall be made promptly so as to not delay the
submission or approval of the label. Any such objection shall be submitted in
writing to the JSC, with a full explanation of the concerns underlying the
objection, and the matter shall be addressed by the JSC at a meeting called

 

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

 

19

 

for
that purpose as soon as reasonably practicable. Failing agreement by the JSC,
the objection shall be referred for resolution under Section 14.2 hereof.

 

3.7.4       Right to Cross-Reference. Each Party shall have the right to
cross-reference and make any other use of the other Party’s NDAs/MAAs and INDs/CTAs
for the Product that it would have if it were the owner [***] including without limitation access
to all data Controlled by the other Party and contained or referenced in such
NDAs/MAAs and INDs/CTAs, in each case as may be reasonably necessary to enable
such Party to Develop, Manufacture or Commercialize Products as permitted under
this Agreement. In addition, each Party shall have the right to cross-reference
the other Party’s drug master file (“DMF”) in connection with the
performance of its obligations under this Agreement.

 

3.7.5       [***]. Subject to applicable law, Janssen shall
provide Vertex at its request with all material information relating to Janssen’s
[***] in the EU and material
information that serves as the basis for [***]
in the EU.

 

Article 4 -Manufacture and Supply

 

4.1       General Background. In general, the Parties intend that the
provision of supply of raw materials, Intermediates, API and Product for both
clinical and commercial purposes in the Territory will occur in accordance with
the terms of this Agreement as follows:

 

(a)           Clinical. Vertex will be responsible for providing
Product Candidate supply under the Global Development Plan and, subject to
availability, for Additional Development Activities pursuant to the provisions
of Section 3.6.4.

 

(b)           Commercial. The
Parties intend that (i) Janssen will be responsible for the Manufacture of
Product for Commercialization in the Territory including but not limited to
Intermediates, API, and Product, and (ii) Vertex will be responsible for the
Manufacture of Product for Commercialization outside the Territory, provided
that Janssen will, as a secondary source for Vertex, also be responsible for
the Manufacture of Product for Commercialization by Vertex outside the
Territory as described in Section 4.5(d).

 

(c)           Technical Transfer. Accordingly, the Parties will commence technical transfer activities [***] with the goal of enabling Janssen to
supply Product for Commercialization in the Territory at Product launch and, as
soon as practicable, to serve as a secondary source for Product for
Commercialization outside the Territory as described in Section 4.5(d). In the
event the Joint Manufacturing Committee determines that Janssen’s progress
under the Technical Transfer Plan (as defined in Section 4.5(b)) [***] Vertex shall [***] to supply Product to Janssen in
accordance with the terms of the Supply Agreement (as defined in Section
4.5(a)).

 

(d)           [***]

 

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

 

20

 

4.2       Joint
Manufacturing Committee. Promptly after the Effective Date, the Parties
shall establish a Joint Manufacturing Committee (the “Joint Manufacturing
Committee” or “JMC”) to oversee Manufacturing activities related to
the Territory, subject to the terms of this Agreement and the oversight of the
JSC. The JMC shall be responsible, without limitation, for the following:

 

4.2.1       consider and discuss the strategy for the
Manufacture of the Product and Product Candidates in the Territory with the
goal of synchronizing supply and demand; and

 

4.2.2       review and approve the Technical Transfer
Plan described in Section 4.5(b), and monitor Janssen progress under such
Technical Transfer Plan.

 

4.3       Manufacturing
Director. Promptly following the Effective Date, each Party shall appoint
one of its representatives to the JMC to direct all matters related to
Manufacturing within its organization and to coordinate with the appointed
representatives’ counterpart designated by the other Party.

 

4.4       Initial
Forecast. [***]  As a necessary component of estimating supply
chain capacity requirements, the Parties will deliver to each other [***] forecast for Product [***] which will also include [***]

 

4.5       Supply
of Product.

 

(a)           Supply Agreement. Within [***] of the Effective Date, Janssen and
Vertex will negotiate [***], and
separately enter into a supply agreement for the supply by Vertex, [***], of Janssen’s requirements of Product
for distribution and sale in the Territory (the “Supply Agreement”). The
Supply Agreement shall include the Supply Agreement Key Elements attached
hereto as Exhibit 4.5(a) and such customary representations, warranties,
covenants and conditions as are necessary or appropriate for transactions of
this type, not inconsistent with the terms and conditions hereof; [***] 
Vertex will supply Product to Janssen [***]  In the event Regulatory Authorities in the
Territory require different specifications, [***]

 

(b)           Technical Transfer to Janssen. Within [***] Janssen will propose to the JMC a
plan for establishing manufacturing capabilities necessary for Janssen to
manufacture the Product for the Territory and for use outside the Territory as
a secondary source for Vertex (the “Technical Transfer Plan”). Following
approval of the Technical Transfer Plan by the JMC, Janssen will commence and
use Diligent Efforts to perform technical transfer activities and achieve its
supply and secondary source obligations in accordance with such plan, the
capacity expectations described in section 4.5(d) below and any applicable
supply agreement. Janssen will provide Vertex with all documentation that is
required and useful to effect regulatory filings necessary for regulatory
approval of secondary source manufacturing facilities. Vertex will assist with
such technical transfer by providing both technical documentation and FTE
resources as may be reasonably requested to inform Janssen about the
manufacturing process, subject to the understanding that Vertex will provide [***] at the initiation of the

 

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

 

21

 

technical transfer for each discrete aspect of the manufacturing
process: [***]  Following the initiation of the technical
transfer, individuals having the expertise shared with Janssen at the
initiation of the technical transfer (as provided above) will be available to
participate in [***] project
teleconferences with Janssen during the execution of the Technical Transfer
Plan. If requested by Janssen and agreed by Vertex’s Third Party suppliers,
Vertex will use reasonable efforts [***]  Notwithstanding the foregoing, Janssen will
retain sole responsibility for the implementation and progress of the Technical
Transfer Plan and for meeting its needs for Product Supply (either through its
own Manufacturing activities or through the supply agreement) at launch and
thereafter.

 

(c)           Sale
of Intermediates. [***], and subject to the terms of the Supply Agreement,
Vertex will use Diligent Efforts to supply Janssen with the raw materials,
Intermediates required for its manufacture of the API to be converted into
Product for Commercialization in the Territory and, as a secondary source to
Vertex, for Product to be sold outside the Territory. [***]

 

(d)           Notice
of Establishment of Supply Capability; Secondary Source Capacity. Janssen
shall notify Vertex promptly following its establishment of supply capability
for Manufacture of Product for Commercialization in the Territory. [***] following delivery of such notice,
the Parties will enter into a supply agreement for Janssen to be a secondary
supplier, which supply agreement shall include usual and customary terms
including, but not limited to, provisions for good faith forecasts, binding
purchase orders for periodic orders by Vertex from Janssen, purchase price, and
term, for supply of [***] provided
the purchase price shall be [***]

 

In addition, Janssen agrees to use [***]
to supply additional quantities of [***]
if requested by Vertex, provided, however, [***]

 

(e)           Third
Party Agreements. Vertex will provide Janssen with copies of draft Third
Party manufacturer agreements for the commercial supply of VX-950 and will
consider in good faith Janssen’s comments provided [***].

 

4.6       Packaging.
Janssen will be responsible for Packaging of Products for commercial sale in
the Territory.

 

4.7       Support
for Establishment of Supply Capabilities. [***]  Vertex will invoice Janssen for costs
incurred under Section 4.7 as they occur and Janssen will pay such invoice
within [***]  Vertex may sell Product from its inventory
following Regulatory Approval of the Product in Vertex’s territory and, [***]

 

Article 5 - Commercialization in the
Territory

 

5.1       Janssen
Commercialization Efforts. Janssen shall warehouse and distribute the
Product in the Territory and shall be responsible for recording sales and
handling all aspects of Product order processing, invoicing, collection,
inventory and receivables in the Territory. In this work and in all other
aspects of Commercialization of the Product in the Territory, Janssen shall use
Diligent Efforts, including without limitation by [***]  Except relating
to the philanthropic and access programs and activities pursuant to Article 6,
Janssen will use

 

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

 

22

 

Diligent Efforts to maximize Net Sales of Products in the Territory
through its commercial marketing, pricing and contracting strategies [***] 
Janssen shall bear all of its own costs and expenses of Commercializing
the Product in the Territory.

 

5.2       Joint
Commercialization Committee. Promptly after the Effective Date, the Parties
shall establish a Joint Commercialization Committee (the “Joint
Commercialization Committee” or “JCC”). The JCC shall be led by
co-chairs, one of which shall be selected by Vertex and one of which shall be
selected by Janssen.

 

5.2.1       Responsibilities. The JCC shall be
responsible for the following:

 

5.2.1.1    use reasonable efforts to establish a global
brand for the Product including but not limited to, establishing overall
strategic objectives for the Product;

 

5.2.1.2    review and discuss the Territory
Commercialization Plan and the North American Commercialization Plan; and

 

5.2.1.3    discuss commercial activities that may benefit
from joint involvement or coordination, including but not limited to [***] other
matters of mutual interest.

 

5.3       Commercialization
Plans. The JCC will review and discuss the Territory Commercialization Plan
and the North American Commercialization Plan, each of which will be provided
to the JCC by Janssen or Vertex, respectively, no later than [***] prior to the projected commercial
launch for the Product in the United States (with respect to the North American
Commercialization Plan) or the European Union (with respect to the Territory
Commercialization Plan). [***]  The responsible Party will also provide to
the JCC, for review and discussion, any subsequent material amendments to the
most recent Commercialization Plan that it provided to the JCC and in any event
shall submit an updated plan on an annual basis. [***] prior to the projected commercial launch for the Product
in either the United States or the European Union, the JCC will consider plans
for sharing certain global Commercialization activities (i.e., activities that
benefit the Product in both the Vertex’ and Janssen’s territories, including
without limitation such activities that relate to [***] and the appropriate allocation of responsibilities and
budget for such activities. Any such plan (including the allocation of
responsibilities and budget) recommended by the JCC will be referred to the JSC
for approval and if approved, will be reviewed and updated annually thereafter
by the JSC upon referral from the JCC. The Territory Commercialization Plan
will contain the annual Commercialization plans and budgets for [***] with sufficient detail with respect
to Commercialization,  including but not
limited to details [***] to enable
the JCC to conduct a meaningful review of such plans. Comparable information
will be provided for the Territory as a whole and on a regional basis.
Amendments and updates to the Territory Commercialization Plan and particularly
the Commercialization plans for [***]
shall not be effective without review and discussion by the JCC.

 

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

 

23

 

Notwithstanding the foregoing, Janssen shall be solely responsible for
all decisions regarding the prices charged for the Product in the Territory, as
well as discounts, rebates and all other deductions from Net Sales allowed
under Section 1.77.

 

5.4       Scientific
Meetings; [***]  Commencing [***], the Parties will discuss the
scientific meetings inside and outside the Territory to which each Party
intends to send a representative(s) during the balance of 2006 and for the
following year, and will periodically review their respective plan in this
regard with each other. The discussions will be for the purpose of coordinating
efforts in connection with [***]
in connection with supporting the worldwide exchange of scientific information.
[***]

 

5.5       Advertising
and Promotional Materials.

 

(a)           Janssen shall develop
relevant educational, sales, promotion and advertising materials relating to
the Product (“Territory Product Materials”), for use in the Territory,
that shall be consistent with the Territory Commercialization Plan and
compliant with applicable law and the provisions of applicable Regulatory
Approvals. Copies of all Territory Product Materials used in the Territory will
be archived by Janssen in accordance with applicable law. Upon Vertex’s
request, Janssen shall provide copies of the material core Territory Product
Materials for the Key Countries to Vertex for its review and comment prior to
their first use. Moreover, upon request, Janssen shall provide copies of any
other Territory Product Materials for other countries in the Territory to
Vertex for its review and comment. Janssen will provide Vertex with any English
translations, if available, of such Territory Product Materials that are
produced for its own use. Janssen will consider in good faith any comments
Vertex may have with respect to such Territory Product Materials. Upon Janssen’s
request, Vertex shall provide Janssen with copies of the material core
educational, sales, promotion and advertising materials relating to the Product
in North America (“North American Product Material”), for review and
comment prior to their use. Vertex will consider in good faith any comments
Janssen may have with respect to such North American Product Material. Requests
for North American Product Material and Territory Product Materials shall be
made through a member of the JCC or his or her designee.

 

(b)           Subject to any
limitations imposed by applicable law, all Territory Product Materials and all
documentary information and oral presentations, whether in hard-copy written,
electronic or other media form regarding the education, marketing and promotion
for the Product in countries of the Territory shall acknowledge the Parties’
license arrangement and shall display the Janssen or Janssen Affiliate and
Vertex names and logos with equal prominence.

 

(c)           In the event that
Janssen uses, in a majority of the Major Market Countries in the Territory, the
same Trademark for the Product used by Vertex in the United States, at Vertex’s
option the Parties will coordinate the establishment, content, operation, and
maintenance of any site or domain on the internet which incorporates the
Trademark, and the related annual cost [***]
The costs incurred by Vertex in the search for and selection of the Trademark
will be shared in the same proportion.

 

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

 

24

 

(d)           Where not prohibited by
law or regulation, and subject to any required Regulatory Approval, which
Janssen shall use diligent efforts to obtain, Vertex’s name and logo will be
carried on all Product packaging, package inserts, labels and containers, and
on all printed, electronic and digital material related thereto (including
educational materials and advertisements), with a prominence substantially equivalent
to that of Janssen, or the Janssen Affiliate that is the most prominent name
listed on any such material.

 

5.6       Referral
of Orders; Returns. If Vertex receives any orders for the Product in the
Territory, it shall refer such orders to Janssen. If Janssen receives any
orders for the Product outside the Territory, it shall refer such orders to
Vertex. Janssen shall be solely responsible for handling all returns of the
Product sold in the Territory. If Product sold in the Territory is returned to
Vertex, Vertex shall promptly ship such Product to a facility designated by
Janssen. If Product sold in North America is returned to Janssen, Janssen shall
promptly ship such Product to a facility designated by Vertex, at Vertex’s
expense.

 

5.7       Adverse
Event and Product Complaint Reporting Procedures. Each Party will (i)
provide the other Party with all Product complaints, adverse event information,
and safety data in its control necessary or desirable for the other Party to
comply with all applicable law with respect to the Product and (ii) report and
provide such information to the other Party in such a manner and time so as to
enable the other Party to comply with all applicable law. Vertex shall maintain
a global adverse event database for the Product and shall generate adverse
event reports for Janssen’s use in the Territory. Janssen shall have access to
all data in the global adverse event database. Janssen shall be responsible for
submitting adverse events reports to the applicable Regulatory Authorities in the
Territory. The Parties will enter into a Pharmacovigilance Agreement along with
any other sublicensees of Vertex and Janssen (the “Pharmacovigilance Agreement”)
within [***], setting forth the
product complaint procedures to which each Party will adhere; provided that in
any event, the Pharmacovigilance Agreement will be in place prior to (a) the
earlier of initiation by Janssen of any activities under the Global Development
Plan, or any Additional Development Activities, or (b) the submission by Janssen
of any applications for Regulatory Approval of the Product in the Territory.
The costs and expenses of maintaining the global adverse event database shall
be borne [***]  Notwithstanding the foregoing, [***] the Parties will enter into a new
Pharmacovigilance Agreement and Vertex and its sublicensees will have benefits
and relevant obligations substantially similar to those which Janssen had in
the initial Pharmacovigilance Agreement. The foregoing shall not be interpreted
as requiring either Vertex or Janssen, respectively, to be responsible for the
cost of maintenance of the global adverse event database, except as otherwise
required by law, beyond the point at which Vertex or Janssen, respectively,
terminates Development or Commercialization of Products under this Agreement.

 

[***] of this
Agreement, the Parties shall meet to establish a safety oversight working group
(the “Safety Oversight Working Group”) composed of members of both
Parties, which during the [***]
and as otherwise provided in the Pharmacovigilance Agreement, shall discuss
processes and procedures for sharing information needed to support each Party’s
respective regulatory responsibilities and to comply with applicable regulatory
pharmacovigilance requirements. Any such procedures shall not be construed to
restrict either Party’s ability to take action that it deems to be appropriate
or required of it under

 

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

 

25

 

the applicable regulatory requirements, but when permitted by
applicable laws and regulations, the Parties shall consult with each other
before taking such action.

 

5.8       Commercial
Information. In addition to royalty reports required pursuant to Section
9.6, Janssen will provide Vertex, on an annual basis as part of the Territory
Commercialization Plan, with information relating to Sales Call metrics on a
country-by-country basis in the [***]
on a country-by-country basis for the [***].

 

5.9       [***]

 

5.10     Recalls,
Market Withdrawals or Corrective Actions.

 

5.10.1     In the Territory. If any Regulatory Authority
issues or requests a recall or takes a similar action in connection with the
Product in the Territory, or if either Party determines that an event, incident
or circumstance has occurred that may result in the need for a recall or market
withdrawal in the Territory, the Party notified of such recall or similar
action, or the Party that desires such recall or similar action, shall [***] advise the other Party thereof by
telephone or facsimile. Janssen, in consultation with Vertex, shall decide
whether to conduct a recall in the Territory (except in the case of a
government mandated recall, when Janssen may act without such advance notice
but shall notify Vertex as soon as possible) and the manner in which any such
recall shall be conducted. Vertex will make available to Janssen, upon request,
all pertinent records within Vertex’s control that Janssen may reasonably
request to assist Janssen in effecting any recall. Janssen shall bear the
expense of any such recall in the Territory, subject to the terms of the Supply
Agreement.

 

5.10.2     Outside the Territory. In the event that any
Regulatory Authority issues or requests a recall or takes a similar action in
connection with the Product in any country outside the Territory, or in the
event either Party determines that an event, incident or circumstance has
occurred that may result in the need for a recall or market withdrawal in any
country outside the Territory, the Party notified of such recall or similar
action, or the Party that desires such recall or similar action, shall [***], advise the other Party thereof by
telephone or facsimile. Vertex and/or its Related Parties, in consultation with
Janssen, shall decide whether to conduct a recall in any country outside the
Territory and the manner in which any such recall shall be conducted. Janssen
will make available to Vertex, upon request, all pertinent records within
Janssen’s control that Vertex may reasonably request to assist Vertex in
effecting any recall. Vertex and/or its Related Parties shall bear the expense
of any such recall.

 

5.11     Medical
Inquiries.

 

5.11.1     In the Territory. After the First Commercial
Sale, Janssen shall handle all medical questions or inquiries from members of
the medical profession in the Territory regarding the Product [***] 
Vertex shall, and shall cause its medical affairs and/or sales
department to, refer to Janssen all such questions and inquiries within [***] of receipt. In no event will Vertex
or its Sales Representatives or MSLs respond to any such medical question or
inquiry. Notwithstanding the foregoing, [***]

 

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

 

26

 

5.11.2     Outside the Territory. Vertex shall handle all
medical questions or inquiries from members of the medical profession outside
the Territory regarding the Product. Janssen shall, and shall cause its medical
affairs and/or sales department to refer to Vertex all such questions and
inquiries within [***] of receipt.
In no event will Janssen or its Sales Representatives or MSLs respond to any
such medical question or inquiry.

 

Article 6 -Philanthropic Program.

 

Vertex and Janssen along with their respective Affiliates share the
goal of promoting the diagnosis, prevention, treatment and cure of HCV Infection
worldwide. In addition to Developing and Commercializing the Product in their
respective territories, the Parties intend to engage in worldwide philanthropic
activities directed toward this goal. Accordingly, the Parties agree that, [***], each Party will set aside an amount [***] to apply in furtherance of such
philanthropic objectives (the “Philanthropic Funds”). Each Party shall
make its contribution no later than [***].
The Philanthropic Funds will be provided by each Party in any one of a variety
of approved forms at such Party’s election, such as [***]  Also as part of
this philanthropic program, the Parties shall consider in good faith activities
and programs to increase the access to the Product, especially in countries
identified by the World Health Organization as developing countries. In
addition, as part of the Philanthropic program, Janssen may [***] 
The disposition of the Philanthropic Funds shall be determined by
consensus of the members of a Joint Philanthropic Committee (“JPC”),
with equal representation from each Party; provided, however, that the
Philanthropic Funds shall be allocated in such a way as to maximally benefit
the causes of the diagnosis, prevention, treatment and cure of HCV Infection. If
the JPC is unable to reach consensus, either Party may refer the matter to the
Executive Officers in accordance with Section 14.2. Each Party will afford
equal recognition to the other Party in any public description by that Party of
activities under this Article 6.

 

Article 7 -License Grants

 

7.1       Development
License. Vertex and its Affiliates hereby grant to Janssen a co-exclusive
(with Vertex) right and license under Vertex Patent Rights and Vertex’s rights
under Joint Patent Rights, to Develop Product Candidates and Products in the
Territory in the Field, provided however, that such license shall not include a
license to Vertex Patent Rights resulting from inventions conceived or reduced
to practice as a result of Additional Development Activities, if Janssen
elected not to participate in those activities, unless and until Janssen has
paid the amounts specified in Section 3.5 hereof with respect to those
Additional Development Activities.

 

7.2       Commercialization
License. Vertex and its Affiliates hereby grant to Janssen an exclusive
right and license under Vertex Patent Rights and Vertex’s rights under Joint
Patent Rights, to Commercialize Product Candidates and Products in the
Territory in the Field, provided however, that such license shall not include a
license to Vertex Patent Rights resulting from inventions conceived or reduced
to practice as a result of Additional Development Activities, if Janssen
elected not to participate in those activities, unless and

 

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

 

27

 

until Janssen has paid the amounts specified in Section 3.5 hereof with
respect to those Additional Development Activities.

 

7.3       Know-How
License. Vertex and its Affiliates hereby grant to Janssen an exclusive
license in the Field in the Territory under all Vertex Know-How to the extent
that it relates exclusively to Compounds, Product Candidates or Products,
solely to discharge Janssen’s obligations and exercise its rights under this
Agreement, provided however, that such license shall not include a license to
Vertex Know-How resulting from inventions conceived or reduced to practice as a
result of Additional Development Activities, if Janssen elected not to
participate in those activities, unless and until Janssen has paid the amounts
specified in Section 3.5 hereof with respect to those Additional Development
Activities.

 

7.4       Licenses
from Janssen. Janssen and its Affiliates hereby grant to Vertex a
non-exclusive, royalty-free license in the Field under all Janssen Patent
Rights, Janssen Know-How and Janssen’s rights under Joint Patent Rights, solely
for the purpose of Developing or Manufacturing Product Candidates or Products
worldwide, and an exclusive, royalty-free license in the Field under all
Janssen Patent Rights, Janssen Know-How and Janssen’s rights under Joint Patent
Rights, for Commercializing Product Candidates and/or Products outside the
Territory, provided however, that such license shall not include a license to
Janssen Patent Rights or Know-How resulting from inventions conceived or
reduced to practice as a result of Additional Development Activities, if Vertex
elected not to participate in those activities, unless and until Vertex has
paid the amounts specified in Section 3.5 hereof with respect to those
Additional Development Activities.

 

7.5       Manufacturing
License. Vertex and its Affiliates hereby grant to Janssen an exclusive
license in the Field in the Territory to Manufacture Product Candidates and
Products for Commercial use in the Territory, and a co-exclusive (with Vertex)
right and license to Manufacture Product Candidates and Products for purposes
of exercising its rights under the Development License granted under Section
7.1 above, in each case under Vertex Patent Rights, Vertex Know-How and Vertex’s
right under Joint Patent Rights. Any license provided to Janssen under the
Supply Agreement shall be incremental to the license right granted in this
section.

 

7.6       License
of Trademarks. Prior to Commercialization of a Product, the Parties shall
enter into a trademark licensing agreement under which Vertex and its
Affiliates grant to Janssen a [***]
license during the term of the Agreement to use (i) logos chosen and owned
by Vertex (the “Vertex Logo”) and (ii) the Trademarks Controlled by
Vertex, on labeling, package inserts, monographs and packaging materials for
the Product, Product Materials and samples, and other materials used in
connection with the performance of this Agreement during its term. Janssen
shall have no rights under this Agreement in or to the Vertex Logo, the Vertex
Trademarks or the goodwill pertaining thereto except as specifically provided
in the trademark licensing agreement. Janssen agrees that upon termination or
expiration of this Agreement, it will discontinue all use of the Vertex Logo
and the Vertex Trademarks, provided, however, Janssen shall have the right to
sell off any inventory of Product containing Vertex Logo or Vertex Trademarks
in accordance with the terms of this Agreement.

 

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

 

28

 

7.7       Right
to Sublicense. Each Party shall have the right to grant sublicenses under
the rights and licenses granted to it under Sections 7.1, 7.2, 7.3, 7.4 and 7.5
of this Agreement, provided that any such sublicense obliges the sublicensee to
comply with all relevant terms of this Agreement and that each Party remains
liable to the other for all material acts and omissions of any such
sublicensee.

 

Notwithstanding the foregoing, if Janssen wishes to grant a sublicense
to a Third Party of its Development or Commercialization rights in [***] 
For the avoidance of doubt, Janssen shall not be required to seek the
consent of Vertex in respect of sublicenses granted to its Affiliates.

 

7.8       Vertex
Retained Rights. Notwithstanding the foregoing, Vertex shall retain rights
under the Vertex Patent Rights and the Joint Patent Rights to the extent
necessary or useful to discharge its obligations and exercise its rights under
this Agreement, including but not limited to performing all activities
(directly or with Related Parties) included in the Global Development Plan from
time to time.

 

7.9       No
Implied Licenses. Except as specifically set forth in this Agreement,
neither Party shall acquire any license or other intellectual property
interest, by implication or otherwise, in any Information disclosed to it under
this Agreement or under any patents or patent applications owned or Controlled
by the other Party or its Affiliates.

 

7.10     [***]

 

7.11     [***]

 

Article 8 -

 

(This Article is intentionally left blank).

 

Article 9 -Financial
Provisions

 

9.1       Upfront License Fee. In consideration of the licenses
granted pursuant to Article 7, Janssen shall pay to Vertex a one-time
non-refundable, non-creditable payment of One Hundred Sixty Five Million
Dollars (US $165,000,000) within [***]
the Effective Date.

 

9.2       Milestones

 

9.2.1       Milestone Payment. In further consideration
of the licenses granted pursuant to Article 7, Janssen shall also pay each of
the amounts set forth in the table below (each, a “Milestone Payment”)
if and when the corresponding development milestone event (each, a “Milestone
Event”) is achieved.

 

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

 

29

 

	
  Milestone
  Event

  	
   

  	
  Milestone

  Amount

  
	
   

  	
   

  	
  (USD)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

[***]

 

[***]

 

9.2.2       Each Milestone Payment shall be payable only
once upon the initial achievement of the associated Milestone Event. Vertex
will invoice Janssen upon the occurrence of each of the Milestone Events [***], and the invoiced amount shall be
payable within [***] of receipt of
invoice. Janssen will notify Vertex in writing not later than [***] after the occurrence (or deemed
occurrence) of each of the Development Milestone Events [***], and shall pay the appropriate
Milestone Payment within [***] of
receipt of an invoice thereafter from Vertex.

 

9.3       Development
Cost Reimbursement. Janssen will pay to Vertex fifty (50%) percent of the
Global Development Costs. Not later than [***]
after the end of each calendar quarter, Vertex will submit to Janssen a summary
of Global Development Costs for the Calendar Quarter just ended, including a
brief description of the aggregate internal and external costs and an
allocation of the Global Development Costs across various Development
activities. With the summary, Vertex will include an invoice for fifty (50%)
percent of the reported Global Development Costs, which invoice shall be due
and payable by Janssen [***]  If Janssen has responsibility for Development
activities under the Global Development Plan, Janssen will provide to Vertex,
also on a quarterly basis and with a description as set forth above, a summary
of the Janssen’s Global Development Costs under the Global Development Plan for
the preceding quarter. Janssen may apply fifty (50%) percent of any such Global
Development Costs appropriately incurred and disclosed hereunder against any
unpaid amounts otherwise due to Vertex on account of Global Development Costs
previously incurred by Vertex, and if the amount of any such offset exceeds the
amount otherwise due and payable to Vertex, [***]
The books and records of each Party and any of that Party’s Related Parties
relating to Global Development Costs to be charged to the other Party hereunder
will be subject to inspection as provided below [***] upon reasonable notice from the Party charged to the
charging Party, for the purpose of verifying the accuracy of the summary of
submitted Global Development Costs. Those records will be made available during
normal business hours and will include all appropriate supporting information,
such as a record of time expended on Development activities and invoices
received covering all Third Party costs included in any summary of Global
Development Costs submitted by the Party being audited. The inspection shall be
conducted by an independent certified public accounting firm of nationally
recognized standing, selected by (and at the expense of) the Party exercising
its inspection right and reasonably acceptable to the Party being audited. The
accounting firm conducting any such inspection shall only

 

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

 

30

 

disclose to the Party exercising its inspection right whether the
summary of Global Development Costs being audited is accurate, and if not, by
what aggregate amount the summary is inaccurate. The books and records of each
Party pertaining to Global Development Costs shall be retained by such Party
for a period of [***]  The summary information provided by either
Party under the reporting provisions set forth above and any additional
information disclosed by that Party upon audit shall be Information of the
Party providing the information and subject to the confidentiality and non-use
obligations of Section 11.1.

 

9.4       Royalties.

 

9.4.1       Royalties Payable By Janssen. In further
consideration of the licenses granted pursuant to Article 7, Janssen shall pay
to Vertex royalties on cumulative Net Sales of Products in the Territory as set
out in this Section 9.4. The royalty rate payable shall be determined [***]:

 

	
   

  	
  [***]

  	
  [***]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Royalties on sales of Products, at the royalty rates determined as set
forth above with reference to annual aggregate Net Sales in the Territory,
shall be payable on a country-by-country basis until, [***] 
For purposes of determining aggregate Calendar Year Net Sales under this
Section 9.4.1 for any Calendar Year, [***].

 

9.4.2       Unlicensed Competition. Notwithstanding
Section 9.4.1, if a Third Party sells a pharmaceutical product in any country
that is a “Generic Version” of a Product being sold in that country (the
generic version, a “Third Party Product”), then [***] 
For purposes of this subsection 9.4.2, a “Generic Version” of a product
is [***]  This Section 9.4.2 shall not be applicable to
any product being sold by a Third Party to which Janssen has granted a
sublicense hereunder. The [***]
provided in this Section 9.4.2 shall not be applied to any Net Sales in respect
of which a royalty report has already been provided pursuant to Section 9.7
prior to receipt by Vertex from Janssen of written notice that sales of a
Generic Version of a Product covered by that royalty report [***]

 

9.5       Third
Party Licenses. Janssen shall be responsible for [***] of any royalties, or other amounts relating to
intellectual property rights, payable on account of Products sold in the
Territory, including without limitation, royalties due under any of the
Existing Third Party Agreements. Neither Party shall enter into any agreement
with a Third Party, without the other Party’s written consent, obligating the
other Party to pay royalties or other amounts relating to the Third Party’s
intellectual property rights in connection with the

 

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

 

31

 

Development, Manufacture or Commercialization by that other Party of
Product Candidate or Products in that other Party’s territory. If Vertex pays
any such royalties or other payments otherwise the responsibility of Janssen,
those payments will be deemed to have been made on behalf of Janssen and
Janssen shall promptly reimburse Vertex for any such payments [***] days of receipt of an invoice
therefor from Vertex. The Parties shall establish such procedures as are
reasonably necessary to permit them to reconcile Vertex’s actual payments
pursuant to the foregoing with Janssen’s payments to Vertex or to any Third
Party under this Section 9.5.

 

9.6       Reports;
Payment of Royalty. During the term of this Agreement following the First
Commercial Sale of a Product, Janssen shall furnish to Vertex [***], at the end of each [***], showing (i) the Net Sales of
Products in each country in the Territory during the reporting period, and any
permitted deductions from gross sales taken to arrive at the Net Sales
calculation as set forth in Section 1.77 of this Agreement; (ii) the royalties
payable under this Agreement on account of those Net Sales and the basis for
calculating those royalties; (iii) the exchange rates and other methodology
used in converting Net Sales into U.S. dollars, from the currencies in which
sales were made in order to determine the appropriate royalty tier; and (iv)
dispositions of Products other than pursuant to sale for cash. Net Sales in
countries invoiced in currency other than U.S. Dollars shall be translated to
U.S. Dollars using Janssen’s then-current standard exchange rate methodology,
fairly applied, for the translation of foreign currency into U.S. dollars, as
employed on a consistent basis throughout Janssen’s operations and disclosed to
Vertex in advance. Should Janssen change its foreign currency translation
methodology, the new methodology will be disclosed in writing to Vertex. [***] 
Royalties shown to have accrued by each [***] royalty report shall be due and payable to Vertex no
later than the [***]. Janssen
shall keep complete and accurate records in sufficient detail to enable the
royalties payable hereunder to be determined and the information provided
hereunder to be verified by Vertex’s accounting firm pursuant to Section 9.7.

 

9.7       Audits.
Upon the written request of Vertex, with [***]
prior written notice to Janssen, [***],
Janssen shall permit an independent certified public accounting firm of
nationally recognized standing selected by Vertex and reasonably acceptable to
Janssen, [***], to have access
during normal business hours to such of the records of Janssen and its
Affiliates as may be reasonably necessary to verify the accuracy of the royalty
reports hereunder for any [***]. Those
records shall include, without limitation, gross sales of each Product or
Product Candidate on a country-by-country basis, as well as all deductions
taken from gross sales in that country to arrive at Net Sales in that country. The
accounting firm shall disclose to Vertex only whether the royalty reports are
correct or incorrect and the specific details concerning any discrepancies.

 

If such independent accountant’s review of Janssen’s royalty reports
shows an underpayment, Janssen shall remit or cause its Related Parties to
remit to Vertex within [***] after
Janssen’s receipt of such report: (i) the amount of such underpayment plus
interest as determined under Section 9.10 below, and (ii) if such underpayment
exceeds [***] of the total amount
owed for the period being audited, the reasonable and necessary fees and
expenses of the independent accountant performing the audit. If such
underpayment does not exceed [***],
the fees and expenses of the independent accountant

 

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

 

32

 

performing any such audit shall be paid by Vertex. [***] Upon prior written notice to Janssen
as provided above, Vertex shall have a further right, exercisable not more
frequently than once [***], to
audit Net Sales, deductions taken from gross sales, and royalties earned by
Vertex in any country in which a prior audit has shown an understatement of
royalties due of at least [***].

 

Janssen shall include in each sublicense granted by it pursuant to this
Agreement a provision requiring the sublicensee to make reports to Janssen, to
keep and maintain records of sales made pursuant to such sublicense and to
grant access to such records by Vertex’s independent accountant to the same
extent required of Janssen under this Agreement.

 

Upon the expiration of [***]
the calculation of royalties payable with respect to such year shall be binding
and conclusive upon the Parties, and Janssen and its Related Parties shall be
released from any liability or accountability with respect to royalties for
such Calendar Year.

 

Vertex shall treat all financial Information subject to review under
this Section 9.7 or under any sublicense agreement in accordance with the
confidentiality and non-use provisions of this Agreement, and shall cause its
accounting firm to enter into an acceptable confidentiality agreement with
Janssen and/or its Related Parties obligating it to retain all such Information
in confidence pursuant to such confidentiality agreement.

 

9.8       Payments.
All payments to be made by Janssen to Vertex under this Agreement shall be made
in U.S. dollars and shall be paid by bank wire transfer in immediately
available funds to such bank account in the United States or elsewhere as may
be designated in writing by Vertex from time to time.

 

9.9       Income
Tax Withholding.

(a)           Janssen will make all
payments to Vertex under this Agreement without deduction or withholding for
taxes except to the extent that any such deduction or withholding is required
by law in effect at the time of payment, and Janssen has notified Vertex of any
such deduction or withholding in the royalty report.

 

(b)           Any tax required to be
withheld on amounts payable under this Agreement will promptly be paid by
Janssen on behalf of Vertex to the appropriate governmental authority, and
Janssen will furnish Vertex with proof of payment of such tax. Any such tax
required to be withheld will be an expense of and borne by Vertex.

 

(c)           Janssen and Vertex will
cooperate with respect to all documentation required by any taxing authority or
reasonably requested by Janssen or Vertex to secure a reduction in the rate of
applicable withholding taxes.

 

(d)           If Janssen had a duty
to withhold taxes in connection with any payment it made to Vertex under this
Agreement but Janssen failed to withhold, and such taxes were assessed against
and paid by Janssen, then Vertex will indemnify and hold harmless Janssen from
and against such taxes (including interest but excluding penalties). If Janssen
makes a

 

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

 

33

 

claim under this Section 9.9(d), it will comply with the obligations
imposed by Section 9.9(b) as if Janssen had withheld taxes from a payment to
Vertex.

 

9.10     Interest
Penalty. In case of any delay in payment by Janssen to Vertex (including a
delay in payment identified in connection with an audit under Section 9.7
above) [***] interest at the [***] assessed from the [***] after the due date of the payment,
shall be due from Janssen and payable [***].

 

9.11     [***]

 

Article 10 -Intellectual Property Ownership, 

Protection and Related Matters

 

10.1     Filing,
Prosecution and Maintenance of Vertex Patent Rights. Vertex shall have the
exclusive right and the obligation (subject to Vertex’s election not to file,
prosecute, or maintain pursuant to Section 10.3), to diligently file, prosecute
and maintain (by timely paying all maintenance fees, renewal fees, and other
such fees and costs required under applicable laws) the Vertex Patent Rights
worldwide, and to conduct any interference, opposition and re-examination or
other similar proceeding with respect thereto, in all such countries as is
customary for Vertex to file, prosecute and maintain patent rights covering
pharmaceutical products. [***]  If Janssen notifies Vertex that it wishes
Vertex to file and prosecute patent applications covering Vertex Patent Rights
in any country or countries in the Territory in which it is not customary for
Vertex to do so, or to conduct any interference, opposition and re-examination
or other similar proceedings with respect to the Vertex Patent Rights in the
Territory, [***] Vertex shall keep
Janssen advised of the status of all actual and prospective patent filings in
the Territory and upon the request of Janssen, provide advance copies of any
papers related to the filing, prosecution and maintenance of such patent
filings. Vertex shall promptly give reasonable advance notice to Janssen of the
grant, lapse, revocation, surrender, invalidation or abandonment of any Vertex
Patent Rights in the Territory for which Vertex is responsible for the filing,
prosecution and maintenance. Vertex shall solicit Janssen’s advice and review
of the nature and text of such patent applications and important prosecution
matters related thereto in reasonably sufficient time prior to filing thereof,
and Vertex shall consider Janssen’s comments related thereto.

 

10.2     Filing,
Prosecution and Maintenance of Joint Patent Rights. In respect of any Joint
Information and Inventions, the Parties shall agree, without prejudice to
ownership, which Party shall have the right and/or obligation to prepare and
file a priority patent application, and prosecute such application(s) and
maintain any patents derived therefrom, with the Parties equally sharing the
Patent Costs for the preparation, filing, prosecution and maintenance of such
priority patent application. Should the agreed-upon Party elect not to prepare
and/or file any such patent application, it shall (i) provide the other Party
with written notice as soon as reasonably possible after making such election
but in any event no later than [***]
before the other Party would be faced with a possible loss of rights, (ii)

 

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

 

34

 

give the other Party the right, at the other Party’s discretion and
sole expense, to prepare and file the priority application(s), and (iii) offer
reasonable assistance in connection with such preparation and filing [***] 
The other Party, at its discretion and cost, may prosecute such
application(s) and maintain any patents derived therefrom.

 

10.3     Option
to Prosecute and Maintain Patents.

 

10.3.1     Vertex shall give notice to Janssen of any
desire to cease prosecution and/or maintenance of Vertex Patent Rights or Joint
Patent Rights on a country-by-country basis in the Territory and, in such case,
shall permit Janssen, at its sole discretion, to continue prosecution or
maintenance of such Vertex Patent Rights [***].
If Janssen elects to continue prosecution or maintenance or to file based on
Vertex’s election not to file pursuant to this Section 10.3, Vertex shall
execute such documents and perform such acts at [***] expense as may be reasonably necessary to allow Janssen
to initiate or continue such filing, prosecution or maintenance.

 

10.3.2     Janssen shall give notice to Vertex of any
desire to cease prosecution and/or maintenance of Janssen Patent Rights or
Joint Patent Rights in any country and, in such case, shall permit Vertex at
its sole discretion, to continue prosecution or maintenance of such Janssen
Patent Rights [***]. If Vertex
elects to continue prosecution or maintenance or to file based on Janssen’s
election not to file pursuant to this Section 10.3, Janssen shall execute such
documents and perform such acts at [***]
expense as may be reasonably necessary to allow Vertex to initiate or continue
such filing, prosecution or maintenance.

 

10.4     Interference,
Opposition, Re-examination and Re-issue.

 

10.4.1     Vertex shall promptly, but in any case within [***] of learning of such event, inform
Janssen of any request for, or filing or declaration of, any interference,
opposition, or re-examination by a Third Party relating to Vertex Patent Rights
or Joint Patent Rights for which Vertex is responsible, in the Territory. Janssen
and Vertex shall thereafter consult and cooperate fully to determine a course
of action with respect to any such proceeding. Janssen shall have the right to
review and approve any submission to be made in connection with such
proceeding.

 

10.4.2     Vertex shall not initiate any re-examination,
interference or re-issue proceeding relating to Vertex Patent Rights or Joint
Patent Rights in the Territory without the prior written consent of Janssen,
which consent shall not be unreasonably withheld.

 

10.4.3     In connection with any interference,
opposition, re-issue, or re-examination proceeding relating to Vertex Patent
Rights or Joint Patent Rights in the Territory, Janssen and Vertex will
cooperate fully and will provide each other with any information or assistance
that either may reasonably request. Vertex shall keep Janssen informed of
developments in any such action or proceeding, including, to the extent
permissible by law, consultation and approval of any settlement, the status of
any settlement negotiations and the terms of any offer related thereto.

 

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

 

35

 

10.4.4     The expense of any interference,
re-examination or re-issue proceeding, and the expense of any opposition or
similar two-party proceeding conducted under rules of the U.S. Patent and
Trademark Office, or any comparable foreign authority shall, unless agreed
otherwise, [***]

 

10.5     Enforcement
and Defense.

 

10.5.1     Each Party shall promptly give the other Party
notice of (i) any infringement of Vertex Patent Rights, Janssen Patent Rights
or Joint Patent Rights, or (ii) any misappropriation or misuse of Vertex
Know-How or Janssen Know-How, that may come to the first Party’s attention. Janssen
and Vertex shall thereafter consult and cooperate fully to determine a course
of action, including but not limited to the commencement of legal action by
either or both Janssen and Vertex, to terminate any infringement of Vertex
Patent Rights, Janssen Patent Rights or Joint Patent Rights or any
misappropriation or misuse of Vertex Know-How or Janssen Know-How, in the
Territory. Vertex, upon notice to Janssen, shall have the first right to
initiate and prosecute any such legal action in the name of Vertex and Janssen,
or to control the defense of any declaratory judgment action, relating to
Vertex Patent Rights, Joint Patent Rights or Vertex Know-How in the Territory. Janssen,
upon notice to Vertex, shall have the first right to initiate and prosecute any
such legal action in the name of Janssen and Vertex, or to control the defense
of any declaratory judgment action, relating to Janssen Patent Rights or
Janssen Know-How in the Territory. [***]  Each Party shall promptly inform the other
Party if it elects not to exercise its first right as described above and the
other Party shall thereafter have the right to either initiate and prosecute
such action or to control the defense of such declaratory judgment action in
its name of and, if necessary, the name of the first Party. Each Party shall
have the right to be represented by counsel of its own choice [***]

 

10.5.2     For any action to terminate any infringement
of Vertex Patent Rights, Janssen Patent Rights or Joint Patent Rights or any
misappropriation or misuse of Vertex Know-How or Janssen Know-How, as permitted
in accordance with Section 10.5.1, in the event that the Party initiating the
action is unable to initiate or prosecute such action solely in its own name,
the other Party will join such action voluntarily and will execute and cause
its Affiliates to execute all documents necessary for the first Party to
initiate litigation to prosecute and maintain such action. In connection with
any such action, Janssen and Vertex will cooperate fully and will provide each
other with any information or assistance that either may reasonably request. Each
Party shall keep the other informed of developments in any such action or
proceeding, including, to the extent permissible by law, the consultation and
approval of any settlement negotiations and the terms of any offer related
thereto.

 

10.5.3     Any recovery obtained by either or both
Janssen and Vertex in connection with or as a result of any action contemplated
by this Section, whether by settlement or otherwise, shall be shared in order
as follows:

 

[***]

 

[***]

 

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

 

36

 

[***]

 

10.5.4     Vertex shall inform Janssen of any
certification regarding any Vertex Patent Rights it has received pursuant to
either 21 U.S.C. §§355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor
provisions or any similar provisions in a country in the Territory and shall
provide Janssen with a copy of such certification [***] Vertex’s and Janssen’s rights with respect to the
initiation and prosecution of any legal action as a result of such
certification or any recovery obtained as a result of such legal action shall
be as defined in subsections 10.5.1 through 10.5.4; provided, however,
that Vertex shall have the first right to initiate and prosecute any action and
shall inform Janssen of such decision [***],
in the case of certification regarding any Vertex Patent Rights it has received
pursuant to either 21 U.S.C. §§355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV), or
within a similarly appropriate time in the case of certifications or the like
in countries outside of the United States, of receipt of the certification,
after which time Janssen shall have the right to initiate and prosecute such
action.

 

10.6     Patent
Term Restoration. Vertex shall be responsible for obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country in the Territory where applicable to Vertex Patent Rights and Joint
Patent Rights. Janssen shall be responsible for obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country in the Territory where applicable to Janssen Patent Rights. The Parties
hereto shall cooperate with each other in obtaining patent term restoration or
supplemental protection certificates or their equivalents in any country in the
Territory where applicable to Vertex Patent Rights, Janssen Patent Rights and
Joint Patent Rights. In the event that elections with respect to obtaining such
patent term restoration are to be made, Vertex shall have the right to make the
election with respect to Vertex Patent Rights and Joint Patent Rights and
Janssen shall have the right to make the election with respect to Janssen
Patent Rights.

 

10.7     Third
Party Claims.

 

10.7.1     Without prejudice to Section 12.3.2, if any
action, suit or proceeding is brought against Janssen or Vertex or any
Affiliate or sublicensee of either Party alleging the infringement of the
intellectual property rights of a Third Party by reason of the discovery,
development, manufacture, use, sale, importation or offer for sale of a Product
Candidate or Product in the Territory, Janssen shall have the sole right but
not the obligation to defend itself and Vertex in such action, suit or
proceeding [***]  The Parties shall cooperate with each other
in any defense of any such suit, action or proceeding. The Parties will give
each other prompt written notice of the commencement of any such suit, action
or proceeding, or receipt of any claim of infringement, and will furnish each
other a copy of each communication relating to the alleged infringement. Without
regard to which Party defends an Infringement Claim under this Section 10.7,
all damages (including all reasonable costs and expenses associated with any
defense of a claim hereunder) associated with any such infringement claim in
the Territory shall be borne equally by the Parties.

 

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

 

37

 

10.7.2     Neither Party shall compromise, litigate,
settle or otherwise dispose of any such suit, action or proceeding without the
other Party’s advice and prior consent, provided that the Party not having the
right to defend the suit shall not unreasonably withhold its consent to any
settlement which does not have a material adverse effect on its rights,
obligations or benefits, either under this Agreement or otherwise. Notwithstanding
the foregoing, if Janssen decides to seek a license, and Vertex elects not to
seek such license, Janssen may seek to obtain such license for its benefit [***]  provided  that the terms
and conditions of such license do not include an admission of invalidity of any
Vertex Patent Rights or Joint Patent Rights, or restrict Vertex’s ability to
challenge or litigate the validity or applicability of any intellectual property
to which the license relates.

 

10.7.3     The Party first having actual notice of any
claim, action or proceeding referenced in Section 10.7.1 above shall promptly
notify the other Party in writing, setting forth in reasonable detail, to its
knowledge, the facts related to any such claim, action or proceeding. The
Parties shall promptly discuss proposed responses to any such matters.

 

10.8     Trademarks.
Janssen shall have the right but not the obligation to use Vertex’
Trademarks to market and promote the Product in its Territory, subject to the
provisions of the license to be provided under Section 7.6 hereof. Janssen may,
however, select all Trademarks which it employs in connection with Product in
the Territory, and subject to the following sentence, shall own and control,
and shall be responsible for registration and maintenance of all such
Trademarks. In the event Janssen selects a Product Trademark for any country in
the Territory that is the same as the Product Trademark selected by Vertex for
use in the United States, Vertex will own the related Trademark and will
provide Janssen with a license as provided in Section 7.6 of this Agreement to
use that Trademark in the Territory. [***]  Nothing in this Agreement shall be construed
as a grant of rights, by license or otherwise, to Vertex to use any Trademarks
owned by Janssen for any purpose, except as might otherwise be permitted under
applicable law or as provided in Article 13 hereof in the event of the
termination of this Agreement by Vertex with cause or by Janssen without cause.

 

Article 11 -Confidentiality, Publication and
Publicity

 

11.1     Nondisclosure
Obligation. All Information disclosed by one Party to the other Party shall
be maintained in confidence by the receiving Party and shall not be disclosed
to a Third Party or used for any purpose except as set forth herein without the
prior written consent of the disclosing Party, except to the extent that such
Information:

 

11.1.1     is known by the receiving Party at the time of
its receipt, and not through a prior disclosure by the disclosing Party, as
documented by the receiving Party’s contemporaneous business records;

 

11.1.2     is in the public domain through no breach of
this Agreement by the receiving Party;

 

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

 

38

 

11.1.3     is subsequently disclosed to the receiving
Party by a Third Party who may lawfully make such disclosure and is not to the
best of the receiving Party’s knowledge under an obligation of confidentiality
to the disclosing Party;

 

11.1.4     is developed by the receiving Party
independently of Information received from the disclosing Party, as documented
by the receiving Party’s contemporaneous business records;

 

11.1.5     is disclosed to governmental or other
regulatory agencies to comply with applicable law or regulations, provided the
receiving Party provides to the disclosing Party prompt prior written notice of
its obligation to make such disclosure and takes reasonable and lawful actions
to avoid or minimize the degree of such disclosure; or

 

11.1.6     is deemed necessary by the receiving Party in
the reasonable exercise of its judgment to be disclosed to Related Parties,
agents or consultants, to the extent the receiving Party deems necessary or
advisable, in connection with the Development, Manufacturing and/or
Commercialization of a Product or Product Candidate (or for such entities to
determine their interest in performing such activities) in accordance with this
Agreement, on the condition that any such Third Parties agree to be bound by
confidentiality and non-use obligations that are no less stringent than those
confidentiality and non-use provisions contained in this Agreement.

 

A combination consisting of multiple components shall not be deemed to
fall within the foregoing exclusions merely because one or more individual
components of that disclosure are published or available to the general public
or in the rightful possession of the receiving Party, unless the combination
itself is published or available to the general public or otherwise falls
within one of the foregoing exclusions.

 

If a Party is required by judicial or administrative process to
disclose Information that is subject to the non-disclosure provisions of this
Section 11.1, such Party shall promptly inform the other Party of the
disclosure that is being sought in order to provide the other Party an
opportunity to challenge or limit the disclosure obligations. Information that
is disclosed by judicial or administrative process shall remain otherwise
subject to the confidentiality and non-use provisions of this Section 11.1, and
the receiving Party shall cooperate with any reasonable attempts of the
disclosing Party to limit any such disclosure required by law, including
without limitation by way of obtaining an order of confidentiality, to ensure
the continued confidential treatment of such Information.

 

The confidential and non-use obligations of this Section 11.1 shall
survive the termination or expiration of this Agreement.

 

11.2     Employee,
Consultant and Advisor Obligations. Each Party agrees that it and its
Affiliates shall provide or permit access to Information received from the
other Party and such Party’s Affiliates and representatives only to the
receiving Party’s employees, consultants, Permitted Sublicensees and
subcontractors, and to the employees, consultants, Permitted Sublicensees and
subcontractors of the receiving Party’s Affiliates, who in such Party’s
reasonable judgment have a need to know such Information to assist the
receiving Party with the activities contemplated by this Agreement and who are
subject to

 

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

 

39

 

obligations of confidentiality and non-use with respect to such
Information no less restrictive than the obligations of confidentiality and
non-use of the receiving Party pursuant to Section 11.1; provided that each
Party shall remain responsible for any failure by its Affiliates, and its and
its Affiliates’ respective employees, consultants, permitted subcontractors and
sublicensees, to treat such Information as required under Section 11.1 (as if
such Affiliates, employees, consultants, permitted subcontractors and
sublicensees were Parties directly bound to the requirements of Section 11.1).

 

11.3     Publication.
Each of Janssen and Vertex reserves the right to publish or publicly present
the results (the “Results”) of the Development Program, subject to the
following terms and conditions. The Party proposing to publish or publicly
present the Results (the “Publishing Party”) will submit a draft of any
proposed manuscript, abstract or speech to the other Party (the “Non-Publishing
Party”) for comments [***]
prior to submission for publication or oral presentation. The Non-Publishing
Party shall notify the Publishing Party in writing [***] of receipt of such draft whether such draft contains (i)
information of the Non-Publishing Party which it considers to be confidential
under the provisions of Section 11.1 hereof, (ii) information that if published
would have an adverse effect on a patent application covering the subject
matter of this Agreement, or (iii) information that the Non-Publishing Party
reasonably believes would be likely to have a material adverse impact on the
Development, Manufacture or Commercialization of a Product Candidate or Product.
In any such notification, the Non-Publishing Party shall indicate with
specificity its suggestions regarding the manner and degree to which the
Publishing Party may disclose such information. In the case of item (i) above,
no Party may publish Information of the other Party without its consent in
violation of Section 11.1 of this Agreement. In the case of item (ii) above,
the Non-Publishing Party may request a delay and the Publishing Party shall
delay such publication or presentation, for a period [***], to permit the timely preparation and filing of a patent
application or an application for a certificate of invention covering the
information at issue. In the case of item (iii) above, if the Publishing Party
shall disagree with the Non-Publishing Party’s assessment of the impact of the
publication or presentation, then the issue shall be referred by the Publishing
Party to the JSC for resolution, or if there is no JSC at the time of referral,
then to the Parties’ respective Chief Executive Officers for discussion and
resolution. The decision of the JSC or the Chief Executive Officers, if the
referral is made to them, shall be final, provided that such decision shall
always be subject to the confidentiality provisions of Section 11.1 hereof and
shall be made with reasonable regard for the interests of the Non-Publishing
Party and provided further that no decision shall be made to publish or present
information if the publication or presentation would have a material adverse effect
on the commercial prospects of any Product Candidate or Product. The Parties
agree that authorship of any publication or presentation will be determined
based on the customary standards then being applied in the relevant scientific
journal or conference. The Parties will require any agents conducting the
Development Program on their behalf to comply with publication and presentation
restrictions comparable to those set forth herein. The forgoing provisions
shall not be interpreted to prevent the publication by a Party of information
required by law to be published by that Party.

 

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

 

40

 

This Section 11.3 shall terminate with the termination of this
Agreement, but the provisions of Section 11.1 hereof shall continue to govern
the disclosure by one Party, whether by publication or otherwise, of
Information of the other.

 

11.4     Publicity/Use
of Names. Prior to the Effective Date, the Parties shall agree upon the
timing and content of an initial press release relating to the execution of
this Agreement and its terms. Except to the extent already disclosed in that
initial press release, no disclosure of the existence of this Agreement or its
terms may be made by either Party, and no Party shall use the name, trademark,
trade name or logo of the other Party or its employees in any publicity, news
release or promotional materials relating to this Agreement or its subject
matter, without the prior express written permission of the other Party, except
as permitted by this Agreement or as may be required by applicable laws,
regulations, or judicial order. The Party desiring to make any such public
announcement shall provide the other Party with a written copy of the proposed
announcement sufficiently in advance of the public release to allow such other
Party to comment upon such announcement, prior to its release.

 

In addition to the foregoing restrictions on public disclosure, if
either Party concludes that a copy of this Agreement must be filed with a
securities exchange or regulatory or governmental body to which that Party is
subject, wherever situated, such Party shall provide the other Party with a
copy of this Agreement showing any sections as to which the filing Party
proposes to request confidential treatment, will provide the other Party with
an opportunity and a reasonable time period to comment on any such proposal and
to suggest additional portions of the Agreement for confidential treatment and
will take such Party’s comments into consideration before filing the Agreement.
If the filing Party disagrees with the other Party’s additional confidential
treatment request, the Parties shall attempt in good faith to discuss the
matter before the Agreement is filed.

 

Article 12 -Representations and Warranties;
Indemnification

 

12.1     Representations
and Warranties of Vertex. Vertex, for itself and its Affiliates, represents
and warrants to Janssen that, as of the Effective Date:

 

12.1.1     Authorization. This Agreement has been duly
executed and delivered by Vertex and constitutes the valid and binding
obligation of Vertex, enforceable against Vertex in accordance with its terms
except as enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors’ rights generally and by general equitable principles. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of Vertex, its officers and directors.

 

12.1.2     Intellectual Property. The Vertex Patent
Rights are existing and, to Vertex’s knowledge, the patents in Vertex Patent Rights
are not invalid or unenforceable. Vertex has disclosed to Janssen all patent
applications and issued patents comprising the Vertex Patent Rights, and all
prosecution history relating thereto, which patent applications and issued
patents are listed in Schedule 1.116. Except for [***], Vertex has full right and

 

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

 

41

 

interest in all Vertex Know-How and Vertex Patent Rights. Vertex has
not granted any right, title or interest in or to any Vertex Know-How or Vertex
Patent Rights that are inconsistent with the rights, licenses and interests
granted under the terms of this Agreement.

 

12.1.3     Encumbrances. To Vertex’s knowledge,Vertex
Patent Rights are free of any liens, charges and encumbrances.

 

12.1.4     Mitsubishi. Vertex has the right to sublicense
to Janssen hereunder any rights to know-how or patents that it obtains from
Mitsubishi Pharma Corporation under its existing agreement with Mitsubishi in
connection with Products incorporating VX-950.

 

12.1.5     Government Funding. Vertex is not a party to
any agreement with the U.S. Federal government or an agency thereof pursuant to
which the U.S. federal government or such agency provided funding for the
development of the Compound or Product.

 

12.1.6     No Third Party Patents. To Vertex’s knowledge,
no Third Party right or patent would necessarily be infringed by the Development,
Manufacture, use or Commercialization of VX-950 pursuant to this Agreement, and
Vertex is not aware of any pending patent application that, if issued, would
necessarily be infringed by the Development, Manufacture, use or
Commercialization of VX-950 pursuant to this Agreement.

 

12.1.7     No Interference. The Vertex Patent Rights are
not the subject of any interference proceeding known to Vertex, and Vertex is
not aware of any pending or threatened action, suit, proceeding or claim by a
Third Party challenging Vertex’s ownership rights in, or the validity or scope
of, the Vertex Patent Rights.

 

12.1.8     [***]

 

12.1.9     VX-950 Patents. Schedule 1.116 contains
a complete list of all patents and patent applications Controlled by Vertex, as
of the Effective Date, that [***]

 

12.1.10  No Debarment. Neither Vertex nor any of its
Affiliates has been debarred or is subject to debarment. During the term of the
Development Program and any Supply Agreement adopted hereunder, Vertex and its
Affiliates will use commercially reasonable efforts to avoid using in any
capacity, in connection with the Development, Manufacture or Commercialization
of the Product Candidate or Product, any Person who to Vertex’s knowledge has
been debarred pursuant to Section 306 (or comparable law or regulation) of the
United States Federal Food, Drug, and Cosmetic Act, or who to Vertex’s
knowledge is the subject of a conviction described in such section. Vertex
agrees to inform Janssen in writing immediately if it or any Person who is
performing services hereunder is debarred or is the subject of a conviction
described in Section 306 (or comparable law or regulation), or if any action,
suit, claim, investigation or legal or administrative proceeding is pending or,
to the best of Vertex’s knowledge, is threatened, relating to the debarment or
conviction of Vertex or any Person used in any capacity by Vertex or any of its
Affiliates in connection with the Development, Manufacture or Commercialization
of any Product.

 

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

 

42

 

12.1.11  [***]

 

12.2     Representations
and Warranties of Janssen. Janssen, for itself and its Affiliates,
represents and warrants to Vertex that, as of the Effective Date:

 

12.2.1     Authorization. This Agreement has been duly
executed and delivered by Janssen and constitutes the valid and binding
obligation of Janssen, enforceable against Janssen in accordance with its
terms, except as enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other laws relating to
creditors’ rights generally and by general equitable principles. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of Janssen, its officers and directors.

 

12.2.2     No Debarment. Neither Janssen nor any of its
Affiliates has been debarred or is subject to debarment. During the term of the
Development Program and any Supply Agreement adopted hereunder, Janssen and its
Affiliates will use commercially reasonably efforts to avoid using in any
capacity, in connection with the Development, Manufacture or Commercialization
of the Product Candidate or Product, any Person who to Janssen’s knowledge has
been debarred pursuant to Section 306 (or comparable law or regulation) of the
United States Federal Food, Drug, and Cosmetic Act, or who to Janssen’s
knowledge is the subject of a conviction described in such section. Janssen
agrees to inform Vertex in writing immediately if it or any Person who is
performing services hereunder is debarred or is the subject of a conviction
described in Section 306 (or comparable law or regulation), or if any action,
suit, claim, investigation or legal or administrative proceeding is pending or,
to the best of Janssen’s knowledge, is threatened, relating to the debarment or
conviction of Janssen or any Person used in any capacity by Janssen or any of
its Affiliates in connection with the Development, Manufacture or
Commercialization of any Product.

 

12.2.3     [***]

 

12.3     Indemnification.

 

12.3.1     Indemnification by Vertex. Except to the
extent due to the negligence or willful misconduct of Janssen or its
Affiliates, and subject to Section 12.3.5, Vertex shall indemnify, defend and
hold Janssen and its Affiliates, and their respective directors, officers,
employees and agents, harmless from and against any claims of damages (except
to the extent arising from any claims of intellectual property infringement),
bodily injury, death, or property damage made by a Third Party (a “Third
Party Claim”) to the extent arising from: (i) the negligence or willful
misconduct of Vertex under this Agreement or the Supply Agreement; (ii) the
material breach by Vertex of any material warranty, representation or
obligation of Vertex under this Agreement; or (iii) any product liability
claims related to the Product and arising from Commercialization in North
America and the Far East.

 

12.3.2     Indemnification by Janssen. Except to the
extent due to the negligence or willful misconduct of Vertex or its Affiliates,
and subject to Section 12.3.5, Janssen shall

 

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

 

43

 

indemnify, defend and hold Vertex and its Affiliates, and their
respective directors, officers, employees and agents, harmless from and against
any Third Party Claim resulting from (i) the negligence or willful misconduct
of Janssen or its Affiliates under this Agreement, the Supply Agreement or any
other supply agreement under which Janssen supplies Product Candidates or
Products to Vertex; (ii) the material breach by Janssen of any material
warranty, representation or obligation of Janssen under this Agreement; or
(iii) any product liability claims related to the Product and arising from
Commercialization in the Territory.

 

12.3.3     Claims for Indemnification. If a Party (the “Indemnitee”)
intends to claim indemnification under this Section, it shall promptly notify
the other Party (the “Indemnitor”) in writing of any Third Party Claim
for which the Indemnitee intends to claim such indemnification. The failure of
the Indemnitee to deliver written notice to the Indemnitor within a reasonable
time after the commencement of any such action shall relieve the Indemnitor of
any obligation to the Indemnitee under this Section with respect to any such
action, to the extent that the failure prejudices the Indemnitor’s ability to
defend a Third Party Claim. The Indemnitee shall permit the Indemnitor to
control the litigation and/or settlement of such Third Party Claim, and
cooperate fully with Indemnitor in all matters related thereto, provided that
unless agreed by Indemnitee (i) counsel appointed by Indemnitor to defend
Indemnitee shall not take any position which, if sustained, would cause
Indemnitee not to be indemnified by Indemnitor and (ii) no settlement will
involve any terms binding on Indemnitee except payment of money to be paid by
Indemnitor.

 

12.3.4     Direct Damage Claims Only. Neither Party shall
be liable to the other for indirect, consequential, special or punitive damages
under this Agreement.

 

12.3.5     Claims Arising in Connection with Development. Except
to the extent due to the negligence or willful misconduct of a Party,

 

(a)           [***]

 

(b)           Janssen
will indemnify Vertex from and against any Third Party Claims arising out of any
Additional Development Activities conducted by or at the direction of Janssen
or its Affiliates, and

 

(c)           Vertex
will indemnify Janssen from and against any Third Party Claims arising out of
any Additional Development Activities conducted by or at the direction of
Vertex.

 

Article 13 -Term and Termination

 

13.1     Term
and Expiration. This Agreement shall be effective as of the Effective Date
and unless terminated earlier pursuant to Sections 13.2, 13.3, 13.6 or 13.7,
this Agreement shall continue in effect until expiration of all royalty
obligations under Article 9.

 

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

 

44

 

13.2     Termination
by Janssen Without Cause. Notwithstanding anything contained herein to the
contrary, Janssen shall have the right to terminate this Agreement at any time
in its sole discretion by giving six months’ advance written notice to Vertex;
provided, however, if a Product has received a Marketing Authorization in any
Major Market Country, the notice required shall be [***] unless such termination is for a reason other than a
Valid Safety Issue, in which case termination may be with immediate effect. For
the purposes of this Agreement, a “Valid Safety Issue” [***]

 

Following any delivery by Janssen of notice of termination pursuant to
this Section 13.2, Janssen and Vertex will cooperate in good faith to agree and
implement a transition plan, in order to give effect to Section 13.5. Until the
earlier of (i) transfer of any central marketing authorization from Janssen to
Vertex or its designee or the effective date of any such termination, Janssen
will use all reasonable efforts to agree and implement a transition plan and
will continue to use Diligent Efforts to Develop, Manufacture and Commercialize
Product Candidates and Products in the Territory in accordance with the plans
then in effect and approved by the JDC and/or JCC, and will otherwise conduct
itself with the objective of avoiding a negative impact, either by its actions
or inaction, on the value of a Product Candidate or Product.

 

13.3     Termination
for Cause. This Agreement may be terminated at any time during the term of
this Agreement:

 

13.3.1     upon written notice by either Party if the
other Party is in breach of its material obligations hereunder and has not
cured such breach after notice from the terminating Party requesting cure of
the breach; provided, however, in the event of a good faith dispute with
respect to the existence of a material breach, the cure period shall be tolled
until such time as the dispute is resolved pursuant to Section 14.5; and
provided that the terminating Party has given the defaulting Party the following
opportunities to remedy any breach:

 

(i)       the
written notice of breach referenced above shall detail the specific obligation
under this Agreement which is alleged to have been breached; the manner of such
alleged breach; and the steps which must be taken in order to remedy such
breach; and

 

(ii)     the
terminating Party has provided the defaulting Party with a reasonable amount of
time (but no more than [***]) in
which to complete any steps which might be taken to remedy the breach, as
stated in the notification of breach;

 

13.3.2     by either Party upon the filing or institution
of bankruptcy, reorganization, liquidation or receivership proceedings, or upon
an assignment of a substantial portion of the assets for the benefit of
creditors, by the other Party; provided, however, in the case of any
involuntary bankruptcy proceeding such right to terminate shall only become
effective if the Party consents to the involuntary bankruptcy or such
proceeding is not dismissed within [***]
after the filing thereof.

 

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

 

45

 

13.4     Effect
on License of Termination by Janssen for Cause.

 

13.4.1     If Janssen terminates this Agreement under
Section 13.3.1, then (i) Janssen’s licenses pursuant to Article 7 shall become
perpetual, exclusive licenses subject to the financial provisions of Article 9;
and (ii) Janssen shall have the right to offset against any monies owed to
Vertex (pursuant to Article 9 of this Agreement) all of its direct costs,
losses and expenses incurred as a result of Vertex’s breach, [***] 
Notwithstanding the foregoing, no offsets may be taken by Janssen in any
Calendar Year that would reduce the aggregate royalties payable to Vertex on
account of Net Sales in that Calendar Year [***]

 

13.4.2     If Janssen terminates this Agreement pursuant
to subsection 13.3.2, all licenses and rights to licenses granted under or
pursuant to this Agreement by Vertex to Janssen are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the United States Bankruptcy
Code (the “Code”), licenses of rights to “intellectual property” as
defined under Section 101(35A) of the Code. The Parties agree that Janssen, as
a licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Code, and that upon
commencement of a bankruptcy proceeding by Vertex under the Code, or against
Vertex if such proceeding is not dismissed within [***] of its initial filing, Janssen shall be entitled to
complete access to any such intellectual property and all embodiments of such
intellectual property in the Territory.

 

13.5     Effect
of Termination by Vertex For Cause or by Janssen Without Cause.

 

If Vertex terminates this Agreement under Section 13.3 or Janssen
terminates this Agreement under Section 13.2:

 

13.5.1     The license granted to Janssen and its
Affiliates under Article 7, and any sublicense granted by Janssen with respect
to any [***] under Section 7.7,
shall terminate as of the effective date of termination, except to the extent
necessary to enable Janssen to perform its obligations under this section 13.5,
and Janssen shall, within [***] after
such termination, return or cause to be returned to Vertex at Vertex’s request
all Vertex Information in tangible form, and all substances or compositions
delivered or provided by Vertex, as well as any other material provided by
Vertex in any medium, except that Janssen may retain one copy in its
confidential files for records purposes.

 

13.5.2     The license granted to Vertex by Janssen under
Section 7.4 hereof shall continue in effect notwithstanding termination of this
Agreement and shall be extended in geographic scope to cover the right to
Develop, Manufacture and Commercialize Product Candidates and Products in the
Territory. During the period commencing with notice of termination and ending [***] following the effective date of
termination, Janssen will provide Vertex and its sublicensees, at Janssen’s
expense and in accordance with procedures to be agreed by the Parties, with
reasonable access to information and know-how necessary for Vertex to apply the
licensed technology.

 

13.5.3     If Vertex terminates this Agreement pursuant
to subsection 13.3.2, all licenses and rights to licenses granted under or
pursuant to this Agreement by Janssen to Vertex are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the United States Bankruptcy
Code (the “Code”), licenses of rights to “intellectual property” as

 

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

 

46

 

defined under Section 101(35A) of the Code. The Parties agree that
Vertex, as a licensee of such rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the Code, and that upon
commencement of a bankruptcy proceeding by Janssen under the Code, or against
Janssen if such proceeding is not dismissed within [***] of its initial filing, Vertex shall be entitled to
complete access to any such intellectual property and all embodiments of such
intellectual property in the Territory.

 

13.5.4     Upon termination by Janssen under Section
13.2, (a) all filings and approvals with Regulatory Authorities and Regulatory
Approvals concerning Product Candidates or Products and Marketing
Authorizations relating to any Product will be assigned or otherwise
transferred to or at the direction of Vertex as soon as practicable and at
Janssen’s expense, and any reports required to be made to any Regulatory
Authority covering any periods prior to the effective date of termination of
the Agreement will be prepared promptly and filed at Vertex’s direction with
the appropriate Regulatory Authority or, at Vertex’s discretion, made available
to or at the direction of Vertex for filing by Vertex. Janssen will also
promptly deliver to or at the direction of Vertex (i) all governmental and
regulatory correspondence and conversation logs relating to the Development,
Manufacture or Commercialization of Product Candidates and Products in the
Territory, (ii) copies of all data, reports, records and materials in Janssen’s
possession or Control relating to the Development, Manufacture or
Commercialization of Product Candidates and Products in the Territory,
including all non-clinical and clinical data relating to Product Candidates and
Products, and (iii) all records and materials in Janssen’s possession or
Control containing Confidential Information of Vertex.

 

(b)  Janssen will appoint Vertex
as Janssen’s and/or its Affiliates’ agent for all Product-related matters
involving Regulatory Authorities in the Territory.

 

(c)  if Vertex so requests,
Janssen and its Affiliates will assign to Vertex any agreements with Third
Parties relating solely to the Development, Manufacture or Commercialization of
the Product to which Janssen is a party to the extent permitted by the
applicable law and the terms of such agreements, and Janssen will use best
efforts not to enter into any agreement that restricts its ability to comply
with this provision.

 

(d)  Janssen will, upon request
by Vertex, appoint Vertex or its designee as its exclusive distributor of the
Product in the Territory, and grant Vertex or its designee the right to appoint
sub-distributors.

 

(e)  Janssen will, at its cost,
return to Vertex or its designee all inventory of Intermediates and Product in
its possession as of the date of termination and, at Vertex’s election, make
payment to Vertex for any Intermediates and Product ordered by Janssen pursuant
to the Supply Agreement but not yet paid for.

 

(f)  Notwithstanding the
provisions of Section 11.1, Vertex shall be able to disclose any such data and
information as is necessary to exercise its rights with respect to a Compound,
Product Candidate or Product.

 

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

 

47

 

(g)  Notwithstanding termination
of this Agreement, this Section 13.5.4 shall remain in effect until the
completion by Janssen of all actions which are required by it to enable a full
transfer to Vertex of all filings for Regulatory Approvals and all Marketing
Authorizations relating to any Product.

 

13.5.5     If Janssen or any of its Affiliates at the
time of termination is performing any Manufacturing activities with respect to
a Product Candidate or Product, then at Vertex’s request Janssen or its
Affiliates, as applicable, shall continue to perform those Manufacturing
activities with respect to a Product on the same terms in accordance with
forecasts under the most recent and mutually agreed forecast for commercial
supply, as applicable, until [***]  During that period Janssen shall
use [***] at Janssen cost to
cooperate with Vertex in the transition of manufacturing capacity to other sources
as early as practicable.

 

13.6     [***]

 

This section 13.6 is not a termination provision under section 13.7 of
this Agreement.

 

13.6.1     [***]

 

13.6.2     [***]

 

13.7     Survival.

 

Any expiration or termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement prior to expiration or
termination, including without limitation the obligation to pay royalties for
Product(s) sold prior to such expiration or termination or make other payments
under this Agreement. In addition to any other provisions which by their terms
specifically survive expiration or termination of this Agreement, the following
provisions shall indefinitely survive any expiration or termination of this
Agreement: Section 7.4, provided that any and all licenses granted under
Section 7.4 shall be non-exclusive, Sections 9.6, 9.7, 9.9, and 9.11, Article
11, Section 12.3, Article 13, sections 14.1, 14.2, 14.3, and 14.5, sections
15.1, 15.3, 15.4, 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 15.12, 15.13,
15.14, and 15.15, and the definitions of terms from Article 1 that are part of
the recitation of any of the sections listed in this section 13.7.

 

13.8     Non-exclusive
Remedies. The remedies provided to either Party in this Article 13 shall
not be deemed the exclusive remedies available to that Party, and in particular
shall not limit any legal or equitable remedies otherwise available to that
Party.

 

Article 14 -Governing Law and Dispute
Resolution

 

14.1     Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts without reference to any rules of
conflict of laws. The United Nations Convention on the Sale of Goods shall not
apply.

 

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

 

48

 

14.2     Referral
to Executive Officers. If for any reason the JSC cannot resolve any matter
properly referred to it for resolution, either Party may refer the matter to
the Executive Officers for resolution. If, after discussing the matter in good
faith and attempting to find a mutually satisfactory resolution to the issue,
the Executive Officers fail to come to consensus within [***] after the date on which the matter is
referred to the Executive Officers (unless a longer period is agreed to in
writing by the Parties) the provisions of Section 14.3 shall apply and
resolutions reached through such provisions shall be binding on the Parties;
provided that [***]

 

14.3     Final
Decision-Making Authority. If the Executive Officers fail to come to
consensus on any matter properly referred to the Executive Officers within the
period for resolution set forth in Section 14.2 (an “Unresolved Matter”)
then the following provisions shall apply:

 

14.3.1     Subject to the provisions of subsections
14.3.2 through 14.3.3, Vertex shall have final decision-making authority over
all Unresolved Matters;

 

14.3.2     Janssen shall have final decision-making
authority with respect to the following:

 

14.3.2.1       [***]

 

14.3.2.2       [***]

 

14.3.2.3       [***]

 

14.3.2.4       [***]

 

14.3.3     Notwithstanding the foregoing provisions of
this Section 14.3, neither Party shall have final decision-making authority
pursuant to this Section 14.3 with respect to matters over which one or the
other of the Parties is expressly allocated decision-making authority elsewhere
in this Agreement.

 

14.4     Decision
to Terminate or Suspend a Study Based on Safety Concerns. The Party
sponsoring or controlling any clinical study of a Product Candidate may
terminate or suspend such clinical study if (a) a Regulatory Authority or
safety data review board for such clinical study has required such termination
or suspension, or (b) if such Party believes in good faith that such
termination or suspension is warranted because of safety or tolerability risks
to the study subjects. In either case, such Party shall promptly notify the
other Party of such termination or suspension, and shall use all reasonable
efforts to notify and consult with the other Party prior to taking such action.

 

14.5     Dispute
Resolution.

 

14.5.1     The Parties shall negotiate in good faith and
use reasonable efforts to settle any dispute, controversy or claim arising from
or related to this Agreement or the breach thereof. If the Parties are unable
to resolve a dispute other than a dispute properly referred to the Executive
Officers under Sections 14.2 and 14.3 above, despite using reasonable efforts
to do so, either Party may, by written notice to the other, pursue any matter
through binding arbitration in accordance with the Rules for Non-Administered

 

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

 

49

 

Arbitration then pertaining of the International Institute for Conflict
Prevention and Resolution (available at
http://www.cpradr.org/arb-intro.asp?M=9.3) or its successor (“CPR”), except
where those rules conflict with these provisions, in which case these
provisions control. This dispute resolution provision will be binding on any
corporate parent, subsidiary, affiliate under common control, director or
officer of the Parties hereto. All proceedings will be conducted in the English
language.

 

14.5.2     The arbitration will be held in Boston, MA.

 

14.5.3     The panel shall consist of [***] arbitrators chosen from the CPR
Panels of Distinguished Neutrals (or, by agreement, from another provider of
arbitrators) each of whom is either a lawyer [***]  In the event the aggregate damages sought by
the claimant are stated to be less than [***],
and the aggregate damages sought by the counterclaimant are stated to be less
than [***] then a [***] shall be chosen, having the same
qualifications and experience specified above. Each arbitrator shall be
impartial and independent of the Parties and shall abide by the Code of Ethics
for Arbitrators in Commercial Disputes then pertaining (available at
http://www.adr.org/EthicsAndStandards).

 

14.5.4     The Parties agree to cooperate (1) to attempt
to select the arbitrator(s) by agreement within [***] of initiation of the arbitration, including jointly
interviewing the final candidates, (2) to meet with the arbitrator(s) within [***] of selection and (3) to agree at that
meeting or before upon procedures for discovery and as to the conduct of the
hearing which will result in the hearing being concluded within no more than [***] after selection of the arbitrator(s)
and in the award being rendered within [***]
of the conclusion of the hearings, or of any post-hearing briefing, which
briefing will be completed by both sides within [***] after the conclusion of the hearings.

 

14.5.5 In the event
the Parties cannot agree upon selection of the arbitrator(s), the CPR will
select arbitrator(s) as follows:  CPR
shall provide the Parties with a list of no less than [***] proposed arbitrators ([***] if a single arbitrator is to be
selected) having the credentials referenced above. Within [***] of receiving such list, the Parties
shall rank at least [***] of the
proposed arbitrators on the initial CPR list, after exercising cause challenges.
The Parties may then interview the [***] candidates
([***] if a [***] arbitrator is to be selected) with
the highest combined rankings for no more than [***] each and, following the interviews, may exercise [***] each. The panel will consist of the
remaining [***] candidates (or [***], if [***]
is to be selected) with the highest combined rankings. In the event these
procedures fail to result in selection of the required number of arbitrators,
CPR shall select the appropriate number of arbitrators from among the members
of the various CPR Panels of Distinguished Neutrals, allowing each side [***] each.

 

14.5.6     In the event the Parties cannot agree upon
procedures for discovery and hearing, then the arbitrator(s) shall set dates
for a hearing, any post-hearing briefing, and the issuance of the award. The
arbitrator(s) shall provide for discovery, giving recognition to the
understanding of the Parties that they contemplate reasonable discovery,
including

 

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

 

50

 

document demands and depositions. Multiple hearing days will be
scheduled consecutively to the greatest extent possible.

 

14.5.7     The arbitrator(s) are expressly empowered to
decide dispositive motions, including but not limited to pre-hearing motions to
dismiss and summary judgment motions, and shall endeavor to decide such motions
as would a U.S. District Judge of the District where the hearings are to be
held.

 

14.5.8     The arbitrator(s) must render their award by
application of the substantive law of the Commonwealth of Massachusetts and are
not free to apply “amiable compositeur” or “natural justice and equity.”  The arbitrator(s) shall render a written
opinion setting forth findings of fact and conclusions of law with the reasons
therefor stated. A transcript of the evidence adduced at the hearing shall be
made and shall, upon request, be made available to either Party. The
arbitrator(s) shall have power to exclude evidence on grounds of hearsay,
prejudice beyond its probative value, redundance, or irrelevance and no award
shall be overturned by reason of such ruling on evidence. To the extent
possible, the arbitration hearings and award will be maintained confidential.

 

14.5.9     In the event the panel’s award exceeds [***] in monetary damages or includes or
consists of equitable relief, or rejects a claim in excess of that amount or
for that relief, then the losing Party may obtain review of the arbitrators’
award or decision pursuant to the CPR Arbitration Appeal Procedure then
pertaining by a single appellate arbitrator (the “Appeal Arbitrator”) selected
from the CPR Panels of Distinguished Neutrals by agreement or, failing
agreement within [***] working
days, pursuant to the selection procedures specified in Section 14.5.5. If CPR
cannot provide such services, the Parties will together select another provider
of arbitration services that can do so. No Appeal Arbitrator shall be selected
unless he or she can commit to rendering a decision within [***] following oral argument; any such
review must be initiated within [***]
following the rendering of the award referenced in Section 14.5.8.

 

14.5.10 The Appeal
Arbitrator will make the same review of the arbitration panel’s ruling and its
bases that the U.S. Court of Appeals of the Circuit where the arbitration
hearings are held would make of findings of fact and conclusions of law
rendered by a district court after a bench trial and then reverse, modify,
vacate or affirm the arbitration panel’s award or decision accordingly, or
remand to the panel for further proceedings. The Appeal Arbitrator will
consider only the arbitration panel’s findings of fact and conclusions of law,
pertinent portions of the hearing transcript and evidentiary record as
submitted by the Parties, opening and reply briefs of the Party pursuing the
review, and the answering brief of the opposing Party, plus a total of no more
than [***] or oral argument evenly
divided between the Parties. The Party seeking review must submit its opening
brief and any reply brief within [***]
respectively, following the date of the

 

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

 

51

 

award under review, whereas the opposing Party must submit its
responsive brief within [***] of
that date. Oral argument shall take place within [***] after the date of the award under review, and the Appeal
Arbitrator shall render a decision within [***]
following oral argument. That decision will be final and not subject to further
review, except pursuant to the Federal Arbitration Act.

 

14.5.11 The Parties
irrevocably consent to and submit their person to the jurisdiction of the U. S.
District Court for the District in which the arbitration is held for the
enforcement of these provisions and the entry of judgment on any award rendered
hereunder (including after review by the Appeal Arbitrator where such an appeal
is pursued). Should such court for any reason lack jurisdiction, any court with
jurisdiction shall act in the same fashion.

 

14.5.12Each Party
has the right before, or if the arbitrator(s) cannot hear the matter within an
acceptable period, during the arbitration to seek and obtain from the
appropriate court provisional remedies such as attachment, preliminary
injunction, repelevin, etc. to avoid irreparable harm, maintain the status
quo, or preserve the subject matter of the arbitration.

 

14.5.13 EACH PARTY
HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

 

14.5.14 EACH PARTY
HERETO WAIVES ANY CLAIM TO PUNITIVE, EXEMPLARY OR MULTIPLIED DAMAGES FROM THE
OTHER.

 

14.5.15 EACH PARTY
HERETO WAIVES ANY CLAIM OF CONSEQUENTIAL DAMAGES FROM THE OTHER.

 

14.5.16 EACH PARTY
HERETO WAIVES ANY CLAIM FOR ATTORNEYS’ FEES AND COSTS AND PREJUDGMENT INTEREST
FROM THE OTHER, EXCEPT THAT THE COST OF THE ARBITRATORS AND ANY FEES AND
EXPENSES PAYABLE TO CPR SHALL BE BORNE BY THE PARTY AGAINST WHOM THE MATTER AT
ISSUE IS ULTIMATELY RESOLVED.

 

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

 

52

 

Article 15 -Miscellaneous

 

15.1     Force
Majeure. Neither Party shall be held liable to the other Party nor be
deemed to have defaulted under or breached this Agreement for failure or delay in
performing any obligation under this Agreement when such failure or delay is
caused by or results from causes beyond the reasonable control of the affected
Party including, but not limited to, embargoes, war, acts of war (whether war
be declared or not), insurrections, riots, civil commotions, strikes, lockouts
or other labor disturbances, fire, floods, or other acts of God, or acts,
omissions or delays in acting by any governmental authority or the other Party.
The affected Party shall notify the other Party of such force majeure
circumstances as soon as reasonably practical, and shall promptly undertake all
reasonable efforts necessary to cure such force majeure circumstances.

 

15.2     Assignment.
Except as provided in this Section 15.2, this Agreement may not be assigned or
otherwise transferred, nor may any right or obligation hereunder be assigned or
transferred, by either Party without the consent of the other Party, which
consent shall not be unreasonably withheld. Either Party may, without the other
Party’s consent, assign this Agreement and its rights and obligations hereunder
in whole or in part to an Affiliate, if that Party guarantees the full
performance of its Affiliate’s obligations hereunder. Any permitted assignee
shall assume all obligations of its assignor under this Agreement and shall be
subject to all of the provisions of this Agreement. Any attempted assignment
not in accordance with this Section shall be void. Notwithstanding the above,
Vertex or Janssen may, without the other’s consent, assign this Agreement and
all rights and obligations hereunder, in the event it experiences a Change of
Control, to the Change of Control party, subject to the other provisions of
this Agreement.

 

15.3     Severability.
If any one or more of the provisions contained in this Agreement is 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, unless the absence of the invalidated
provision(s) adversely affects the substantive rights of the Parties. The
Parties shall in such an instance use their best efforts to replace the
invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provision(s) which, insofar as practical, implement the purposes of
this Agreement.

 

15.4     Notices.
All notices that are required or permitted hereunder shall be in writing and
will be sufficient if delivered personally, sent by facsimile (and promptly
confirmed by personal delivery, registered or certified mail or overnight
courier), sent by internationally-recognized courier or sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:

 

	
  if to Vertex, to:

  	
   

  	
  Vertex Pharmaceuticals Incorporated

  130 Waverly Street

  Cambridge, MA 02139

  Attn: Office of Business
  Development

  Facsimile No.: (617) 444-6632

  

 

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

 

53

 

	
  and:

  	
   

  	
  Attn: General
  Counsel

  Facsimile No.: (617) 444-7117

  
	
   

  	
   

  	
   

  
	
  if to Janssen, to:

  	
   

  	
  Janssen Pharmaceutica, N.V.

  30, Turnhoutsesteenweg

  B-2340 Beerse, Belgium

  Attn: President

  Telephone: 32 14 60 2111

  Facsimile No.: 32 14 60 2841

  
	
  and:

  	
   

  	
  Office of the General Counsel

  Johnson & Johnson

  One Johnson & Johnson Plaza

  New Brunswick, NJ 08933

  Attn: General Counsel

  Telephone: 732-524-2448

  Facsimile: 732-524-2788

  

 

or to such other address as the Party to whom notice is to be given may
have furnished to the other Party in writing in accordance herewith. Any such
notice shall be deemed to have been given: (a) when delivered if personally
delivered or sent by facsimile on a business day; (b) on the next business day
after dispatch if sent by internationally-recognized overnight courier; and/or
(c) on the fifth (5th) business day following the date of mailing if
sent by other internationally-recognized courier or by mail. Notices hereunder
will not be deemed sufficient if provided only between or among each Party’s
representatives on any committee established in accordance with this Agreement.

 

15.5     Entire
Agreement; Amendments. This Agreement, together with the Exhibits and
Schedules hereto, contains the entire understanding of the Parties with respect
to the subject matter hereof and supercedes and cancels all previous express or
implied agreements and understandings, negotiations, writings and commitments,
either oral or written, in respect to the subject matter hereof. The Schedules
to this Agreement are incorporated herein by reference and shall be deemed a
part of this Agreement. This Agreement may be amended, or any term hereof
modified, only by a written instrument duly executed by authorized
representatives of both Parties.

 

15.6     Headings.
The captions to the several articles, sections and subsections hereof are not a
part of this Agreement, and shall not be interpreted as having any substantive
meaning, but are merely for convenience to assist in locating and reading the
several Articles and Sections hereof.

 

15.7     Independent
Contractors. It is expressly agreed that Vertex and Janssen shall be
independent contractors and that the relationship between the two Parties shall
not constitute a partnership, joint venture or agency. Neither Vertex nor
Janssen shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party. Neither
Party shall have any responsibility for the hiring, firing or compensation of
the other Party’s employees or for any employee benefits. No employee or
representative of a Party shall have any authority to bind or obligate the
other Party to

 

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

 

54

 

this Agreement for any sum or in any manner whatsoever, or to create or
impose any contractual or other liability on the other Party without said Party’s
written approval.

 

15.8     Waiver.
The waiver by either Party hereto of any right hereunder, or the failure of the
other Party to perform, or a breach by the other Party, shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by such
other Party whether of a similar nature or otherwise.

 

15.9     Cumulative
Remedies. No remedy referred to in this Agreement is intended to be exclusive,
but each shall be cumulative and in addition to any other remedy referred to in
this Agreement or otherwise available under law.

 

15.10  Waiver of Rule of Construction. Each Party has
had the opportunity to consult with counsel in connection with the review,
drafting and negotiation of this Agreement. Accordingly, the rule of
construction that any ambiguity in this Agreement shall be construed against
the drafting Party shall not apply.

 

15.11  Certain Conventions. Any reference in this
Agreement to an Article, Section, subsection, paragraph, clause, Schedule or
Exhibit shall be deemed to be a reference to an Article, Section, subsection,
paragraph, clause, Schedule or Exhibit, of or to, as the case may be, this
Agreement, unless otherwise indicated. Unless the context of this Agreement
otherwise requires, (a) words of any gender include each other gender, (b)
words such as “herein”, “hereof”, and “hereunder” refer to this Agreement as a
whole and not merely to the particular provision in which such words appear,
and (c) words using the singular shall include the plural, and vice versa.

 

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.

 

15.13  Performance by Affiliates. To the extent that
this Agreement imposes obligations on Affiliates of a Party, such Party agrees
to cause its Affiliates to perform such obligations. Either Party may use one
or more of its Affiliates to perform its obligations and duties hereunder,
provided that the Parties shall remain liable hereunder for the prompt payment
and performance of all their respective obligations hereunder. Each of Vertex
and Janssen guarantees performance of this Agreement by any of its Affiliates.
Any Affiliate of Vertex or Janssen to which rights are extended or which
performs any of the obligations required of the respective Party hereunder
shall be deemed to have accepted and be bound by the relevant terms and conditions
of this Agreement including, without limitation, the jurisdiction and binding
effect of the arbitration proceeding carried out pursuant to Section 14.5.

 

15.14  Standstill. Janssen agrees that during the period
beginning on the Effective Date and ending on [***]
neither Janssen nor any of its Affiliates will, without the prior written
consent of Vertex (i) acquire, or participate as part of a group which in the
aggregate acquires, securities representing [***]
of the voting power of the outstanding voting securities of Vertex, or (ii)
make, or in any way participate in, directly or indirectly, any

 

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

 

55

 

“solicitation” of “proxies” (as such terms are used in the rules of the
United States Securities and Exchange Commission). The foregoing provisions of
this Section 15.14 shall no longer apply (i) if Vertex announces publicly that
(a) it is seeking, or considering seeking, purchasers for Vertex or (b) it is
otherwise exploring, or considering exploring, strategic options in this
regard; (ii) upon the commencement by a Third Party of a tender or exchange offer
for shares of Vertex voting stock which, when added to shares then owned by the
Third Party, would result in ownership by the Third Party of [***] of the voting power of the
outstanding voting securities of Vertex; (iii) if a Third Party acquires or seeks
to acquire beneficial ownership of [***]
of the outstanding common stock of Vertex; (iv) if Vertex publicly announces a
transaction, or an intention to effect any transaction which would result in
(a) the sale by Vertex or one or more of its subsidiaries of assets
representing [***] of the
consolidated earning power or assets of Vertex; (b) the common stockholders of
Vertex (other than stockholders who are Affiliates of the acquiring entity)
immediately prior to such transaction owning [***]
of the outstanding common stock of the acquiring entity or, in the case of a
merger transaction, the surviving corporation (or, if the surviving corporation
is a subsidiary of a parent company, the parent company); or (c) a Third Party
acquiring beneficial ownership of [***]
or more of the outstanding common stock of Vertex.

 

15.15  Export Control. This Agreement is made subject to
any restrictions concerning the export of products or technical information
from the United States of America or other countries that may be applicable to
Janssen or Vertex from time to time. Neither Party will export, directly or
indirectly, any technical information acquired from the other Party under this
Agreement, or any products using that technical information, to a location or
in a manner that at the time of export requires an export license or other
governmental approval, without first obtaining necessary and sufficient
consents to do so from the appropriate agency or other governmental authority.

 

IN WITNESS WHEREOF,
the Parties have executed this Agreement as of the date first set forth above.

 

	
  JANSSEN PHARMACEUTICA, N.V.

  	
  VERTEX PHARMACEUTICALS

  INCORPORATED

  
	
   

  	
   

  
	
  By:

  	
    /s/Dirk Collier

  	
   

  	
  By:

  	
    /s/Kenneth S. Boger

  	
   

  
	
  Name: Dirk Collier

  	
  Name: Kenneth S. Boger

  
	
  Title: Board Member

  	
  Title: Senior Vice President and General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: 30/6/06

  	
  Date: June 30, 2006

  
	
   

  	
   

  
	
  By: 

  	
   /s/Didier de Chaffoy de
  Courcelles

  	
   

  	
   

  
	
  Name: Didier de Chaffoy de
  Courcelles

  	
   

  
	
  Title: Senior Vice President, Research and

  	
   

  
	
   

  	
   Early
  Development Europe

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 30/6/06

  	
   

  
									

 

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

 

56

 

Schedule 1.7

 

Janssen 2006 Universal Calendar

 

	
   

  	
   

  	
  M

  	
   

  	
  T

  	
   

  	
  W

  	
   

  	
  T

  	
   

  	
  F

  	
   

  	
  S

  	
   

  	
  S

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JAN

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  30

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FEB

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MAR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  
	
  (5
  Weeks)

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  APR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MAY

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JUN

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  
	
  (5
  Weeks)

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JUL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  
	
   

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AUG

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SEP

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  
	
  (5
  Weeks)

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OCT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  30

  	
   

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NOV

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  
	
  (4
  Weeks)

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  	
  18

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  	
  25

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  
	
  (5
  Weeks)

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  16

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  18

  	
   

  	
  19

  	
   

  	
  20

  	
   

  	
  21

  	
   

  	
  22

  	
   

  	
  23

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
  25

  	
   

  	
  26

  	
   

  	
  27

  	
   

  	
  28

  	
   

  	
  29

  	
   

  	
  30

  	
   

  	
  31

  	
   

  

 

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

 

 

Schedule 1.19

[***]

 

[***]

 

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

 

 

Schedule 1.31

Existing Third Party Agreements

 

[***]

 

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

 

 

Schedule 1.32

Far East

 

[***]

 

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

 

 

Schedule 1.55

Janssen Patent Rights

 

[***]

 

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

 

 

Schedule 1.116

Vertex Patent Rights

 

[***]

 

	
  Docket No.

  	
   

  	
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  VPI/00-131 BR

  	
   

  	
  0113666-6

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
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  [***]

  
	
  VPI/00-131 CN

  	
   

  	
  01815055

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
  VPI/00-131 CO

  	
   

  	
  03016961

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
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  [***]

  
	
  VPI/00-131 EA

  	
   

  	
  200300318

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
  [***]

  	
   

  	
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  [***]

  
	
  VPI/00-131 EP

  	
   

  	
  01968040.4

  	
   

  	
   

  	
   

  	
  1320540

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
  VPI/00-131 HK

  	
   

  	
  03108422.8

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  PUBLISHED

  	
   

  	
  01/20/2003

  
	
  VPI/00-131 HR

  	
   

  	
  20030139

  	
   

  	
   

  	
   

  	
  02/2005

  	
   

  	
  PUBLISHED

  	
   

  	
  08/31/2001

  
	
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  [***]

  	
   

  	
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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.

 

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Patent No.

  	
   

  	
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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.

 

2

 

[***]

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  	
   

  	
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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.

 

3

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Patent No.

  	
   

  	
  Publication No.

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
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  Docket No.

  	
   

  	
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  [***]

  

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
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  VPI/04-139 US

  	
   

  	
  11/264,746

  	
   

  	
   

  	
   

  	
  US 2006/0105978

  	
   

  	
  PUBLISHED

  	
   

  	
  10/31/2005

  
	
  VPI/04-139 WO

  	
   

  	
  PCT/US2005/039240

  	
   

  	
   

  	
   

  	
  WO 2006/050250

  	
   

  	
  PUBLISHED

  	
   

  	
  10/31/2005

  

 

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

 

4

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  	
   

  	
  [***]

  
	
  VPI/04-136 WO

  	
   

  	
  PCT/US2005/035191

  	
   

  	
   

  	
   

  	
  WO 2006/039488

  	
   

  	
  PUBLISHED

  	
   

  	
  09/30/2005

  

 

	
  Docket No.

  	
   

  	
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  [***]

  	
   

  	
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  [***]

  
	
  VPI/04-114 US

  	
   

  	
  11/147,524

  	
   

  	
   

  	
   

  	
  US 2006/0089385

  	
   

  	
  PUBLISHED

  	
   

  	
  06/08/2005

  
	
  VPI/04-114 WO

  	
   

  	
  PCT/US2005/019929

  	
   

  	
   

  	
   

  	
  WO 2005/123076

  	
   

  	
  PUBLISHED

  	
   

  	
  06/08/2005

  

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Patent No.

  	
   

  	
  Publication No.

  	
   

  	
  Status

  	
   

  	
  Filed

  
	
  [***]

  	
   

  	
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  [***]

  	
   

  	
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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.

 

5

 

	
  VPI/03-172 US

  	
   

  	
  10/974,558

  	
   

  	
   

  	
   

  	
  US 2005/0136400

  	
   

  	
  PUBLISHED

  	
   

  	
  10/27/2004

  
	
  VPI/03-172 WO

  	
   

  	
  PCT/US2004/035839

  	
   

  	
   

  	
   

  	
  WO 2005/042570

  	
   

  	
  PUBLISHED

  	
   

  	
  10/27/2004

  

 

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

 

6

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Patent No.

  	
   

  	
  Publication No.

  	
   

  	
  Status

  	
   

  	
  Filed

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
  VPI/03-171 US

  	
   

  	
  10/974,538

  	
   

  	
   

  	
   

  	
  US 2006/0003942

  	
   

  	
  PUBLISHED

  	
   

  	
  10/27/2004

  
	
  VPI/03-171 WO

  	
   

  	
  PCT/US2004/035549

  	
   

  	
   

  	
   

  	
  WO 2005/042020

  	
   

  	
  PUBLISHED

  	
   

  	
  10/27/2004

  

 

	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Patent No.

  	
   

  	
  Publication No.

  	
   

  	
  Status

  	
   

  	
  Filed

  
	
  VPI/03-149 TW

  	
   

  	
  093127683

  	
   

  	
   

  	
   

  	
  200518669

  	
   

  	
  PUBLISHED

  	
   

  	
  09/13/2004

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
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  [***]

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
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  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
  VPI/03-149 US

  	
   

  	
  10/939,958

  	
   

  	
   

  	
   

  	
  US 2005/0120398

  	
   

  	
  PUBLISHED

  	
   

  	
  09/13/2004

  
	
  VPI/03-149 WO

  	
   

  	
  PCT/US2004/29961

  	
   

  	
   

  	
   

  	
  WO 2005/025517

  	
   

  	
  PUBLISHED

  	
   

  	
  09/13/2004

  

 

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

 

7

 

Schedule 1.117

 

VX-950

 

 

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

 

 

[***]

 

[***]

 

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

 

 

Exhibit 4.5(a)

Supply Agreement Key Elements

 

The Parties agree to negotiate the terms of a supply agreement in good
faith, subject to the terms of this Agreement, which will include the
following:

 

1.             Vertex will supply
Product that meets the Specifications (unless otherwise agreed by Vertex) to Janssen
[***] the Effective Date of the
Agreement.

 

2.             Janssen will forecast
and place orders with Vertex for its Product requirements and its requirement
of Intermediates for Commercialization in the Territory, commencing [***] of the first requested delivery of
Tablets. Based on the current Development Program, the first forecast to be
provided under the Supply Agreement will be due [***]  Based on the
forecast, Vertex will make commitments to Third Party Manufacturers for
Territory supplies, in accordance with lead-time or contractual obligations
with Third Party Manufacturers, that will be binding on Janssen.

 

3.             Vertex will supply
Janssen through its Third Party Manufacturers in accordance with the terms of
the Third Party Manufacturer agreements.

 

4.             Vertex will supply
the Product to Janssen at [***]. All
[***] directly related to supply
of Product to the Territory will be borne by Janssen. Vertex will provide
financial transparency for all [***]
associated with supply of Product for the Territory.

 

5.             Delivery will be FCA
facility (see INCOTERMS 2000).

 

6.             Janssen will be
responsible for shipping and handling charges arising in connection with
Product delivered to Janssen, and for defining the method of shipment and for
undertaking, at its expense, any validation that may be required.

 

7              Rights with respect
to non-conforming product, shortage of supply and late delivery will be
consistent with comparable rights that Vertex has with the relevant Third Party
Manufacturers. [***]

 

8.             [***]

 

9.             Representations,
warranties, insurance and indemnification will be no more extensive than those
which Vertex has in the relevant Third Party Agreements.

 

10.           Vertex’s liability will
be limited to its own negligence. [***]  In the event product delivered to Janssen is
non-conforming, Janssen’s remedy will be that Vertex will [***] to seek remedies available pursuant
to the relevant Third Party Manufacturing Agreements and pass those remedies on
to Janssen.

 

11.           The agreement will
include provisions that address continuity of supply concerns for Janssen.

 

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

 

 

12.           The Parties will
execute a Quality Agreement.

 

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

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