Exhibit 10.3
FACILITY BUILD-OUT AGREEMENT
This Facility Build-Out Agreement (this “Agreement”) is made as of April ___,
2005, between Advancis Pharmaceutical Corporation, a Delaware corporation
(“Advancis”), and Clonmel Healthcare Limited, whose registered office is
situated at Waterford Road, Clonmel, Co. Tipperary (“Clonmel”).
RECITALS

A.   On or about October 18, 2004, Advancis and Clonmel entered into that
certain Letter of Intent and Authorization to Begin Purchasing (the “LOI”) in
respect of a proposed collaboration between the parties to facilitate the
manufacture and supply by Clonmel of Advancis’ amoxicillin PULSYS product (the
“Product”), and on or about December 3, 2004, Advancis and Clonmel entered into
that certain Heads of Agreement (the “HOA”), pursuant to which, among other
things, it was anticipated that:

  (i)   Clonmel will perform development, scale-up and validation services with
respect to the Product;     (ii)   Clonmel will design, construct and make
available to Advancis certain production and office facilities at Waterford
Road, Clonmel, Co. Tipperary, Clonmel, Ireland, as more specifically described
in Exhibit A hereto (the “Build-Out Facilities”) and shall procure the
installation of the equipment (the “Build-Out Equipment”) currently identified
and to be identified at Exhibit B in the Build-Out Facilities for the purpose of
being able to develop and manufacture the Product; and     (iii)   Clonmel will
manufacture at the Build-Out Facilities and supply commercial quantities of the
Product for sale and distribution by Advancis.

B.   Advancis and Clonmel are in the process of entering into a Development and
Clinical Manufacturing Agreement (the “Development Agreement”) and a
Manufacturing and Supply Agreement (the “Supply Agreement” and collectively with
the Development Agreement, the “Product Agreements”).   C.   Further to the
Product Agreements:

  (i)   Clonmel has received from DPS Engineering & Construction Ltd (“DPS”), a
proposal setting out details relating to the design and construction of the
Build-Out Facilities and the installation of the Build-Out Equipment, more
specifically identified on Exhibit C, and the form of which shall be in
accordance with the form previously reviewed by the parties (the “DPS
Proposal”);     (ii)   Advancis and Clonmel have already purchased and will
purchase and install or cause to be installed at the Build-Out Facilities the
Build-Out Equipment; and     (iii)   Clonmel has purchased certain Materials
(defined below) to be used in the manufacture of Products.

 

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D.   In addition, Clonmel and DPS are, substantially simultaneously herewith,
entering into certain Articles of Agreement with the Schedule and the six
attachments thereto, and including both the 10% +/- Cost Estimate approved by
the parties and the standard form of performance bond (the “DPS Agreement”). The
DPS Agreement is a project management agreement with respect to the design and
construction of the Build-Out Facilities, which incorporates the terms of the
DPS Proposal, and the form of which shall be in accordance with the form
previously reviewed by the parties. DPS is currently performing work in respect
of the Build-Out Facilities pursuant to the purchase order entered into with
Clonmel that is more specifically identified on Exhibit D.   E.   As an
inducement for Advancis to enter into the Supply Agreement, Advancis has agreed
to reimburse Clonmel for certain payments made by Clonmel under this Agreement
in respect of the Build-Out Facilities and Build-Out Equipment. Advancis and
Clonmel desire to set forth the terms and conditions on which Advancis will
reimburse Clonmel for payments made to DPS for design and construction of the
Build-Out Facilities and to third party suppliers of the Equipment and
Materials.

TERMS OF AGREEMENT
Accordingly, the parties hereby agree as follows:

1.   Construction.

1.1.   Clonmel shall procure the design and construction of the Build-Out
Facilities. Advancis acknowledges that this obligation may be sub-contracted to
DPS by Clonmel or to such others as may be agreed in writing by the parties
(provided that nothing in this clause shall relieve Clonmel of any of its
obligations pursuant to this Agreement).

  (a)   Clonmel shall use with any contractors, and to the extent DPS is
entering into agreements with subcontractors, shall require DPS to use forms
substantially similar to the Articles of Agreement RIAI form as modified by the
Clonmel Healthcare Limited Main Contractor Building Agreement in accordance with
the forms previously reviewed by the parties. In addition, subject to approval
of costs by Advancis, Clonmel shall require each contractor and shall procure
that, where appropriate, DPS or any other Exhibit D Third Party (as defined in
clause 1.2(a) below), shall require any contractors which they engage in
connection with the design or construction of the Build-Out Facilities, to enter
into a performance bond for [***] percent ([***]%) of the relevant contract
price and on substantially similar terms to the performance bond referenced in
the DPS Agreement. Clonmel acknowledges and shall ensure that Advancis shall be
the ultimate beneficiary of any such performance bond.     (b)   Clonmel
represents and warrants to Advancis that the Build-Out Facilities, as currently
described in the Approved Build-Out Documents (as defined in clause

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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1.2(a) below), and as may be further described and developed in amendments to
Exhibit D, will be sufficient and appropriate for Clonmel to meet all of its
obligations under the Product Agreements (referred to herein as “Fitness for
Purpose”). Clonmel will use its best efforts at each stage of the construction
of the Build-Out Facility to provide plans and specifications that if executed,
will provide a Build-Out Facility that complies with Clonmel’s Fitness for
Purpose representation and warranty. If Clonmel determines that a change to the
plans and specifications is necessary, Clonmel must obtain Advancis’ prior
approval pursuant to clause 2.6(a) of this Agreement. Upon the completion of the
construction of the Build-Out Facility, if the Build-Out Facility fails to meet
the Fitness for Purpose standard, Clonmel shall be solely responsible for
correcting any flaws and providing a Build-Out Facility that complies with the
Fitness for Purpose standard.

1.2.   Subject to clause 1.3, Advancis shall, within[***] days after receipt of
Clonmel’s invoice therefore, pay Clonmel for the actual amounts paid or to be
paid by Clonmel for:

  (a)   all properly incurred and payable expenses arising out of any of the
agreements listed on Exhibit D to this Agreement (the “Approved Build-Out
Documents”), performed by any third party who is a party to the Approved Build
Out Documents (referred to herein as an “Exhibit D Third Party”) and supported
by all documentation and vouching which Advancis may require; and/or     (b)  
expenditures by Clonmel in respect of the Build-Out Equipment (in accordance
with Section 2 below).

1.3.   Notwithstanding anything to the contrary in clause 1.2:

  (a)   all sums payable by Advancis under this Agreement shall be exclusive of
VAT; Clonmel is solely responsible for all VAT, in respect of any of the
transactions or activities contemplated in this Agreement; and     (b)   All
funds paid by Advancis to Clonmel that are for costs not yet incurred shall
promptly be paid by Clonmel, without deduction or set off, to any Exhibit D
Third Party in accordance with Clonmel’s obligations under the applicable
Approved Build-Out Document or for the applicable Build-Out Equipment, and
Clonmel shall promptly deliver to Advancis documentation confirming in
reasonable detail such payments to such parties.

1.4.   Advancis shall have no obligation to pay or reimburse Clonmel for:

  (a)   any obligation incurred by Clonmel as a result of a modification to the
Approved Build-Out Documents made without the prior written consent of Advancis;

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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  (b)   any amount paid or agreed as due by Clonmel, including pursuant to the
Approved Build-Out Documents, in respect of penalties, interest, damages,
indemnification or other similar obligations of Clonmel that do not constitute
fees for services rendered by an Exhibit D Third Party (for the avoidance of
doubt, this clause cannot be used by Advancis to avoid any indemnification
obligations under clause 10.2 of this Agreement); or     (c)   any equipment
appearing in the third category, as described below, of Exhibit B.

1.5.   The parties acknowledge and agree that Advancis has already provided
Clonmel with payments in the amount of $[***], and such funds have been and
shall be applied to pay for all properly incurred and payable expenses arising
out of the Approved Build-Out Documents and performed by any Exhibit D Third
Party.   1.6.   Exhibit D may be varied at any time by agreement in writing
between the parties (and, without limitation, the signature of both parties on a
revised and restated Exhibit D shall be sufficient evidence of any such
agreement). Advancis shall agree to any amendment to Exhibit D and any
modification to any Approved Build-Out Document in respect of work reasonably
required in order that the Build-Out Facilities achieve Fitness for Purpose. If
the parties cannot reasonably agree to a modification to Exhibit D, the dispute
shall be handled in accordance with the provisions of Section 14.   1.7.  
Clonmel shall procure all works, and each Approved Build-Out Document shall
provide that all works shall be performed by each Exhibit D Third Party, on a
transparent cost basis with Advancis having a right to information on price
build up and access to overhead and profit figures for the purpose of approving
bids.

2.   Build-Out Equipment Purchase and Reimbursement.

2.1.   In relation to the items of Build-Out Equipment identified in Exhibit B:

  (a)   Clonmel shall purchase in its own name the Build-Out Equipment
identified in Part 1 of Exhibit B. All such equipment shall be the sole property
of Clonmel but all purchases of such equipment must be pre-approved by Advancis.
    (b)   Advancis shall:

  (i)   identify and engage a supplier for;     (ii)   order and purchase;    
(iii)   carry out any necessary factory acceptance testing for;

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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  (iv)   cause to be delivered to the Build-Out Facilities;     (v)   carry out
any necessary site acceptance testing for;     (vi)   make any payment due to
the supplier in respect of;

the Build-Out Equipment identified at Part 2 of Exhibit B, provided that Clonmel
will provide all reasonable assistance to Advancis in carrying out any factory
acceptance testing and site acceptance testing. Where in that exhibit the
ownership of such equipment is specified to vest with Advancis, such equipment
shall remain the sole property of Advancis. Where in Part 2 of Exhibit B the
ownership of that equipment is specified to vest with Clonmel, such equipment
shall become the sole property of Clonmel when incorporated into the Build-Out
Facilities or when incorporated with other pieces of Build-Out Equipment.

  (c)   Clonmel shall purchase in its own name the Build-Out Equipment
identified in Part 3 of Exhibit B. All such equipment shall be the sole property
of Clonmel.     (d)   Clonmel shall cause each item of Build-Out Equipment,
including Build-Out Equipment purchased directly by Advancis, to be installed at
the Build-Out Facility in accordance with the timetable set forth in Exhibit B
(for the avoidance of doubt, this clause cannot be used by Advancis to avoid any
indemnification obligations under clause 10.2 of this Agreement). Save as
otherwise provided in this Agreement, Clonmel shall be entitled to use such
equipment solely to manufacture Products for Advancis or otherwise to perform
its obligations under the Product Agreements.     (e)   Advancis shall, within
[***] days after receipt of Clonmel’s invoice therefore, reimburse Clonmel for
its actual out-of-pocket cost (including any applicable taxes, transportation
fees and installation charges invoiced to Clonmel by the supplier of any
Build-Out Equipment, other than, in all instances, VAT), for the purchase and
installation of the Build-Out Equipment, excluding all such equipment listed in
Part 3 of Exhibit B (and any costs incurred by Clonmel in respect of the
equipment listed in Part 3 of Exhibit B shall be to Clonmel’s account and
Clonmel shall be entitled to no reimbursement of those costs by Advancis
pursuant to this clause, Section 1 above or otherwise). Subject to clause 2.4,
all costs incurred by Clonmel for repairs to and maintenance of the Build-Out
Equipment shall be the responsibility of Clonmel. Clonmel shall keep and
maintain the equipment in good working order and shall provide adequate
insurance for the equipment at Clonmel’s expense.

2.2.   Exhibit B may be varied at any time by agreement in writing between the
parties (and, without limitation, the signature of both parties on a revised and
restated Exhibit B shall be sufficient evidence of any such agreement).

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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2.3.   At the request of Advancis, Clonmel shall execute and deliver such
documents, make such public filings and take such further actions as may be
reasonably necessary or desirable to protect the rights, title and interest of
Advancis in the Build-Out Equipment where ownership in such is specified to vest
with Advancis, as indicated on Exhibit B, including affixing labels or otherwise
marking that Build-Out Equipment in a manner to indicate Advancis’ ownership
thereof.

2.4. (a)   Subject to sub-clause (b) and (c), Advancis may, at any time and from
time to time on reasonable notice to Clonmel, in its sole discretion and it its
sole cost, remove any Build-Out Equipment that is located at the Build-Out
Facilities or otherwise at Clonmel’s facilities where in Exhibit B the ownership
in such is specified to vest with Advancis.

  (b)   Advancis indemnifies Clonmel in respect of any costs, loss or damage
incurred by Clonmel (including, for the avoidance of doubt, loss or damage
incurred by Clonmel by reason of a breach of any agreement with Advancis for the
supply and manufacture of the Product) where Advancis exercises any rights
pursuant to sub-clause (a) above.     (c)   Advancis may not remove any item of
Build-Out Equipment in Clonmel’s possession from the Build-Out Facilities or
elsewhere where any payment due to Clonmel from Advancis in respect of such
equipment (pursuant to clause 2.1 or otherwise) is outstanding.     (d)   For
avoidance of doubt, Advancis shall have no obligation to remove from the
Build-Out Facilities any Build-Out Equipment and shall not be liable for any
Build-Out Equipment that it elects to abandon. Where Advancis has failed to
remove any Build-Out Equipment within two (2) years of notice from Clonmel that
Clonmel intends to proclaim such equipment abandoned, then such equipment shall
be deemed to have been abandoned by Advancis and the property and ownership in
same shall vest with Clonmel. Clonmel shall have no liability or obligations
whatsoever to Advancis in respect of any Build-Out Equipment deemed to have been
abandoned by Advancis pursuant to this sub-clause.

2.5.   The terms of the purchase agreements between Advancis and the suppliers
for any items of Build-Out Equipment supplied by Advancis pursuant to clause
2.1(b) shall be reasonably acceptable to Clonmel. Clonmel hereby confirms that
all such purchase agreements currently reflected in Exhibit B are acceptable. In
addition, Advancis shall take all reasonable steps necessary to assign all
supplier warranties to Clonmel relating to such Build-Out Equipment, and in the
event any warranty is unassignable, Advancis agrees to cooperate with Clonmel to
enable Clonmel to make warranty claims through Advancis.   2.6.   In order to
proceed with the obligations set forth in this Agreement as efficiently as
possible, the parties agree as follows:

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  (a)   Clonmel acknowledges and agrees that in connection with the construction
of the Build-Out Facility, Advancis shall approve all invoices and bids and all
deviations from plans and specifications, [***], and Clonmel shall not proceed
without first obtaining such approval. Clonmel shall provide Advancis with cost
estimates for invoices and bids and all deviations from plans and specification
for Advancis’ [***] review and approval. In addition, Clonmel shall provide
Advancis with reasonable access to the Build-Out Facility.     (b)   Clonmel
shall take all necessary steps to facilitate and assist the construction process
and in no way hinder any contractor either in performance of work or in
accessing the site.     (c)   Clonmel shall procure that the design and
construction of the Build-Out Facility and the installation of the Build-Out
Equipment and all related work shall be in accordance with good contracting
practice, the Safety, Health and Welfare at Work Act, 1989, the Safety, Health
and Welfare at Work (Construction) Regulations 1995, S.I. No. 138 of 1995, the
Safety, Health and Welfare at Work (Construction) Regulations, 2001, as any of
the foregoing may be amended from time to time and any applicable health and
safety legislation, directions, by-laws or codes of practice.     (d)  
Notwithstanding 2.6(a) above, once Advancis has approved such invoices and bids
and such deviations from plans and specifications, Advancis shall not, without
the prior approval of Clonmel, issue any directions or instructions in respect
of the Build-Out Equipment or the Build-Out Facilities to DPS or any Exhibit D
Third Party or otherwise interfere with the carrying out of any works or
services associated with the Build-Out Equipment or the Build-Out Facilities.
Advancis agrees that while on Clonmel’s site, Advancis shall comply with all
reasonable directions of Clonmel or its agents and representatives.

3.   Materials Purchase and Reimbursement.

3.1.   Pursuant to the LOI, Clonmel was authorized to begin purchasing on behalf
of Advancis certain materials necessary to enable Clonmel to manufacture pivotal
trial material with respect to the manufacture and supply of the Products during
the fourth quarter of 2004 (the “Materials”). A list of the Materials is
attached as Exhibit E. All such Materials shall be the sole property of
Advancis, and Clonmel shall be entitled to use such Materials solely to
manufacture Products for Advancis or otherwise to perform its obligations under
the Product Agreements. Advancis shall, within thirty (30) days after receipt of
Clonmel’s invoice therefore, reimburse Clonmel for the actual out-of-pocket cost
of the Materials, including any applicable taxes and transportation fees
invoiced to Clonmel by the supplier of any Materials.   3.2.   At the request of
Advancis, Clonmel shall execute and deliver such documents, make such public
filings and take such further actions as may be reasonably necessary or
desirable to

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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protect the rights, title and interest of Advancis in the Materials, including
affixing labels or otherwise marking the Materials in a manner to indicate
Advancis’ ownership thereof.

3.3.   Advancis may, at any time and from time to time, in its sole discretion
and at its sole cost, remove any or all of the Materials located at the
Build-Out Facilities or otherwise at Clonmel’s facilities. For avoidance of
doubt, Advancis shall have no obligation to remove any such Materials and shall
not be liable for any Materials that it elects to abandon. Where Advancis has
failed to remove any Materials within one (1) year of the termination of the
Product Agreements, such Materials shall be deemed to have been abandoned by
Advancis and the property and ownership in same shall vest with Clonmel. Clonmel
shall have no liability or obligations whatsoever to Advancis in respect of any
Materials deemed to have been abandoned by Advancis pursuant to this clause.

4.   Currency. All invoices issued by Clonmel and all payments made by Advancis
hereunder shall be denominated in U.S. Dollars, regardless of the currency in
which Clonmel’s third party obligations are denominated. Advancis shall not be
required to compensate Clonmel for any currency fluctuations, including any
occurring between the date of Clonmel’s invoice and the date of Advancis’
payment.   5.   Audit Rights. Advancis shall have the right upon reasonable
advance notice, during normal working hours, either itself or by its agent to
examine the books and records of Clonmel insofar as they relate to the amounts
to be paid by Advancis under this Agreement.   6.   Confidentiality. The terms
and conditions of that certain Non Disclosure Agreement by and between Advancis
and Clonmel dated as of June 12, 2000 (the “Non Disclosure Agreement”), are
hereby incorporated herein and the Non Disclosure Agreement is hereby amended
such that the permissible uses of the Information (as defined in the Non
Disclosure Agreement) include the activities contemplated hereunder.   7.  
Intellectual Property Ownership.

7.1.   Clonmel acknowledges and agrees that any and all patents, trade secrets,
technical know-how, trademarks and all other intellectual property rights of any
kind related to the Products are and will remain the sole property of Advancis
and shall constitute Information of Advancis for purposes of the Non Disclosure
Agreement. Any and all ideas, discoveries, inventions, works of authorship,
know-how, processes, formulas, improvements and revisions (collectively,
“Inventions”) made, conceived, reduced to practice or developed by Clonmel,
either solely or jointly with Advancis or any other party, in connection with or
arising from or relating to confidential information of Advancis or the
activities undertaken by Clonmel under this Agreement or that relate to or are
capable of use in connection with any business of Advancis or products offered,
used, sold or developed by Advancis of which Clonmel became aware pursuant to
its activities hereunder, shall belong exclusively to Advancis. Clonmel shall
assign to Advancis, and hereby does so assign, all such Inventions and the right
to obtain patents or copyright registrations on any and all such Inventions in
any or all countries. Upon request by Advancis, Clonmel shall assist Advancis in
any way necessary, including

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    executing documents to perfect in Advancis all right, title and interest in
and to such Inventions.

  7.2.   Clonmel warrants that the performance of Clonmel’s obligations under
this Agreement and DPS’s obligations under the DPS Agreement with respect to the
Build-Out Facility and the construction of same, but not the Build-Out
Equipment, do not and will not infringe any third party intellectual property
rights and Clonmel hereby indemnifies Advancis in respect of any third party
intellectual property infringement.     7.3.   Clonmel shall procure for the
benefit of each of Clonmel and Advancis a perpetual, royalty-free license to use
the copyright and all other rights relating to the design of the Build-Out
Facility and all drawings, designs, reports and other documents for any purpose
related to the design and construction of the Build-Out Facility and the
installation of the Build-Out Equipment.

8.   Term; Termination.

8.1.   This Agreement may be terminated by either party in the event the other
party materially defaults on any of its obligations under this Agreement and
fails to cure such default within [***] calendar days after receipt of written
notice of such default from the non-defaulting party. Any termination pursuant
to this clause shall be without prejudice to any rights the terminating party
may have in respect of the breach the subject of the notice to be issued under
this clause.

  8.2.   (a)  Advancis may terminate this Agreement on not less than [***]
calendar days’ prior written notice to Clonmel.

  (b)   Where Advancis exercises any rights pursuant to this clause 8.2:

  (i)   Clonmel may procure the completion of such of the Build-Out Facilities
as is reasonably required to ensure that the Clonmel premises at Waterford Road
are watertight and otherwise compliant with any legislative requirements
(including without limitation the Safety, Health and Welfare at Work Act 1989
and any regulations made thereunder) and Advancis shall be liable for any
expenses or out-of-pocket costs reasonably incurred by Clonmel pursuant to this
sub-clause.     (ii)   within [***] days of the issue of an appropriate invoice
by Clonmel, Advancis shall pay to Clonmel:

  (A)   any amounts which, but for the termination of the Agreement, would
otherwise have been payable to Clonmel pursuant to the Agreement up to the date
of its termination; and

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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  (B)   an amount equal to the value of any unavoidable commitment or obligation
undertaken by Clonmel in accordance with this Agreement prior to the date of
termination;

  (c)   Advancis acknowledges that although it has the right to terminate this
Agreement at will, Advancis will not terminate this Agreement and then seek
damages from Clonmel for breach of the Product Agreements when Clonmel’s breach
was caused by Advancis’ at will termination of this Agreement. Accordingly,
Advancis hereby agrees not to pursue any actions against Clonmel for breach of
the Product Agreements when Clonmel’s breach of the Product Agreements arises
solely as a result of Advancis’ exercise of its rights under this clause 8.2. In
addition, Advancis hereby consents to Clonmel’s use and admission into evidence
of this clause in any applicable arbitribal, judicial or other proceeding.    
(d)   In the event of a notification of a termination pursuant to this clause
8.2, both parties shall take commercially reasonable efforts to minimise any
capital or other costs being incurred in respect of the Build-Out Facilities,
the Build-Out Equipment or the Product or generally in respect of any obligation
under the Agreement.

8.3. (a)   Either party can terminate this Agreement upon a termination of the
Supply Agreement that occurs prior to the stated expiration of the Supply
Agreement. Termination of this Agreement pursuant to this subclause shall be
effective immediately upon the giving of notice to the other party that the
terminating party has decided to terminate this Agreement.

  (b)   When a termination occurs pursuant to clause 8.3(a):

  (i)   Clonmel may procure the completion of such of the Build-Out Facilities
as is reasonably required to ensure that the Clonmel premises at Waterford Road
are watertight and otherwise compliant with any legislative requirements
(including without limitation the Safety, Health and Welfare at Work Act 1989
and any regulations made thereunder) and Advancis shall be liable for any
expenses or out-of-pocket costs reasonably incurred by Clonmel pursuant to this
sub-clause.     (ii)   within [***] of the issue of an appropriate invoice by
Clonmel, Advancis shall pay to Clonmel:

  (A)   any amounts which, but for the termination of the Agreement, would
otherwise have been payable to Clonmel pursuant to the Agreement up to the date
of its termination; and     (B)   an amount equal to the value of any
unavoidable commitment or

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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obligation undertaken by Clonmel in accordance with this Agreement prior to the
date of termination.

  8.4. (a)   Clonmel and Advancis represent and warrant to each other that:

  (i)   their entry into this Agreement was duly authorized;     (ii)   they
each properly signed and delivered the Agreement to the other, and     (iii)  
this Agreement has been executed by duly authorized representatives from the
respective parties.

  (b)   In addition, Clonmel represents and warrants that it is a wholly owned
subsidiary of Stada Arzneimittel AG (“Stada”), and that Stada has authorized and
approved Clonmel’s entry into this Agreement and the performance of the terms of
the Agreement. Upon request from Advancis, Clonmel will obtain from Stada a
certificate confirming such facts. Upon execution of this Agreement by Clonmel,
Clonmel shall deliver a document in substantially the same form as attached
hereto as Exhibit F, executed by Stada, unconditionally guaranteeing Clonmel’s
performance under this Agreement.

9.   Independent Contractor. The relationship between the parties shall be that
of independent contractors, and nothing in this Agreement shall render either
party or any person employed by either party an agent, employee, joint venturer
or partner of the other party.   10.   Limitation; Indemnification.

  10.1. (a)   Subject to 10.1(b), Clonmel shall indemnify, hold harmless and
defend Advancis and its employees, officers, directors, stockholders and agents
from and against any claims, demands, suits, proceedings, liabilities,
judgments, awards, losses, damages, costs and expenses (including reasonable
attorney fees) (“Claims”) by any third party in connection with this Agreement,
including without limitation Claims made by DPS, Claims made by any Exhibit D
Third Party, the suppliers of Equipment and Materials and the employees of
Clonmel provided always that Clonmel shall not be liable to Advancis in respect
of any such Claim to the extent that it has arisen by reason of the negligence
of Advancis or by reason of a breach by it of this Agreement.

  (b)   For the avoidance of doubt, Clonmel shall have no liability to Advancis
pursuant to this clause 10.1 in respect of:

  (i)   payments due to any supplier of the Build-Out Equipment identified in
Part 2 of Exhibit B or in respect of any tax, duty, royalty, fee or other Claim
in relation to such equipment; and     (ii)   any cost loss or damage
indemnified by Advancis under clause 10.2.

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  10.2. (a)   Advancis shall indemnify, hold harmless and defend Clonmel and its
employees, officers, directors, stockholders and agents from and against any
Claims by any third party in connection with:

  (i)   any penalties, interest, damages, indemnity or similar obligation of
Clonmel which are a result of Advancis’ failure to timely pay Clonmel pursuant
to the terms of this Agreement;     (ii)   any loss arising by reason of a delay
by Advancis in the supply of the Build-Out Equipment; and     (iii)   any breach
by Advancis of clause 2.6(d).

provided always that Advancis shall not be liable to Clonmel in respect of any
such Claim to the extent that it has arisen by reason of an act or the
negligence of Clonmel or by reason of a breach by it of this Agreement.

  (b)   Advancis agrees to take all necessary precautions to prevent injury to
any persons or damage to property and shall defend, indemnify and hold harmless
Clonmel and its directors and employees (the “Indemnitees”) from and against all
claims, damages, liabilities, judgments, losses, expenses (including reasonable
attorneys’ fees), fines and penalties sustained or incurred by or asserted
against any Indemnitee which are based on, related to or arising out of any act
or omission of Advancis or its employees, agents or subcontractors in the course
of conducting its business activities or engaging in activities on the premises
of Clonmel.     (c)   Advancis shall defend, indemnify and hold harmless the
Indemnitees from and against all claims, damages, liabilities, judgments,
losses, expenses (including reasonable attorneys’ fees), fines and penalties
sustained or incurred by or asserted against any Indemnitee for injury to any
person (including death) or damage to property arising out of the use of the
Build-Out Equipment and the Clonmel facilities by Advancis or any of its
employees, agents or subcontractors, whether or not such claim is based upon its
condition or on the alleged negligence of Clonmel in permitting its use;
provided that Advancis shall have no obligations hereunder in the event of, and
to the extent of, Clonmel’s wilful misconduct.     (d)   [***].     10.3.   In
no event will either party be liable for lost profits or loss of data or any
special, indirect, incidental, or consequential damages, however caused, on any
theory of liability and whether or not such party has been advised of the
possibility of such damages, arising under any cause of action and arising in
any way out of this agreement, except to the extent of third party indemnity
claims arising under clauses 10.1 and 10.2 of this Agreement.

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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11.   Notices. Any notice, demand or request required by or made in connection
with this Agreement shall be deemed properly made if personally delivered in
writing, including by nationally-recognized air courier, or if deposited in the
United States mail, postage prepaid, to the address specified below or such
other address as either party may specify to the other by written notice:

 
To Advancis:
 
Advancis Pharmaceutical Corporation
20425 Seneca Meadows Parkway
Germantown, Maryland 20876
USA
Attention: Steven A. Shallcross, Senior Vice President and Chief Financial
Officer

 
With a copy to:
 
Advancis Pharmaceutical Corporation
20425 Seneca Meadows Parkway
Germantown, Maryland 20876
USA
Attention: Joseph J. Rogus, P.E., Senior Vice President, Technical Operations

 
With an additional copy to:
Howard S. Schwartz, Esquire
DLA Piper Rudnick Gray Cary US LLP
6225 Smith Avenue
Baltimore, MD 21209-3600
USA

 
To Clonmel:
 
Clonmel Healthcare Limited
Waterford Road
Clonmel, Co. Tipperary
Ireland
Attention: Senior Vice President

 
With a copy to:
Clonmel Healthcare Limited
Waterford Road
Clonmel, Co. Tipperary
Ireland
Attention: Brendan Fitzpatrick, Operations Director

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With an additional copy to:
Richard Stowe
Matheson Ormsby Prentice
30 Herbert Street
Dublin 2
Ireland

12.   Assignment. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld.   13.   Governing Law. This Agreement shall
be governed by and construed in accordance with [***] without regard to its
principles of conflicts of laws.   14.   Mandatory Arbitration. In the event of
any dispute arising under this Agreement, each party will escalate the dispute
to its senior management and if a resolution cannot be reached within a period
of twenty (20) days, the parties will submit such dispute to arbitration. Any
such arbitration shall be governed by [***]. The person to be appointed as
arbitrator shall be agreed between the parties, or failing such agreement within
ten (10) days, to be nominated by [***].   15.   Third Party Beneficiaries.
Except as otherwise expressly provided in this Agreement, the provisions of this
Agreement are for the benefit of the parties hereto and not for any other
person. This Agreement shall not provide any third person with any remedy,
claim, reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement. Without limiting the generality of the
foregoing, Clonmel acknowledges, represents and warrants to Advancis that it has
not made and will not make any representation or any provision in the Approved
Build-Out Documents that Advancis will have any liability or exposure to those
parties.   16.   Survival. The respective obligations of the Parties under
Section 6, Section 7, clause 8.2(c), Section 10 and Section 14 shall survive the
termination of this Agreement until all applicable statutes of limitations have
run.   15.   Entire Agreement; Amendment. This Agreement, including its
recitals, exhibits and schedules, contains the entire agreement of the parties
as to the construction of the Build-Out Facilities and the installation of the
Build-Out Equipment, and supersedes any and all prior negotiations,
correspondence, understandings and agreements between the parties with respect
to the subject matter hereof. This Agreement may only be amended or modified by
a written instrument signed by both parties.

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

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16.   Waivers. The terms hereof may be waived only by a written instrument
signed by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.   17.   Rules of Construction. The definitions
used in this Agreement shall apply equally to both the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “but not limited to.” All references herein to Sections or clauses shall
be deemed references to Sections or clauses of this Agreement unless the context
shall otherwise require. Words such as “herein,” “hereof,” “hereto,” “hereby”
and “hereunder” refer to this Agreement taken as a whole. Neither the captions
to Sections or clauses or subdivisions thereof shall be deemed to be a part of
this Agreement. Except as otherwise expressly agreed to by both parties in
writing, if any term of any request, proposal, purchase order, invoice,
acknowledgment or other document issued by either party in connection herewith
conflicts with the terms of this Agreement, the terms of this Agreement shall
control.

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Execution
     IN WITNESS WHEREOF, the parties have executed this Facility Build-Out
Agreement as of the date first above written.

            ADVANCIS PHARMACEUTICAL CORPORATION
      By:   /s/ Edward M. Rudnic         Name:   Edward M. Rudnic, Ph.D       
Title:   Chairman and CEO        CLONMEL HEALTHCARE LIMITED
      By:   /s/ James Hanson         Name:   James Hanson        Title:  
Finance Director/CFO   

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EXHIBIT A
BUILD-OUT FACILITIES
Refer to following attachments:
1. The build-out drawing

2. Summary of scope

3. [***]
 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 17 -

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EXHIBIT B
BUILD OUT EQUIPMENT
[TO BE REVIEWED BY ALL PARTIES]
Part One — Build-Out Equipment to be purchased by Clonmel (to be reimbursed by
Advancis)

              Ownership   Scheduled Item   (Clonmel/Advancis)   Delivery Time
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 18 -

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

 

Part Two — Build-Out Equipment to be purchased by Advancis

                  Scheduled Item   Ownership (Clonmel/Advancis)   Delivery Time
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]
 
       
[***]
  Advancis   [***]

The parties acknowledge that the [***] to be used in the manufacturing of
pivotal trial material for the Products, was purchased and installed at the
Build-Out Facility pursuant to the parties’ LOI. The parties agree that such
equipment shall be deemed to have been purchased and installed pursuant to this
Agreement.
 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 19 -

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

 

Part Three — Build-Out Equipment to be purchased by Clonmel (Not to be
reimbursed by Advancis)

                  Scheduled Item   Ownership (Clonmel/Advancis)   Delivery Time
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel   [***]
 
       
[***]
  Clonmel & Advancis   [***]

Part Four — Programme of Works
Refer to attached MS Project Plan from DPS as of February, 2005.
 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 20 -

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EXHIBIT C
Preliminary design proposal received from DPS Engineering & Construction Ltd
including the [***].
 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 21 -

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EXHIBIT D
LIST OF APPROVED BUILD-OUT DOCUMENTS

1.   The Agreement proposed between Clonmel Healthcare Limited (“Clonmel”) and
DPS in respect of the Design and Project/Construction management of the Project;
  2.   The Articles of Agreement RIAI form as modified by the Clonmel Healthcare
Limited Main Contractor Building Agreement to be entered into by the parties set
out in and in accordance with clause 1.1(a) of the Facility Build-Out Agreement.
  3.   The Agreement(s) proposed between Clonmel and other subcontractor(s) in
respect of the following works/services in relation to the Build-Out Facilities
and/or Equipment:

  (a)   Enabling Works, relocation of Glatt support equipment, relocation of
existing cable trays and piping     (b)   Site Clearance     (c)   Noise Survey

- 22 -

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EXHIBIT E
MATERIALS
The following materials have been/are to be purchased by Clonmel and then
re-charged to Advancis.

                              Quantity (if     Material   Date   Supplier (if
known)   known)   Price
[***]
  December 12, 2004   [***]   [***]   [***]
[***]
  December 22, 2004   [***]   [***]   [***]
[***]
  November 4, 2004   [***]   [***]   [***]
[***]
  December 13, 2004   [***]   [***]   [***]

 
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

- 23 -