INTERCREDITOR AGREEMENT

 

<PAGE>

                                                                [EXECUTION COPY]

 

                             INTERCREDITOR AGREEMENT

 

     This INTERCREDITOR AGREEMENT (this "Agreement"), is dated as of October 18,

2005 and entered into by and among (i) MORGAN STANLEY SENIOR FUNDING, INC., in

its capacity as administrative agent under the First Lien Documents (as defined

below), including its successors and assigns from time to time (the "First Lien

Agent"), (ii) U.S. BANK NATIONAL ASSOCIATION, in its capacity as trustee under

the Indenture (as defined below), including its successors and assigns from time

to time (the "Trustee"), (iii) U.S. BANK NATIONAL ASSOCIATION, as the initial

Collection Agent (as defined below), (iv) DULOXETINE ROYALTY SUB, an exempted

company incorporated with limited liability under the laws of the Cayman Islands

("Royalty Sub") and (v) DULOXETINE HOLDCO ROYALTY SUB, an exempted company

incorporated with limited liability under the laws of the Cayman Islands (the

"Pledgor"). Capitalized terms used herein but not otherwise defined herein have

the meanings set forth in Section 1 below.

 

                                    RECITALS

 

     WHEREAS, Royalty Sub, the Pledgor, the lenders party thereto and the First

Lien Agent have heretofore entered into a Credit Agreement, dated as of the date

hereof (as amended, restated, supplemented, modified or Refinanced from time to

time, the "First Lien Credit Agreement");

 

     WHEREAS, Royalty Sub and the Trustee have entered into an Indenture, dated

as of the date hereof (as amended, restated, supplemented, modified or

Refinanced from time to time, the "Indenture"), pursuant to which Royalty Sub

intends to issue on the Closing Date its Duloxetine PhaRMA(SM) Second Lien 13%

Notes due 2013 (the "Second Lien Notes") and following the Closing Date may

issue (following the Discharge of First Lien Obligations) its Class B Notes or

(pursuant to a Refinancing or following the Discharge of First Lien Obligations)

Refinancing Notes;

 

     WHEREAS, the obligations of Royalty Sub under the First Lien Documents will

be secured by substantially all the assets of Royalty Sub and a pledge of

substantiality all of the Capital Securities of Royalty Sub held by the Pledgor,

pursuant to the terms of the First Lien Collateral Documents;

 

     WHEREAS, the obligations of Royalty Sub under the Second Lien Documents

will be secured by substantially all the assets of Royalty Sub and a pledge of

substantially all of the Capital Securities of Royalty Sub held by the Pledgor,

pursuant to the terms of the Second Lien Collateral Documents;

 

     WHEREAS, the priority of payments of the First Lien Obligations and the

Second Lien Obligations are set forth in this Agreement;

 

     WHEREAS, the Liens securing the Second Lien Obligations will be

subordinated and second in priority to the Liens securing the First Lien

Obligations; and

<PAGE>

     WHEREAS, the First Lien Documents and the Second Lien Documents provide,

among other things, that the parties thereto shall set forth in this Agreement

their respective rights and remedies with respect to the priority of payments

thereunder and the Liens on the Collateral.

 

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and

obligations herein set forth and for other good and valuable consideration, the

sufficiency and receipt of which are hereby acknowledged, the parties hereto,

intending to be legally bound, hereby agree as follows:

 

                             SECTION 1. DEFINITIONS.

 

     SECTION 1.1. Defined Terms. Capitalized terms used herein shall have the

meanings set forth in Annex A hereto, and such Annex A is hereby incorporated

herein by reference. Capitalized terms, if any, used in this Agreement that are

not defined in Annex A hereto or otherwise defined herein shall have the

meanings given to such terms in Annex A to the Indenture.

 

     SECTION 1.2. Terms Generally. The definitions of terms herein shall apply

equally to the singular and plural forms of the terms defined, and vice versa. A

term has the meaning assigned to it and an accounting term not otherwise defined

has the meaning assigned to it in accordance with GAAP. Words of the masculine,

feminine or neuter gender shall mean and include the correlative words of other

genders. The words "include", "includes" and "including" and similar terms shall

be construed as if followed by the phrase "without limitation." The word "will"

shall be construed to have the same meaning and effect as the word "shall".

Unless the context requires otherwise (i) references to an agreement or other

document include references to such agreement or document as amended, restated,

supplemented or otherwise modified in accordance with the terms of this

Agreement, and the provisions of this Agreement apply to successive events and

transactions, (ii) references to any statute or other legislative provision

shall include any statutory or legislative modification or re-enactment thereof,

or any substitution therefor, (iii) any reference herein to any Person shall be

construed to include such Person's successors and permitted assigns, (iv) the

words "herein", "hereof" and "hereunder", and words of similar import, shall be

construed to refer to this Agreement in its entirety and not to any particular

provision hereof, (v) all references herein to Exhibits or Sections shall be

construed to refer to Exhibits or Sections of this Agreement and (vi) the words

"asset" and "property" shall be construed to have the same meaning and effect

and to refer to any and all tangible and intangible assets and properties,

including cash, securities, accounts and contract rights.

 

                          SECTION 2. LIEN PRIORITIES.

 

     SECTION 2.1. Seniority. Notwithstanding the date, manner or order of grant,

attachment, perfection or validity of any Liens securing the Second Lien

Obligations granted on the Collateral or of any Liens securing the First Lien

Obligations granted on the Collateral and notwithstanding any provision of the

UCC, any Applicable Law or the Second Lien Documents or any other circumstance

whatsoever, the Trustee, on behalf of itself and the Second Lien Claimholders,

hereby agrees that: (i) any Lien on the Collateral securing any First Lien

Obligations now or hereafter held by or on behalf of the First Lien Agent or any

First Lien Claimholders or any agent or trustee therefor (including the

Collection Agent), regardless of how

 

 

                                       -2-

<PAGE>

acquired, whether by grant, possession, statute, operation of law, subrogation

or otherwise, shall be senior in all respects and prior to any Lien on the

Collateral securing any of the Second Lien Obligations; and (ii) any Lien on the

Collateral securing any of the Second Lien Obligations now or hereafter held by

or on behalf of the Trustee, any Second Lien Claimholders or any agent or

trustee therefor (including the Collection Agent) regardless of how acquired,

whether by grant, possession, statute, operation of law, subrogation or

otherwise, shall be junior and subordinate in all respects to all Liens on the

Collateral securing any First Lien Obligations.

 

     SECTION 2.2. Prohibition on Contesting Liens. Each of the Trustee, for

itself and on behalf of each Second Lien Claimholder, and the First Lien Agent,

for itself and on behalf of each First Lien Claimholder, agrees that it shall

not (and hereby waives any right to) contest or support any other Person in

contesting, in any proceeding (including any Insolvency or Liquidation

Proceeding), the priority, validity, perfection or enforceability of a Lien held

by or on behalf of any of the First Lien Claimholders in the Collateral or by or

on behalf of any of the Second Lien Claimholders in the Collateral, as the case

may be; provided, that nothing in this Agreement shall be construed to prevent

or impair the rights of any First Lien Claimholder to enforce this Agreement,

including the priority of the Liens securing the First Lien Obligations, as

provided in Section 4.1.

 

     SECTION 2.3. No New Liens. So long as the Discharge of First Lien

Obligations has not occurred, the parties hereto agree that no additional Liens

shall be granted or permitted on any asset of any Obligor to secure (i) any

Second Lien Obligation unless immediately after giving effect to such grant or

concurrently therewith, a Lien shall be granted on such asset to secure the

First Lien Obligations or (ii) any First Lien Obligation unless immediately

after giving effect to such grant or concurrently therewith, a Lien shall be

granted on such asset to secure the Second Lien Obligations; provided that, in

either event, the priority and seniority of such Liens shall be consistent with

the terms and provisions of Section 2.1.

 

     SECTION 2.4. Similar Liens and Agreements. It is the intention of the

parties hereto that the First Lien Collateral and the Second Lien Collateral be

identical. In furtherance of the foregoing and of Section 9.10, the parties

hereto agree, subject to the other provisions of this Agreement, upon request by

the First Lien Agent or the Trustee, to cooperate in good faith (and to direct

their counsel to cooperate in good faith) from time to time in order to (i)

determine the specific items included in the First Lien Collateral and the

Second Lien Collateral and the steps taken to perfect their respective Liens

thereon and the identity of the respective parties obligated under the First

Lien Documents and the Second Lien Documents and (ii) agree upon the forms of

the First Lien Collateral Documents and the Second Lien Collateral Documents.

 

                               SECTION 3. PAYMENTS

 

     SECTION 3.1. Establishment of Accounts.

 

          (a) Pursuant to the terms of the Servicing Agreement, Royalty Sub will

     cause Servicer, acting on behalf of Royalty Sub, to establish and maintain

     with the Operating Bank on its books and records in the name of Royalty

     Sub, subject to the Liens established under the First Lien Collateral

     Documents and the Second Lien Collateral Documents, (i) a collection

     account (the "Collection Account"), (ii) a holding account

 

 

                                       -3-

<PAGE>

     (the "Holding Account"), (iii) a repayment and redemption account (the

     "Repayment/Redemption Account"), (iv) an escrow account (the "Escrow

     Account"), (v) a capital contribution account (the "Capital Account"), and

     (vi) any additional accounts the establishment of which is set forth in a

     Board Resolution delivered by Royalty Sub to Servicer and the Collection

     Agent, in each case at such time as is set forth in this Section 3.1 or in

     such Board Resolution. Each Account shall be established and maintained as

     an Eligible Account so as to create, perfect and establish the priority of

     the Liens established under the First Lien Collateral Documents and the

     Second Lien Collateral Documents in such Account and all cash, Eligible

     Investments and other property from time to time deposited therein and

     otherwise to effectuate the Liens under the First Lien Collateral Documents

     and the Second Lien Collateral Documents.

 

          (b) The First Lien Agent and the Trustee agree that the Collection

     Agent, as agent for the First Lien Agent and the Trustee, shall have the

     power to direct withdrawals or transfers from the Accounts and to direct

      the investment and reinvestment of funds in the Accounts, subject to

     Section 3.2, and the Collection Agent shall make withdrawals and transfers

     from the Accounts in accordance with the terms of this Agreement based on

     the Relevant Information and as calculated by it pursuant to this

     Agreement. Each of Royalty Sub (for itself and on behalf of Servicer), the

     Collection Agent, the First Lien Agent and the Trustee acknowledges and

     agrees that the Accounts are "deposit accounts" or "investment property"

     within the meaning of Section 9-102 of the UCC, and Royalty Sub agrees to

     cause (or to direct Servicer to cause) each Operating Bank to enter into an

     agreement (a "Control Agreement") with Royalty Sub, the First Lien Agent

     and the Trustee pursuant to which such Operating Bank agrees to comply with

     any and all instructions of the First Lien Agent or the Trustee (or in

     either case the Collection Agent on its behalf) directing the disposition,

     investment and reinvestment of funds in all Accounts maintained with such

     Operating Bank without the further consent of Royalty Sub or Servicer or

     any other Person, and Royalty Sub shall take such other actions as are

     reasonably required by the First Lien Agent and the Trustee to establish

     its "control", for purposes of Section 9-314 of the UCC, over any such

     Accounts. Notwithstanding the terms of the immediately foregoing sentence

     or of any such Control Agreement, the Trustee agrees that it will not give

     any such instructions to any Operating Bank prior to the Discharge of First

     Lien Obligations without the prior written consent of the First Lien Agent.

 

          (c) If, at any time, any Account ceases to be an Eligible Account,

     Royalty Sub will cause Servicer or an agent thereof to, within ten Business

     Days, establish a new Account meeting the conditions set forth in this

     Section 3.1 in respect of such Account and transfer any cash or investments

     in the existing Account to such new Account, and, from the date such new

     Account is established, it shall have the same designation as the existing

     Account. If the Operating Bank should change at any time, then Royalty Sub

     will cause Servicer, acting on behalf of Royalty Sub, to thereupon promptly

     establish replacement Accounts as necessary at the successor Operating Bank

     and transfer the balance of funds in each Account then maintained at the

     former Operating Bank pursuant to the terms of the Servicing Agreement to

     such successor Operating Bank.

 

 

                                       -4-

<PAGE>

          (d) Royalty Sub will cause Servicer to establish and maintain the

     Collection Account at the Operating Bank not later than the Closing Date,

     and the Collection Account shall bear a designation clearly indicating that

     the funds deposited therein are held for the benefit of the Secured

     Creditors. Except as expressly provided herein, all Collections shall be

      deposited in the Collection Account and transferred therefrom in accordance

     with the terms of this Agreement. No funds shall be deposited in the

     Collection Account that do not constitute Collections except as expressly

     provided in this Agreement without the prior written consent of the

     Collection Agent.

 

          (e) Royalty Sub will cause Servicer to establish and maintain the

     Holding Account at the Operating Bank not later than the Closing Date, and

     the Holding Account shall bear a designation clearly indicating that the

     funds deposited therein are held for the benefit of the Second Lien

     Claimholders. Amounts shall be transferred into the Holding Account only

     following the Discharge of First Lien Obligations pursuant to clause

     (b)(vi) of Section 3.7. Any such amounts held in the Holding Account may be

     transferred (i) to the Collection Account pursuant to Section 3.6 or (ii)

     to Royalty Sub pursuant to Section 3.11.

 

          (f) Upon receipt of written notice of a voluntary or mandatory

     repayment of the Loans pursuant to the terms of the First Lien Credit

     Agreement, or a Redemption of any class of Notes, Royalty Sub will cause

     Servicer to establish and maintain a Repayment/Redemption Account at the

     Operating Bank which shall bear a designation clearly indicating that the

     funds or other assets deposited therein are held for the benefit of the

     Secured Creditors that are the subject of such voluntary or mandatory

     repayment or Redemption. All amounts received for the purpose of any such

     voluntary or mandatory repayment or Redemption shall be deposited in such

     Repayment/Redemption Account and shall be held in such Account until such

     amounts are applied to make such voluntary or mandatory repayment and

     payment of related First Lien Obligations, or pay the Redemption Price of

     such Notes, in each case in accordance with Section 3.9, together with any

     premium or related Second Lien Obligations and, if applicable, such Notes

     are cancelled by the Trustee.

 

          (g) Upon notice by the Trustee to the Collection Agent, the First Lien

     Agent and Servicer that any Noteholder, Agent Member or Beneficial Holder

     has not delivered a Confidentiality Agreement to the Registrar, Royalty Sub

     will cause Servicer to establish and maintain an Escrow Account at the

     Operating Bank in the name of the Trustee which shall bear a designation

     clearly indicating that the funds or other assets deposited therein are

     held for the benefit of any such Noteholder, Agent Member or Beneficial

     Holder. All amounts paid to the Trustee pursuant to Section 3.7 which are

     to be withheld from such Noteholder, Agent Member or Beneficial Holder

     pursuant to Section 2.5(d) of the Indenture shall be deposited in such

     Escrow Account and shall be held in such Account until such amounts are

     distributed as provided in Section 2.5(d) of the Indenture, and the

     Collection Agent agrees to act upon the direction of the Trustee to give

     effect to Section 2.5(d) of the Indenture.

 

          (h) Royalty Sub will cause Servicer to establish and maintain the

     Capital Account at the Operating Bank not later than the Closing Date which

     shall bear a designation

 

 

                                       -5-

<PAGE>

     clearly indicating that the funds or other assets deposited therein are

     held for the benefit of the Secured Creditors into which Quintiles (and the

     Pledgor, as applicable) shall deposit any capital contributions made to

     Royalty Sub. All such capital contributions shall be held in such Account

     and transferred (i) to the Collection Account only to the extent permitted

     by Section 3.8 and (ii) to the Repayment/Redemption Account only to the

     extent specifically provided for in any written notice of a voluntary or

     mandatory repayment of the Loans delivered to the First Lien Agent pursuant

     to the terms of the First Lien Credit Agreement or written notice of an

     Optional Redemption delivered to the Trustee pursuant to Section 3.1(a) of

     the Indenture, any written notice of a Mandatory Redemption delivered to

     the Trustee pursuant to Section 3.1(c) of the Indenture or any written

      notice of a Special Tax Redemption delivered to the Trustee pursuant to

     Section 3.1(d) of the Indenture, in each case for application pursuant to

     Section 3.7. Following the Discharge of First Lien Obligations, Royalty Sub

     also may direct the Collection Agent to deposit in the Capital Account all

     or a portion of any amount otherwise distributable to Royalty Sub pursuant

     to clause (b)(x) of Section 3.7 or Section 3.11, and the Collection Agent

     shall maintain a record of the portion of the funds on deposit in the

     Capital Account allocable to capital contributions and the portion

     allocable to such deposits.

 

     SECTION 3.2. Investments of Cash. Royalty Sub or Servicer, on its behalf,

shall direct the Operating Bank holding each Account in writing to invest and

reinvest the funds on deposit in the Accounts in Eligible Investments, to the

extent available to such Operating Bank; provided, however, that so long as an

Event of Default under the First Lien Credit Agreement or the Indenture has

occurred and is continuing, the First Lien Agent or, following the Discharge of

First Lien Obligations, the Trustee (or in either case the Collection Agent on

its behalf) shall direct the Operating Bank to invest such amount in Eligible

Investments described in clause (d) of the definition thereof from the time of

receipt thereof until such time as such amounts are required to be distributed

pursuant to the terms of this Agreement. In the absence of written direction

delivered to the Operating Bank from Royalty Sub or Servicer, the Operating Bank

shall invest any funds in Eligible Investments described in clause (d) of the

definition thereof. The Operating Bank shall make such investments and

reinvestments in accordance with the terms of the following provisions:

 

          (a) the Eligible Investments shall have maturities and other terms

     such that sufficient funds shall be available to make required payments

     pursuant to this Agreement on the Business Day immediately preceding the

     next occurring Payment Date after such investment is made;

 

          (b) if any funds to be invested are not received in the Accounts by

     1:00 p.m., New York City time, on any Business Day, such funds shall, if

     possible, be invested in overnight Eligible Investments; and

 

          (c) all interest and earnings on Eligible Investments held in the

     Accounts shall be invested in Eligible Investments on an overnight basis

     and credited to the appropriate Account until the next Payment Date.

 

 

                                       -6-

<PAGE>

Royalty Sub acknowledges that regulations of the U.S. Comptroller of the

Currency grant Royalty Sub the right to receive confirmations of security

transactions as they occur. Royalty Sub specifically waives receipt of such

confirmations to the extent permitted by Applicable Law and acknowledges that

the Operating Bank will furnish periodic cash transaction statements that will

detail all investment transactions.

 

     SECTION 3.3. Closing Date Deposits; Withdrawals and Transfers.

 

          (a) On the Closing Date, the First Lien Agent and the Trustee shall,

     subject to the receipt of written direction from Royalty Sub upon receipt

     of the proceeds from (i) the making of the Loans to Royalty Sub and (ii)

     the sale by Royalty Sub of the Second Lien Notes, make the following

     payments from such proceeds in the amounts so directed by Royalty Sub:

 

               (i) to such Persons as shall be specified by Royalty Sub, such

          Transaction Expenses as shall be due and payable in connection with

          the Transaction;

 

               (ii) the Hedge Payment to the Hedge Provider, as directed by

          Royalty Sub; and

 

               (iii) to Quintiles, in accordance with the Purchase and Sale

          Agreement, an amount equal to the Cash Purchase Price.

 

          (b) On the date of issuance of any Class B Notes or Refinancing Notes,

     the Collection Agent shall, subject to the receipt of written direction

     from Royalty Sub upon receipt of the proceeds of the sale by Royalty Sub of

     such Notes, make such payments and transfers as shall be specified in this

     Agreement and, to the extent not in contravention of the terms of this

     Agreement, in the Indenture, the related Board Resolution and any indenture

     supplemental to the Indenture in respect of such Notes, copies of which

     Board Resolution and supplemental indenture shall be attached to such

     written direction.

 

     SECTION 3.4. Capital Contributions. Royalty Sub will immediately forward

any capital contributions received by it from Quintiles or the Pledgor to the

Collection Agent for deposit in the Capital Account.

 

     SECTION 3.5. Calculation Date Calculations.

 

          (a) Prior to Each Payment Date. As soon as reasonably practicable

     after each Calculation Date (a "Relevant Calculation Date") but in no event

     later than 12:00 noon (New York City time) on the second Business Day prior

     to the immediately succeeding Payment Date, the Collection Agent shall,

     based on Servicer Information received by the Collection Agent, and based

     on information known to it or Relevant Information provided to it, make the

     following determinations and calculations (and each of the First Lien

     Agent, the Trustee and Royalty Sub (for itself and on behalf of Servicer)

     agrees to provide any Relevant Information reasonably requested by the

     Collection Agent for the purpose of making such determinations and

     calculations):

 

 

                                       -7-

<PAGE>

               (i) the amount of Collections received during the period

          commencing on the day immediately following the Calculation Date which

          immediately preceded such Relevant Calculation Date and ending on such

          Relevant Calculation Date;

 

               (ii) the balance of funds on deposit in each Account other than

          the Collection Account on such Relevant Calculation Date and the

          amount of interest earnings (net of losses and investment expenses),

          if any, on investments on funds on deposit therein from the day

          immediately following the Calculation Date which immediately preceded

          such Relevant Calculation Date and ending on such Relevant Calculation

          Date;

 

               (iii) the balance of funds on deposit in the Collection Account

          on such Relevant Calculation Date and the amount of interest earnings

          (net of losses and investment expenses), if any, on investments on

          funds on deposit therein from the day immediately following the

          Calculation Date which immediately preceded such Relevant Calculation

          Date and ending on such Relevant Calculation Date (including any

           amount to be transferred to the Collection Account pursuant to clause

          (a) of Section 3.6 in respect of such Payment Date);

 

               (iv) the Available Collections Amount for such Payment Date;

 

               (v) all amounts to be distributed to the Pledgor for the purpose

          of paying franchise Taxes and other fees and expenses required to

          maintain the Pledgor's corporate existence, and to pay other Taxes and

          general corporate and overhead expenses incurred by the Pledgor in the

          ordinary course of its business as a holding company for Royalty Sub;

 

               (vi) all fees, costs and expenses (including reasonable

          attorneys' fees and legal expenses) of the First Lien Claimholders

           under the First Lien Documents (including amounts payable pursuant to

          Section 10.3 of the First Lien Credit Agreement and all amounts

          payable in respect of Taxes pursuant to Section 4.6 of the First Lien

          Credit Agreement) and the Second Lien Claimholders under the Second

          Lien Documents not previously reimbursed;

 

               (vii) all other Expenses not previously reimbursed, with the

          amounts shown on all invoices attached to Servicer Information

           received by the Collection Agent for the reimbursement or payment of

          Expenses not previously paid or reimbursed;

 

               (viii) with respect to the Loans, (A) the applicable interest

          rate on any LIBO Rate Loans and (B) the amount of interest on all

          Loans, calculated pursuant to the terms of the First Lien Credit

          Agreement (including Section 3.2 of the First Lien Credit Agreement)

          for such Payment Date;

 

               (ix) with respect to the Notes, (A) the applicable interest rate

          on each class of Floating Rate Notes based on LIBOR determined on the

          Reference Date for the Interest Accrual Period beginning on such

          Payment Date and (B) the Interest

 

 

                                        -8-

<PAGE>

          Amount (including any Additional Interest and Additional Amounts) on

          each class of Floating Rate Notes and Fixed Rate Notes for such

          Payment Date;

 

               (x) the outstanding principal amount of the Loans on such Payment

          Date immediately prior to any principal payment on such Payment Date;

 

               (xi) if such Payment Date is a Mandatory Repayment Date or a date

          on which a voluntary prepayment of the Loans is to be made under the

          First Lien Credit Agreement, the amount necessary to make such

          voluntary prepayment or a mandatory repayment of the Loans, interest

          and other amounts due thereon and, if all Loans are being repaid on

           such Payment Date, all other First Lien Obligations on such Payment

          Date;

 

               (xii) if such Payment Date is a Redemption Date on which a

          Redemption of Notes is scheduled to occur, the amount necessary to pay

           the Redemption Price of the Notes to be repaid on such Redemption Date

          and the Redemption Premium, if any, to be paid in addition to such

          Redemption Price;

 

               (xiii) the amount of the Lilly Payment, if any, to be made on

          such Payment Date, provided such payment is being made in accordance

          with Section 3.10;

 

               (xiv) the shortfall, if any, of the Available Collections Amount

          for such Payment Date in respect of any amounts payable pursuant to

          clause (a)(v), (a)(vi) or (b)(iv) of Section 3.7, as applicable (a

          "Shortfall"), taking into account any Lilly Payment determined

          pursuant to clause (xiii) above and the payment of expenses described

          in clauses (v), (vi) and (vii) above payable on such Payment Date and,

          with respect to each Shortfall, the amount to be withdrawn from the

          Capital Account, if any, determined as provided in Section 3.8;

 

               (xv) a determination of whether the Interest Coverage Ratio is

          less than or equal to or greater than the specified ratio for such

          Payment Date set forth in Section 3.11; provided that for purposes of

          making such determination, if such determination is not reflected in

          Servicer Information received by the Collection Agent or if the

          Collection Agent has not received such Servicer Information on or

          before the third Business Day prior to the immediately succeeding

           Payment Date, the Interest Coverage Ratio for such Payment Date shall

          be deemed to be not equal to or greater than the specified ratio for

          such Payment Date set forth in Section 3.11; and

 

               (xvi) any other information, determinations and calculations

          reasonably required in order to give effect to the terms of this

          Agreement and the other Transaction Documents.

 

          (b) Following the Discharge of First Lien Obligations. In addition to

     the calculations and determinations to be made pursuant to clause (a)

     above, following the Discharge of First Lien Obligations (and prior

     thereto, if the Collection Agent determines that the Discharge of First

     Lien Obligations will occur on the immediately succeeding

 

 

                                       -9-

<PAGE>

     Payment Date), as soon as reasonably practicable after each Relevant

     Calculation Date but in no event later than 12:00 noon (New York City time)

     on the second Business Day prior to the immediately succeeding Payment

     Date, the Collection Agent shall, based on Servicer Information received by

     the Collection Agent, and based on information known to it or Relevant

     Information provided to it, make the following determinations and

     calculations (and each of the Trustee and Royalty Sub (for itself and on

     behalf of Servicer) agrees to provide any Relevant Information reasonably

     requested by the Collection Agent for the purpose of making such

     determinations and calculations):

 

               (i) the amount, if any, to be transferred from the Holding

          Account as of such Relevant Calculation Date to the Collection Account

          on such Payment Date in accordance with Section 3.6;

 

                (ii) (A) the Outstanding Principal Balance of each class of Notes

          on such Payment Date immediately prior to any principal payment on

          such Payment Date; (B) for each Payment Date, the principal amount

          required to be paid on the Second Lien Notes on such Payment Date that

          would reduce the Outstanding Principal Balance of the Second Lien

          Notes to the Remaining Scheduled Notes Balance for such Payment Date

          on the Class A Principal Payment Schedule; and (C) the amount of any

          other principal payment to be made in respect of each class of Notes

          on such Payment Date;

 

               (iii) any amount that will be deposited into the Holding Account

          pursuant to Section 3.7(b)(vi); and

 

               (iv) the amounts, if any, distributable to Royalty Sub on such

          Payment Date pursuant to clause (b)(x) of Section 3.7 or Section 3.11.

 

          (c) Calculation Report. Following the calculations and determinations

      by the Collection Agent described in clauses (a) and (b) above, as

     applicable, and not later than 1:00 p.m., New York City time, on the second

     Business Day prior to the immediately succeeding Payment Date, the

     Collection Agent shall provide to each of Servicer, Royalty Sub, the First

     Lien Agent and the Trustee a calculation report (a "Calculation Report")

     listing such determinations and calculations and the amount of the

     Available Collections Amount to be applied on such Payment Date to make

     each of the payments, transfers and deposits contemplated by Section 3.7 or

     Section 3.9, and any Lilly Payment due and payable on such date, as

     applicable, setting forth separately the payments to be made in respect of

     the First Lien Obligations and the Second Lien Obligations. In addition,

     following the Discharge of First Lien Obligations, such Calculation Report

     shall include the amount, if any, to be distributed to Royalty Sub from the

     Holding Account on such Payment Date as contemplated by Section 3.11. The

     calculations set forth in each Calculation Report shall be conclusive and

     binding on each Obligor, Servicer, each First Lien Claimholder and each

     Second Lien Claimholder, absent manifest error.

 

          (d) Capital Account Deposits. Following the Discharge of First Lien

     Obligations, not later than one Business Day prior to the immediately

     succeeding Payment Date, Royalty Sub shall advise the Trustee in writing as

     to the portion of amounts, if any,

 

 

                                      -10-

<PAGE>

     distributable to Royalty Sub on such Payment Date pursuant to clause (b)(x)

     of Section 3.7 or Section 3.11 to be deposited in the Capital Account on

     such Payment Date.

 

     SECTION 3.6. Payment Date First Step Transfers.

 

          (a) Each Payment Date. On each Payment Date, the Collection Agent

     shall transfer from any Account (other than the Collection Account) to the

     Collection Account the amount of earnings (net of losses and investment

     expenses), if any, earned as a result of investments of funds on deposit

     therein during the period from the second immediately preceding Calculation

     Date prior to such Payment Date and ending on the Calculation Date

     immediately preceding such Payment Date.

 

          (b) Following the Discharge of First Lien Obligations. In addition to

     the transfers to be made on each Payment Date pursuant to clause (a) above,

     on each Payment Date following the Discharge of First Lien Obligations, the

     Collection Agent shall transfer to the Collection Account the amount in the

     Holding Account as of the immediately preceding Calculation Date if (i) as

     of such Payment Date an Event of Default under the Indenture has occurred

     and is continuing, (ii) the Interest Coverage Ratio for such Payment Date

     is not equal to or greater than the specified ratio for such Payment Date

     set forth in Section 3.11 (as determined pursuant to clause (a)(xv) of

     Section 3.5), (iii) on or after June 15, 2008, as of such Payment Date the

     Patent Extension Event has not occurred or (iv) as of such Payment Date (x)

     the Trustee has received written notice from Noteholders of at least 25% of

      the Outstanding Principal Balance of the Class A Notes that a Material

     Adverse Development has occurred and (y) the Trustee has not received

     further written notice from Noteholders of a majority of the Outstanding

     Principal Balance of the Class A Notes that such Material Adverse

     Development has ended or is no longer applicable; provided, that if the

     Person acting as Trustee is not the same Person as the Collection Agent,

     the Trustee shall notify the Collection Agent of the occurrence of such

     event.

 

     SECTION 3.7. Payment Date Second Step Withdrawals.

 

          (a) Prior to the Discharge of First Lien Obligations. Prior to the

     Discharge of First Lien Obligations, on each Payment Date, after the

     applicable transfers provided for in clause (a) of Section 3.6 have been

     made, after making the distributions from the Repayment/Redemption Account,

     if any, pursuant to Section 3.9, and after the making of any Lilly Payment

     pursuant to Section 3.10, the Collection Agent shall distribute from the

     Collection Account to the First Lien Agent or the Trustee, as applicable,

     the amounts set forth below in the order of priority set forth below but,

     in each case, only to the extent that all amounts then required to be paid

     ranking prior thereto have been paid in full:

 

               (i) first, to the Pledgor, all amounts to be distributed to the

          Pledgor for the purpose of paying fees and expenses of the Pledgor of

          the type described in clause (a)(v) of Section 3.5 in an amount not to

          exceed $20,000 during any fiscal year;

 

               (ii) second, all fees, costs and expenses (including reasonable

          attorneys' fees and legal expenses) of the First Lien Claimholders

          under the First Lien

 

 

                                      -11-

<PAGE>

          Documents (including amounts payable pursuant to Section 10.3 of the

          First Lien Credit Agreement and all amounts payable in respect of

           Taxes pursuant to Section 4.6 of the First Lien Credit Agreement) not

          previously reimbursed;

 

               (iii) third, all fees, costs and expenses (including reasonable

          attorneys' fees and legal expenses) of the Second Lien Claimholders

          (other than the holders of Class B Notes, in such capacity) under the

          Second Lien Documents not previously reimbursed;

 

               (iv) fourth, all Expenses not previously reimbursed, with the

          amounts shown on all invoices attached to Servicer Information

          received by the Collection Agent for the reimbursement or payment of

          Expenses not previously paid or reimbursed;

 

               (v) fifth, to the First Lien Agent for distribution to the

           applicable First Lien Claimholders to the ratable payment of all

          interest payable under the First Lien Documents for such Payment Date

          (including interest accruing after the commencement of a proceeding in

          bankruptcy, insolvency or similar law, whether or not permitted as a

          claim under such law), taking into account any amounts paid pursuant

          to Section 3.8 on such Payment Date;

 

               (vi) sixth, to the Trustee for distribution to the applicable

          Second Lien Claimholders to the ratable payment of the Interest Amount

          then due and payable on the Class A Notes, taking into account any

          amounts paid pursuant to Section 3.8 on such Payment Date;

 

               (vii) seventh, to the ratable payment of the principal amount of

          the Loans then outstanding; and

 

               (viii) eighth, to the ratable payment of all other First Lien

          Obligations until the occurrence of the Discharge of First Lien

          Obligations.

 

          (b) Following the Discharge of First Lien Obligations. Following the

     Discharge of First Lien Obligations, on each Payment Date, after the

     applicable transfers provided for in Section 3.6 have been made, after

     making the distributions from the Repayment/Redemption Account, if any,

     pursuant to Section 3.9, and after the making of any Lilly Payment pursuant

     to Section 3.10, the Collection Agent shall distribute from the Collection

     Account to the Trustee the amounts set forth below in the order of priority

     set forth below but, in each case, only to the extent that all amounts then

     required to be paid ranking prior thereto have been paid in full:

 

               (i) first, to the Pledgor, all amounts to be distributed to the

          Pledgor for the purpose of paying fees and expenses of the Pledgor of

          the type described in clause (a)(v) of Section 3.5 in an amount not to

          exceed $20,000 during any fiscal year;

 

               (ii) second, all fees, costs and expenses (including reasonable

          attorneys' fees and legal expenses) of the Second Lien Claimholders

          under the Second Lien Documents not previously reimbursed;

 

 

                                      -12-

<PAGE>

               (iii) third, all Expenses not previously reimbursed, with the

          amounts shown on all invoices attached to Servicer Information

          received by the Collection Agent for the reimbursement or payment of

          Expenses not previously paid or reimbursed;

 

               (iv) fourth, to the Trustee for distribution to the applicable

          Second Lien Claimholders to the ratable payment of the Interest Amount

          then due and payable on the Class A Notes, taking into account any

          amounts paid pursuant to Section 3.8 on such Payment Date;

 

               (v) fifth, to the Trustee for distribution to the Noteholders,

          principal payments on the Class A Notes, allocated pro rata in

          proportion to the Outstanding Principal Balance of the Class A Notes

          held by such Noteholders, until the Outstanding Principal Balance of

          the Class A Notes equals the Scheduled Remaining Notes Balance for

          such Payment Date on the Class A Principal Payment Schedule; provided,

          however, that principal payments on the Class A Notes shall be made to

          the Trustee for distribution to the Noteholders, allocated pro rata in

          proportion to the Outstanding Principal Balance of the Class A Notes

          held by such Noteholders, regardless of the Scheduled Remaining Notes

          Balance Amount and until the Class A Notes have been paid in full, if

          (A) an Event of Default under the Indenture has occurred and is

           continuing, (B) on or after June 15, 2008, the Patent Extension Event

          has not occurred, (C)(x) the Trustee has received written notice from

          Noteholders of at least 25% of the Outstanding Principal Balance of

          the Class A Notes that a Material Adverse Development has occurred and

          (y) the Trustee has not received further written notice from

          Noteholders of a majority of the Outstanding Principal Balance of the

          Class A Notes that such Material Adverse Development has ended or is

          no longer applicable or (D) prior to the Discharge of First Lien

          Obligations, the First Lien Agent or any other First Lien Claimholder

          disposed of any portion of the Collateral following the occurrence of

          an Event of Default under the Credit Agreement without an Event of

          Default having occurred under the Indenture; provided, that if the

          Person acting as Trustee is not the same Person as the Collection

          Agent, the Trustee shall notify the Collection Agent of the occurrence

          of such event;

 

               (vi) sixth, if the Interest Coverage Ratio for such Payment Date

          is not equal to or greater than the specified ratio for such Payment

           Date set forth in Section 3.11 (as determined pursuant to clause

          (a)(xv) of Section 3.5) and the Outstanding Principal Balance of the

          Class A Notes is greater than zero, for deposit into the Holding

          Account;

 

                (vii) seventh, after the Class A Notes have been paid in full, to

          the Trustee for distribution to the Noteholders of the Class B Notes,

          if any, the Interest Amount on the Class B Notes;

 

               (viii) eighth, after the Class A Notes have been paid in full, to

          the Trustee for distribution to the Noteholders of the Class B Notes,

          if any, payment of the

 

 

                                      -13-

<PAGE>

          principal amount of the Class B Notes in accordance with their terms

          until the Class B Notes have been paid in full;

 

               (ix) ninth, to the ratable payment of all other Second Lien

          Obligations until all such amounts are paid in full; and

 

               (x) tenth, to Royalty Sub, all remaining amounts assuming that

          the Interest Coverage Ratio for such Payment Date is equal to or

          greater than the specified ratio for such Payment Date set forth in

          Section 3.11 (as determined pursuant to clause (a)(xv) of Section

          3.5).

 

          (c) To the extent that any monies are deposited in the Collection

     Account to reimburse prior distributions in respect of a Lilly Shortfall,

     such monies shall be paid to the First Lien Agent on behalf of the First

     Lien Claimholders or the Trustee on behalf of the Second Lien Claimholders,

     as applicable, prior to giving effect to this Section 3.7 to the extent

     that such monies otherwise would have been paid to such First Lien

     Claimholders or Second Lien Claimholders on the prior respective Payment

     Date in accordance with this Section 3.7 in the absence of such Lilly

     Shortfall.

 

     SECTION 3.8. Capital Account; Shortfalls. The Available Collections Amount

does not include the aggregate amount of funds on deposit in the Capital

Account; provided that if the Collection Agent has determined that a Shortfall

exists pursuant to the Calculation Report with respect to any Payment Date, and

there is a positive balance in the Capital Account on such Payment Date, then on

such Payment Date the Collection Agent shall withdraw from the Capital Account

an amount equal to the lesser of the Shortfall and the balance in the Capital

Account and distribute it to the First Lien Agent or the Trustee, as applicable,

in payment of the amounts payable as set forth in clause (a)(v), (a)(vi) or

(b)(iv) of Section 3.7, as applicable; provided further that the Collection

Agent shall make such a withdrawal from the Capital Account in respect of not

more than six Payment Dates in total and in respect of not more than any three

consecutive Payment Dates; provided further that no more than three such

withdrawals shall be made from the Capital Account in respect of interest on the

Notes prior to the Discharge of First Lien Obligations.

 

     SECTION 3.9. Repayment/Redemption.

 

          (a) Voluntary or Mandatory Repayment of Loans. On any Payment Date on

     which the Loans are to be subject to a voluntary or mandatory repayment

     (including pursuant to a voluntary repayment of the Loans with the proceeds

     of Class B Notes pursuant to clause (d) of Section 7.2 of the First Lien

     Credit Agreement), the Collection Agent shall distribute the amounts in the

     applicable Repayment/Redemption Account to the First Lien Agent for payment

     of all amounts then outstanding as calculated by the Collection Agent under

     clause (a)(xi) of Section 3.5, in accordance with the terms of the First

     Lien Documents.

 

          (b) Redemption of Notes. Subject to Section 3.15, on any Payment Date

     on which any class of Notes is to be the subject of a Redemption, in whole

     or in part, the Collection Agent shall distribute the amounts in the

     applicable Repayment/Redemption

 

 

                                       -14-

<PAGE>

     Account to the Trustee for payment of all amounts then outstanding as

     calculated by the Collection Agent under clause (a)(xii) of Section 3.5, in

     accordance with the terms of the Second Lien Documents and any applicable

     Board Resolution, including:

 

               (i) paying to such Persons as shall be specified by Royalty Sub

          such Transaction Expenses as shall be due and payable in connection

          with the issuance and sale of the applicable Class B Notes or

          Refinancing Notes;

 

               (ii) remitting to the Noteholders of such class of Notes, in

          accordance with the Board Resolution authorizing such Redemption, an

          amount equal to the Redemption Price plus Premium, if any, allocated,

          in the event of a Redemption of such Notes in part, pro rata in

          proportion to the Outstanding Principal Balance of such Notes held by

          such Noteholders; and

 

               (iii) making such other distributions and payments as shall be

          authorized and directed by the Board Resolution and supplemental

          indentures executed in connection with such Redemption.

 

     SECTION 3.10. Lilly Shortfall. If, no later than ten Business Days prior to

any Calculation Date, the Collection Agent receives written notice of the

existence of a Lilly Shortfall, the Collection Agent shall promptly (but in no

event later than the next succeeding Business Day following receipt of such

written notice) notify Servicer, Royalty Sub, Quintiles, the Trustee and the

First Lien Agent of such existence of a Lilly Shortfall. Upon Royalty Sub or

Quintiles receiving notification of the same, or upon Royalty Sub or Quintiles

otherwise becoming aware of a Lilly Shortfall, Royalty Sub shall cause Servicer,

no later than such Calculation Date, to confirm the amount of any such Lilly

Shortfall in writing to the Collection Agent, with a copy to Royalty Sub,

Quintiles, the Trustee and the First Lien Agent. Unless the Collection Agent

shall have received prior to the related Payment Date (i) written notification

from Quintiles or the Servicer certifying that any such Lilly Shortfall has been

cured in full, (ii) prior to the Discharge of First Lien Obligations, written

notice from the First Lien Agent that the Required Lenders have indicated that

such payment shall not be made on such Payment Date (with a copy of such notice

to the Trustee if not acting as Collection Agent) or (iii) following the

Discharge of First Lien Obligations, written notice from the Trustee that a

majority of the Outstanding Principal Balance of the Senior Class of Notes has

indicated that such payment shall not be made on such Payment Date, then prior

to making any other distributions pursuant to Section 3.7 or Section 3.8, the

Collection Agent shall make a Lilly Payment to Lilly on such Payment Date in the

amount of such Lilly Shortfall from the Holding Account and, to the extent funds

are not available in the Holding Account therefor, from the Collection Account.

 

     SECTION 3.11. Interest Coverage Ratio. On each Payment Date following the

Discharge of First Lien Obligations, after any transfers required by Section 3.6

have been made and any Lilly Payment has been made, the Collection Agent shall

transfer to Royalty Sub any amounts in the Holding Account on such Payment Date

if the Interest Coverage Ratio for such Payment Date and the Interest Coverage

Ratio for each of the three immediately preceding Payment Dates are equal to or

greater than the following specified ratios for each indicated Payment Date (as

determined pursuant to clause (a)(xv) of Section 3.5):

 

 

                                      -15-

<PAGE>

<TABLE>

<CAPTION>

                     Payment Dates                         Interest Coverage Ratio

                     -------------                         -----------------------

<S>                                                        <C>

From January 15, 2006 to and including October 15, 2006              1.5

From January 15, 2007 to and including October 15, 2007              2.0

From January 15, 2008 to and including October 15, 2008              3.0

From January 15, 2009 to and including October 15, 2009              4.0

From January 15, 2010 and thereafter                                 5.0

</TABLE>

 

Notwithstanding the foregoing, the Collection Agent shall not make any such

transfer described in the immediately preceding paragraph if (i) an Event of

Default under the Indenture has occurred and is continuing, (ii) on or after

June 15, 2008, the Patent Extension Event has not occurred or (iii)(x) the

Trustee has received written notice from Noteholders of at least 25% of the

Outstanding Principal Balance of the Class A Notes that a Material Adverse

Development has occurred and (y) the Trustee has not received further written

notice from Noteholders of a majority of the Outstanding Principal Balance of

the Class A Notes that such Material Adverse Development has ended or is no

longer applicable; provided, that if the Person acting as Trustee is not the

same Person as the Collection Agent, the Trustee shall notify the Collection

Agent of the occurrence of such event.

 

     SECTION 3.12. Distributions. To the extent Royalty Sub receives amounts

from the Collection Agent distributed from the Collection Account pursuant to

clause (b)(x) of Section 3.7 or from the Holding Account pursuant to Section

3.11, such amounts may be distributed by Royalty Sub to the Pledgor (or as

otherwise directed by the Pledgor or any Person designated by the Pledgor to

give such directions) in its sole discretion.

 

     SECTION 3.13. Payments Over. Any Collateral or proceeds thereof received by

the Trustee or any Second Lien Claimholders in connection with the exercise of

any right or remedy (including setoff) relating to the Collateral in

contravention of this Agreement shall, to the extent permitted under Applicable

Law, be segregated and held in trust and forthwith paid over, without recourse,

representation or warranty, to the Collection Agent for the benefit of the First

Lien Agent and the First Lien Claimholders in the same form as received, with

any necessary endorsements or as a court of competent jurisdiction may otherwise

direct until such time as the Discharge of First Lien Obligations has occurred

and to the extent necessary to satisfy the Discharge of First Lien Obligations.

The Collection Agent and the First Lien Agent are hereby authorized to make any

such endorsements as agent for the Trustee or any such Second Lien Claimholders.

This authorization is coupled with an interest and is irrevocable.

 

     SECTION 3.14. Distribution Report. On each Payment Date, promptly following

receipt thereof by Servicer, the Collection Agent shall deliver to the First

Lien Agent and the Trustee a report in a form reasonably satisfactory to the

First Lien Agent and the Trustee, covering the items set forth in Annex B

hereto, prepared by Servicer and delivered to the Collection Agent pursuant to

the terms of the Servicing Agreement (each, a "Distribution Report"). Each

Distribution Report shall, pursuant to the terms of the Servicing Agreement, be

accompanied by (i) a statement prepared by Servicer setting forth an analysis of

the Collection Account activity for the period commencing on the day next

following the preceding Calculation Date and ending on the Calculation Date

relating to such Payment Date, (ii) such information, if any, that Quintiles

shall have provided to the First Lien Agent pursuant to Section 7.1.1 (or any

equivalent provision) of the First Lien Credit Agreement or to the Trustee

pursuant to Section 6.4 of the

 

 

                                      -16-

<PAGE>

Purchase and Sale Agreement during the Interest Accrual Period then ended and

(iii) the information, if any, that Royalty Sub shall have provided to the

Trustee pursuant to Section 5.2 of the Indenture, or Servicer shall have

provided to the Collection Agent pursuant to Section 4.1 of the Servicing

Agreement, during the period then ended.

 

     SECTION 3.15. Prior Payment of First Lien Obligations. Notwithstanding any

of the foregoing provisions of this Section 3, except in the case of a

Refinancing of the Second Lien Notes (or any Refinancing Notes in respect

thereof), in no event shall any amount of principal or premium with respect to

any Notes be paid, redeemed, discharged or otherwise satisfied prior to the

Discharge of First Lien Obligations without the prior written consent of the

First Lien Agent (it being understood that such payment, redemption, discharge

or other satisfaction may occur on the same Payment Date as the Discharge of

First Lien Obligations, provided the Discharge of First Lien Obligations has

occurred).

 

                             SECTION 4. ENFORCEMENT

 

     SECTION 4.1. Exercise of Remedies. At all times prior to the Discharge of

First Lien Obligations, whether or not any Insolvency or Liquidation Proceeding

has been commenced by or against any Obligor, subject to the other terms and

provisions of this Agreement, neither the Trustee nor the Second Lien

Claimholders (nor any representative or agent on their behalf) will exercise or

seek to exercise any rights or remedies (including setoff) available to them by

virtue of any Lien held by them with respect to any Collateral (including the

exercise of any right under any lockbox agreement, control account agreement or

similar agreement or arrangement to which the Trustee or any Second Lien

Claimholder is a party) or institute any action or proceeding with respect to

such rights or remedies (including any action of foreclosure), and will not

contest, protest or object to (or otherwise directly or indirectly hinder or

prevent) any Lien Enforcement Action or other action taken for the purpose of

protecting or preserving Collateral brought by the First Lien Agent or any First

Lien Claimholder with respect to the Collateral, or any other exercise by the

First Lien Agent or any First Lien Claimholder of any rights and remedies

relating to the Collateral, or object to the forbearance by the First Lien Agent

or the First Lien Claimholders from bringing or pursuing any Lien Enforcement

Action, other action taken for the purpose of protecting or preserving

Collateral, or any other exercise of any rights or remedies relating to the

Collateral, in each case so long as such proceeding, Lien Enforcement Action or

other right or remedy or forbearance thereof complies with Applicable Law and

this Agreement; provided, that if an Event of Default under the Indenture has

occurred and is continuing, subject at all times to the provisions of Section

2.1 and Section 3, commencing 180 days after receipt by the First Lien Agent of

a copy of (i) notice of such Event of Default to Royalty Sub and (ii) written

notice by the Trustee or the Second Lien Claimholders to Royalty Sub declaring

its or their intent to take action to enforce its or their Liens on the

Collateral (unless any Obligor is subject to an Insolvency or Liquidation

Proceeding by reason of which such declaration and the making of such demand is

stayed, in which case, commencing on the date of the commencement of such

Insolvency or Liquidation Proceeding), the Trustee or the Second Lien

Claimholders may take action to enforce its or their Liens on the Collateral,

but only so long as the First Lien Agent is not diligently pursuing in good

faith the exercise of its enforcement rights or remedies against, or diligently

attempting to vacate any stay or enforcement of its Liens on, any material part

of the Collateral (including commencement of any

 

 

                                      -17-

<PAGE>

reasonable action to foreclose its Liens on any material part of the Collateral,

any reasonable action to take possession of any material part of the Collateral

or commencement of any reasonable legal proceedings or actions to enforce its

Liens against or with respect to any material part of such Collateral) (prompt

notice of which shall be given to the Trustee as required pursuant to Section

6.1); provided, further, that (x) in any Insolvency or Liquidation Proceeding

commenced by or against any Obligor, the Trustee may file a claim or statement

of interest with respect to the Second Lien Obligations and (y) the Trustee may

take any action (not adverse to the Liens on the Collateral securing the First

Lien Obligations, or the rights of the First Lien Agent or the First Lien

Claimholders to exercise remedies in respect thereof) in order to preserve or

protect its Lien on the Collateral and to preserve its rights to share in the

proceeds of the Collateral in accordance with the terms of this Agreement. Prior

to the Discharge of First Lien Obligations, in any sale or other disposition of

any of the Collateral by the Trustee or any Second Lien Claimholder, (A) the

Trustee or such Second Lien Claimholder shall conduct such sale or other

disposition in a commercially reasonable manner and (B) any Collateral or

proceeds thereof received by the Trustee or such Second Lien Claimholders in

connection with such sale or other disposition shall, to the extent required

under Section 3 and to the extent permitted under Applicable Law, be segregated

and held in trust and forthwith paid over, without recourse, representation or

warranty, to the Collection Agent for application in accordance with Section 3

in the same form as received, with any necessary endorsements or as a court of

competent jurisdiction may otherwise direct. In exercising rights and remedies

with respect to the Collateral permitted hereunder, the First Lien Agent and the

First Lien Claimholders may enforce the provisions of the First Lien Documents

and exercise remedies thereunder and the Trustee and the Second Lien

Claimholders may enforce the provisions of the Second Lien Documents and

exercise remedies thereunder, in each case, all in such order and in such manner

as they may determine in the exercise of their sole discretion. Such exercise

and enforcement shall include the rights of an agent appointed by them to sell

or otherwise dispose of Collateral upon foreclosure, to incur expenses in

connection with such sale or disposition, and to exercise all the rights and

remedies of a secured creditor under the UCC and of a secured creditor under

Bankruptcy Laws.

 

     SECTION 4.2. Actions Not Subject to Limitation. Nothing in this Agreement

shall be construed to in any way limit or impair the right of: (a) any Secured

Creditor to bid for or purchase Collateral at any private or judicial

foreclosure upon such Collateral initiated by any Person; (b) the Trustee or any

Second Lien Claimholder to join (but not control) any Lien Enforcement Action or

other foreclosure or other judicial lien enforcement proceeding with respect to

the Collateral initiated by the First Lien Agent, so long as it does not delay

or interfere in any material respect with the exercise by the First Lien Agent

of its rights as provided in this Agreement; and (c) the Trustee to receive any

remaining proceeds of Collateral after the Discharge of First Lien Obligations.

 

                          SECTION 5. OTHER AGREEMENTS.

 

     SECTION 5.1. Releases. At all times prior to the Discharge of First Lien

Obligations and during the continuance of a Release Event, the Trustee and

Second Lien Claimholders shall, in connection with any contemplated sale or

other disposition of Collateral either by (A) the First Lien Agent or its agents

or (B) any Obligor with the consent of the First Lien Agent: (i) upon the

request of the First Lien Agent with respect to any of the Collateral (which

request shall specify

 

 

                                      -18-

<PAGE>

the proposed terms of such sale or other disposition and the type and amount of

consideration to be received in connection therewith), release or otherwise

terminate its Liens on such Collateral; (ii) promptly upon the request of the

First Lien Agent authorize, execute and/or deliver such release documents and

confirmations of the authorization to file UCC amendments and terminations

provided for herein, in each case as the First Lien Agent may reasonably require

in connection with such sale or other disposition; provided, that (A) subject to

the payment and Lien priorities established pursuant to this Agreement, such

release by the Trustee and Second Lien Claimholders shall not extend to or

otherwise affect any of the rights of the Trustee or Second Lien Claimholders

under this Agreement to the proceeds from any such sale or other disposition of

Collateral, (B) the First Lien Agent and First Lien Claimholders shall promptly

provide such proceeds to the Collection Agent for application in accordance with

Section 3, and (C) no such release and/or authorization documents shall be

required to be delivered by the Trustee and Second Lien Claimholders (1) to any

Obligor or (2) more than one Business Day prior to the date of the closing of

such sale or other disposition; provided further that, if the closing of such

sale or other disposition is not consummated, the First Lien Agent shall

promptly return all release and/or authorization documents to the Trustee and

Second Lien Claimholders, as the case may be; and (iii) be deemed to have

consented under the Second Lien Documents to such sale or other disposition, it

being understood, however, that the Trustee and Second Lien Claimholders shall,

subject to this Agreement, continue to have rights with respect to the proceeds

of such disposition constituting Collateral. The effectiveness of any such

release or termination by the Trustee and Second Lien Claimholders shall be

subject to the sale or other disposition of such Collateral described in such

request or on substantially similar terms and shall lapse in the event such sale

or other disposition does not occur within three days of the anticipated closing

date.

 

     SECTION 5.2. Insurance. At all times prior to the Discharge of First Lien

Obligations, the First Lien Agent and the First Lien Claimholders shall have the

sole and exclusive right, subject to the rights of the Obligors under the First

Lien Documents, to adjust settlement for any insurance policy covering the

Collateral in the event of any loss thereunder and to approve any award granted

in any condemnation or similar proceeding (or any deed in lieu of condemnation)

affecting the Collateral. Unless and until the Discharge of First Lien

Obligations has occurred, and subject to the rights of the Obligors under the

First Lien Collateral Documents, all proceeds of any such policy and any such

award (or any payments with respect to a deed in lieu of condemnation) in

respect of the Collateral shall be paid over to the Collection Agent for

application in accordance with Section 3, such other Person as may be entitled

thereto or as a court of competent jurisdiction may otherwise direct. If the

Trustee or any Second Lien Claimholders shall, at any time prior to the

Discharge of First Lien Obligations, receive any proceeds of any such insurance

policy or any such award or payment, it shall pay such proceeds over to the

Collection Agent for application in accordance with Section 3.

 

     SECTION 5.3. Amendments to First Lien Documents and Second Lien Documents.

 

     (a) Until the Discharge of First Lien Obligations, without the prior

written consent of the First Lien Agent, no Second Lien Document may be amended,

supplemented or otherwise modified to the extent such amendment, supplement or

modification would (i) contravene the provisions of this Agreement or clause (a)

of Section 7.2 of the First Lien Credit Agreement, (ii) increase the Outstanding

Principal Balance of the Second Lien Notes (including any Refinancing

 

 

                                      -19-

<PAGE>

Notes in respect thereof) to an amount in excess of the Outstanding Principal

Balance as of the Closing Date, together with interest that has been accrued and

unpaid under the Second Lien Notes (including any Refinancing Notes in respect

thereof) and, in the case of Refinancing Notes, any redemption premium provided

for in the Indenture and reasonable transaction expenses relating thereto, (iii)

increase the "Stated Rate of Interest" or similar component of the interest or

the yield on the Second Lien Notes or any Refinancing Notes above the Stated

Rate of Interest on the Second Lien Notes (or any Refinancing Notes in respect

thereof) as of the date hereof, (iv) provide for dates for payment of principal,

interest, premium (if any) or fees which are earlier than such dates under the

Indenture or the Second Lien Notes (or any Refinancing Notes in respect thereof)

as in effect on the date hereof, (v) provide for covenants, events of default or

remedies which are more restrictive in any material respect on any Obligor than

those set forth in the Indenture or the Note Purchase Agreements, in each case

as in effect on the date hereof, (vi) provide for redemption, prepayment or

defeasance provisions that are more burdensome in any material respect on any

Obligor than those set forth in the Indenture as in effect on the date hereof,

(vii) provide for collateral securing Secured Obligations thereunder which is

more extensive than the collateral provided for under the First Lien Documents

or (viii) increase the obligations of any Obligor or confer any additional

rights on any Second Lien Claimholder which would be adverse to the First Lien

Claimholders in any material respect.

 

     (b) Each of the Trustee, Royalty Sub and the Pledgor agrees that each

Second Lien Collateral Document shall include the following language (or

language to similar effect approved by the First Lien Agent):

 

          "Notwithstanding anything herein to the contrary, the Lien and

          security interest granted to the Trustee pursuant to this Agreement

          and the exercise of any right or remedy by the Trustee hereunder are

          subject to the provisions of the Intercreditor Agreement, dated as of

          October 18, 2005 (as amended, restated, supplemented or otherwise

          modified from time to time, the "Intercreditor Agreement"), among

          Morgan Stanley Senior Funding, Inc., as First Lien Agent, U.S. Bank

          National Association (or its successor), as trustee for the holders of

          the Second Lien Obligations, U.S. Bank National Association (or its

          successor), as Collection Agent, Duloxetine Royalty Sub, an exempted

          company with limited liability under the laws of the Cayman Islands,

          and Duloxetine Holdco Royalty Sub, an exempted company with limited

          liability under the laws of the Cayman Islands. In the event of any

          conflict between the terms of the Intercreditor Agreement and this

          Agreement, the terms of the Intercreditor Agreement shall govern and

          control."

 

     (c) Without the prior written consent of the Trustee, no First Lien

Document may be amended, supplemented or otherwise modified to the extent such

amendment, supplement or modification would (i) contravene the provisions of

this Agreement or Section 5.1(a) of the Indenture, (ii) increase the then

outstanding aggregate principal amount of the Loans under the First Lien Credit

Agreement in excess of the Maximum First Lien Principal Amount, (iii) increase

the "Applicable Margin" or similar component of the interest or the yield on the

Loans

 

 

                                       -20-

<PAGE>

under the First Lien Credit Agreement by more than 2.0% per annum above the

Applicable Margin on the Loans under the First Lien Credit Agreement as of the

Closing Date (exclusive, for the avoidance of doubt, of any imposition of up to

2.0% of "default" interest), or (iv) provide for a final stated maturity other

than the Final Maturity Date as in effect on the date hereof. The First Lien

Agent shall give notice of any amendment, waiver, consent or other modification

of any First Lien Document to the Trustee within ten (10) Business Days of the

effectiveness of such amendment, waiver, consent or other modification (provided

that the failure of any such notice to be given shall not impair or affect the

Trustee's or any Second Lien Claimholder's obligations to the First Lien Agent

and the First Lien Claimholders, the First Lien Agent's rights hereunder, the

enforceability of this Agreement or any Liens created or granted hereby or under

any First Lien Document or limit or impair the effectiveness or effect of any

such amendment, waiver or consent).

 

     (d) In the event the First Lien Agent or the First Lien Claimholders and

the relevant Obligor(s) enter into any amendment, waiver or consent in respect

of any of the First Lien Collateral Documents for the purpose of adding to, or

deleting from, or waiving or consenting to any departures from any provisions

of, any First Lien Collateral Document or changing in any manner the rights of

the First Lien Agent, the First Lien Claimholders, or any Obligor thereunder,

then such amendment, waiver or consent shall apply automatically to any

comparable provision of the Second Lien Collateral Documents without the consent

of the Trustee or the Second Lien Claimholders and without any action by the

Trustee or any Obligor; provided that (i) no such amendment, waiver or consent

shall have the effect of (A) removing assets subject to the Lien of the Second

Lien Collateral Documents, except to the extent that a release of such Lien is

permitted by Section 5.1 (or, for the avoidance of doubt, is expressly permitted

under the terms of the Second Lien Collateral Documents), (B) imposing duties on

the Trustee without its consent or (C) permitting other Liens on the Collateral

not permitted under the terms of Section 7 and (ii) notice of such amendment,

waiver or consent shall have been given to the Trustee within ten (10) Business

Days of the effectiveness of such amendment, waiver or consent (provided that

the failure of any such notice to be given shall not impair or affect the

Trustee's or any Second Lien Claimholder's obligations to the First Lien Agent

and the First Lien Claimholders, the First Lien Agent's rights hereunder, the

enforceability of this Agreement or any Liens created or granted hereby or under

any First Lien Document or limit or impair the effectiveness or effect of any

such amendment, waiver or consent or the automatic application thereof to any

comparable provision of the Second Lien Documents).

 

     SECTION 5.4. Rights As Unsecured Creditors. The Trustee and the Second Lien

Claimholders may exercise rights and remedies as unsecured creditors against the

Obligors in accordance with the terms of the Second Lien Documents and

Applicable Law. Except as otherwise set forth in this Agreement, nothing in this

Agreement shall prohibit the receipt by the Trustee or any Second Lien

Claimholders of payments in respect of the Second Lien Obligations, so long as

such receipt is (i) in accordance with all terms and provisions (including as to

priority of payments) of Section 3 and (ii) not the direct or indirect result of

the exercise by the Trustee or any Second Lien Claimholders of rights or

remedies available to them by virtue of any Lien or enforcement of any Lien, in

either case held by them, in contravention of this Agreement.

 

 

                                      -21-

<PAGE>

     SECTION 5.5. Agent for Perfection.

 

          (a) Each of the Agents, as applicable, acknowledges and agrees to

     hold, maintain control of or be listed as an additional insured or loss

     payee with respect to, the Pledged Collateral that is part of the

     Collateral in its possession, control or with respect to which it is listed

     as an additional insured or loss payee (or in the possession or control of

     its agents or bailees) as agent for the benefit of the First Lien Agent and

     the Trustee and any assignee solely for the purpose of perfecting the

     security interest granted under the First Lien Collateral Documents and the

     Second Lien Collateral Documents, subject to the terms and conditions of

     this Section 5.5.

 

          (b) Except to the extent otherwise provided under Section 3 or Section

     4.1 and until the Discharge of First Lien Obligations has occurred, the

     First Lien Agent and the Collection Agent, as applicable, shall be entitled

     to deal with the Pledged Collateral in accordance with the terms of the

     First Lien Collateral Documents as if the Liens of the Trustee under the

     Second Lien Collateral Documents did not exist. The rights of the Trustee

     shall at all times be subject to the terms of this Agreement and to the

     First Lien Agent's rights under the First Lien Collateral Documents.

 

          (c) Each of the First Lien Agent and the Trustee hereby appoints the

     other and the Collection Agent as its agent and representative, solely for

     the purpose of perfecting the Lien granted in the Collateral to such First

     Lien Agent, the Trustee or the Collection Agent, with respect to any

      financing statements, security agreements and any other documentation filed

     from time to time naming such other as secured party with respect to the

     Collateral and which is required to be filed in order to perfect the Lien

     of such other Person on the Collateral under Applicable Law ("Filing

     Collateral"), and each of the First Lien Agent, the Trustee and the

     Collection Agent hereby accepts such appointment and agrees to hold such

     financing statements, security agreements and any other documentation in

     such capacity solely for the purpose of perfecting the Lien granted in the

     Collateral to such other Person.

 

          (d) The First Lien Agent and the Collection Agent shall have no

     obligation whatsoever to the Trustee or any Second Lien Claimholder to

     assure that the Pledged Collateral or the Filing Collateral is genuine or

     owned by any Obligor or to preserve rights or benefits of any Person except

     as expressly set forth in this Section 5.5. The duties or responsibilities

     of the First Lien Agent and the Collection Agent under this Section 5.5

     shall be limited solely to holding the Pledged Collateral as agent for the

     First Lien Agent and the Trustee and acting as agent and representative

     with respect to the Filing Collateral, in each case, in accordance with

     this Section 5.5. The Trustee shall have no obligation whatsoever to the

     Collection Agent, the First Lien Agent or any First Lien Claimholder to

     assure that the Filing Collateral is genuine or owned by any Obligor or to

     preserve rights or benefits of any Person except as expressly set forth in

     this Section 5.5. The duties or responsibilities of the Trustee under this

     Section 5.5 shall be limited solely to acting as agent and representative

     with respect to the Filing Collateral in accordance with this Section 5.5.

 

 

                                      -22-

<PAGE>

          (e) The Collection Agent and the First Lien Agent shall not have by

      reason of the Second Lien Collateral Documents, this Agreement or any other

     document, or its acceptance of the appointment set forth in clause (c)

     above, a fiduciary relationship or any other obligations or liabilities in

     respect of the Trustee or any Second Lien Claimholder. The Collection Agent

     and the Trustee shall not have by reason of the First Lien Collateral

     Documents, this Agreement or any other document, or its acceptance of the

     appointment set forth in clause (c) above, a fiduciary relationship or any

     other obligations or liabilities in respect of the First Lien Agent or any

     First Lien Claimholder.

 

          (f) Upon the Discharge of First Lien Obligations, the First Lien Agent

     or the Collection Agent, as applicable, shall deliver, without recourse,

     representation or warranty, the remaining Pledged Collateral (if any)

     together with any necessary endorsements to the Trustee for its benefit and

     that of the Second Lien Claimholders, at the sole cost and expense of such

     holders to the extent Second Lien Obligations remain outstanding, in each

     case, so as to allow such Person to obtain possession or control of, or (if

     applicable) be listed as an additional insured or loss payee with respect

     to, such Pledged Collateral in accordance with the UCC or other Applicable

     Law. Upon such Discharge of the First Lien Obligations, the First Lien

     Agent and the Collection Agent further agree to take all other action

     reasonably requested by the Trustee, at the sole cost and expense of the

     Second Lien Claimholders, in connection with the Trustee obtaining a

     first-priority interest in the Collateral or as a court of competent

     jurisdiction may otherwise direct including the establishment of the

     Accounts in the name of the Trustee.

 

     SECTION 5.6. Consent Under Purchase and Sale Agreement, Servicing Agreement

or Second Lien Pledge and Security Agreement. So long as no Event of Default

under the First Lien Credit Agreement has occurred and is continuing, the First

Lien Agent and the First Lien Claimholders agree that the First Lien Agent will

not, without the prior written consent of the Trustee, (i) consent to any

amendment, waiver, modification, restatement or supplement of the Purchase and

Sale Agreement under Section 6.2, 9.6 or 9.8 thereof, (ii) consent to any

amendment, waiver, modification, restatement or supplement of the Servicing

Agreement under Section 6.4 or 6.6 thereof, or exercise its rights under Section

4.1 thereof to replace the Servicer, or exercise any consent rights under

Section 6.6 of the Servicing Agreement, (iii) exercise any consent rights under

Section 6.1(l) or 9.8 of the Purchase and Sale Agreement or (iv) exercise any

consent rights under Section 6.1, 6.5, 6.9 or 6.10 of the Second Lien Pledge and

Security Agreement.

 

              SECTION 6. SECOND LIEN CLAIMHOLDERS PURCHASE OPTION.

 

     SECTION 6.1. Notice of Exercise. The First Lien Agent shall give the

Trustee prior written notice (a "Trigger Notice") of its intention to either (i)

require the Second Lien Claimholders to release their Lien on Collateral

pursuant to the terms hereof during the continuance of a Release Event or (ii)

take any Lien Enforcement Action or other action taken for the purpose of

protecting or preserving Collateral under the First Lien Documents (including

written notice to Quintiles of a Liquidated Damages Event, unless the Trustee

has given a notice to Quintiles of a Liquidated Damages Event under Section 8.2

of the Purchase and Sale Agreement that has not been rescinded by the First Lien

Agent pursuant to the terms of such Section 8.2, in which case no Trigger Notice

shall be required), together with a description in

 

 

                                      -23-

<PAGE>

reasonable detail as to the Lien Enforcement Action or such other action it

intends to take. The First Lien Agent shall give such Trigger Notice (x) in the

absence of an Exigent Circumstance, not less than ten Business Days prior to the

taking of any such Lien Enforcement Action or other action taken for the purpose

of protecting or preserving Collateral under the First Lien Documents or (b) if

Exigent Circumstances exist, as soon as practicable and in any event

contemporaneously with the taking of such Lien Enforcement Action or such other

action. The Trustee, on behalf of the Second Lien Claimholders who elect to so

participate pursuant to the Indenture (the "Participating Second Lien

Claimholders"), shall then have the option, exercised by delivery of notice to

the First Lien Agent on behalf of the First Lien Claimholders (the "Purchase

Notice") within ten Business Days following receipt of such Trigger Notice, to

purchase all of the First Lien Obligations from the First Lien Claimholders.

Such notice from the Trustee to the First Lien Agent shall be irrevocable. In

the event that during such ten Business Day period, the Trustee shall send to

the First Lien Agent a Purchase Notice, the First Lien Agent shall not commence

any Lien Enforcement Action or other foreclosure or other action to sell or

otherwise realize upon the Collateral; provided, that continuing collection of

amounts to be paid to or on behalf of the First Lien Claimholders under the

terms of Section 3 shall not be prohibited hereunder; provided further that the

purchase and sale with respect to the First Lien Obligations provided for herein

shall have closed within five Business Days after receipt by the First Lien

Agent of such Purchase Notice and the First Lien Agent shall have received

payment in full of the First Lien Obligations as provided for herein within such

five Business Day period.

 

     SECTION 6.2. Purchase and Sale. On the date specified by the Trustee in

such Purchase Notice (which shall not be less than three Business Days nor more

than five Business Days after the receipt by the First Lien Agent of the

Purchase Notice from the Trustee), the First Lien Claimholders shall sell to the

Trustee (for the account of the Participating Second Lien Claimholders), and the

Trustee shall purchase (on behalf of the Participating Second Lien Claimholders)

from the First Lien Claimholders, the First Lien Obligations; provided, that the

First Lien Agent and the First Lien Claimholders shall retain all rights to be

indemnified or held harmless by the Obligors in accordance with the terms of the

First Lien Documents but shall not retain any rights to the security therefor.

 

     SECTION 6.3. Payment of Purchase Price. Upon the date of such purchase and

sale, the Trustee shall (a) pay to the First Lien Agent on behalf of the First

Lien Claimholders as the purchase price therefor the full amount of all the

First Lien Obligations then outstanding and unpaid (including principal,

interest, fees and expenses, including reasonable attorneys' fees and legal

expenses) and (b) agree to reimburse the First Lien Claimholders for any loss,

cost, damage or expense (including reasonable attorney's fees and legal

expenses) in connection with any checks or other payments provisionally credited

to the First Lien Obligations as to which any First Lien Claimholder has not yet

received f