Exhibit
10.16


 


LICENSE
AGREEMENT


 


BY AND
BETWEEN


 


CUBIST
PHARMACEUTICALS, INC.


 


AND


 


CHIRON
HEALTHCARE IRELAND LTD.


 


October 2, 2003


 














 


TABLE OF CONTENTS


 


	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1. DEFINITIONS

  	
   

  	
  2

  
	
  1.1.   “Additional Daptomycin Product”

  	
   

  	
  2

  
	
  1.2.   “Affiliate”

  	
   

  	
  2

  
	
  1.3.   “Approved New Trademark”

  	
   

  	
  2

  
	
  1.4.   “Chiron Data”

  	
   

  	
  2

  
	
  1.5.   “Chiron Development Plan”

  	
   

  	
  2

  
	
  1.6.   “Chiron Interest”

  	
   

  	
  2

  
	
  1.7.   “Chiron Inventions”

  	
   

  	
  2

  
	
  1.8.   “Chiron Joint Technology Rights”

  	
   

  	
  2

  
	
  1.9.   “Chiron Know-How”

  	
   

  	
  3

  
	
  1.10.   “Chiron Marketing Information”

  	
   

  	
  3

  
	
  1.11.   “Chiron Patent”

  	
   

  	
  3

  
	
  1.12.   “Chiron Related Know-How”

  	
   

  	
  3

  
	
  1.13.   “Chiron Related Patent”

  	
   

  	
  3

  
	
  1.14.   “Chiron Technology”

  	
   

  	
  3

  
	
  1.15.   “Commercial Launch”

  	
   

  	
  3

  
	
  1.16.   “Commercialize”

  	
   

  	
  4

  
	
  1.17.   “Commercially Important Indications”

  	
   

  	
  4

  
	
  1.18.   “Commercially Reasonable Efforts”

  	
   

  	
  4

  
	
  1.19.   “Confidential Information”

  	
   

  	
  4

  
	
  1.20.   “Contract Manufacturing Agreements”

  	
   

  	
  4

  
	
  1.21.   “Control”

  	
   

  	
  5

  
	
  1.22.   “cSSSI”

  	
   

  	
  5

  
	
  1.23.   “Cubist Data”

  	
   

  	
  5

  
	
  1.24.   “Cubist Development Plan”

  	
   

  	
  5

  
	
  1.25.   “Cubist Inventions”

  	
   

  	
  5

  
	
  1.26.   “Cubist Joint Technology Rights”

  	
   

  	
  5

  
	
  1.27.   “Cubist Know-How”

  	
   

  	
  5

  
	
  1.28.   “Cubist Marks”

  	
   

  	
  5

  
	
  1.29.   “Cubist Patent”

  	
   

  	
  5

  
	
  1.30.   “Cubist Technology”

  	
   

  	
  5

  
	
  1.31.   “Daptomycin”

  	
   

  	
  6

  
	
  1.32.   “Daptomycin IV Product”

  	
   

  	
  6

  
	
  1.33.   “Defective Manufactured Product”

  	
   

  	
  6

  
	
  1.34.   “Directly Competitive Product”

  	
   

  	
  6

  
	
  1.35.   “Dollar”

  	
   

  	
  6

  
	
  1.36.   “Drug Approval Application”

  	
   

  	
  6

  
	
  1.37.   “Drug Master File,”

  	
   

  	
  6

  
	
  1.38.   “Effective Date Third Party Licenses”

  	
   

  	
  6

  
	
  1.39.   “EMEA”

  	
   

  	
  6

  
	
  1.40.   “Fair Market Value”

  	
   

  	
  6

  



 






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  1.41.   “FDA”

  	
   

  	
  6

  
	
  1.42.   “Global Harm”

  	
   

  	
  7

  
	
  1.43.   “IND”

  	
   

  	
  7

  
	
  1.44.   “Indemnify”

  	
   

  	
  7

  
	
  1.45.   “Information”

  	
   

  	
  7

  
	
  1.46.   “Infringement”

  	
   

  	
  7

  
	
  1.47.   “Injection”

  	
   

  	
  7

  
	
  1.48.   “Joint Coordination Team”

  	
   

  	
  7

  
	
  1.49.   “Joint Inventions”

  	
   

  	
  7

  
	
  1.50.   “Joint Know-How”

  	
   

  	
  7

  
	
  1.51.   “Joint Patents”

  	
   

  	
  7

  
	
  1.52.   “Joint Technology”

  	
   

  	
  7

  
	
  1.53.   “Key Development Studies”

  	
   

  	
  7

  
	
  1.54.   “Knowable Patent”

  	
   

  	
  7

  
	
  1.55.   “Launch Indication(s)”

  	
   

  	
  7

  
	
  1.56.   “Licensed Products”

  	
   

  	
  7

  
	
  1.57.   “Lilly”

  	
   

  	
  8

  
	
  1.58.   “Lilly License”

  	
   

  	
  8

  
	
  1.59.   “Lilly Patent”

  	
   

  	
  8

  
	
  1.60.   “Losses”

  	
   

  	
  8

  
	
  1.61.   “MAA”

  	
   

  	
  8

  
	
  1.62.   “Major Market Countries”

  	
   

  	
  8

  
	
  1.63.   “Manufacturing Information”

  	
   

  	
  8

  
	
  1.64.   “Manufacturing Plan”

  	
   

  	
  8

  
	
  1.65.   “Marketing Plan”

  	
   

  	
  8

  
	
  1.66.   “Marketing Plan Trigger Event”

  	
   

  	
  8

  
	
  1.67.   “Medical Affairs Studies”

  	
   

  	
  8

  
	
  1.68.   “NDA”

  	
   

  	
  8

  
	
  1.69.   “Net Sales”

  	
   

  	
  8

  
	
  1.70.   “Other Licensee”

  	
   

  	
  9

  
	
  1.71.   “Other Licensee Data”

  	
   

  	
  9

  
	
  1.72.   “Patent”

  	
   

  	
  10

  
	
  1.73.   “Price Approval”

  	
   

  	
  10

  
	
  1.74.   “Primary Endpoint”

  	
   

  	
  10

  
	
  1.75.   “Reasonable Buyer”

  	
   

  	
  10

  
	
  1.76.   “Reciprocating Licensee”

  	
   

  	
  11

  
	
  1.77.   “Regulatory Approval”

  	
   

  	
  11

  
	
  1.78.   “Regulatory Authority”

  	
   

  	
  11

  
	
  1.79.   “Regulatory Plan”

  	
   

  	
  11

  
	
  1.80.   “Replacement Indication”

  	
   

  	
  11

  
	
  1.81.   “Replacement Indication Study”

  	
   

  	
  11

  
	
  1.82.   “Replacement Study”

  	
   

  	
  11

  
	
  1.83.   “Required
  Study”

  	
   

  	
  11

  
	
  1.84.   “Restricted
  Period”

  	
   

  	
  11

  
	
  1.85.   “Royalty Rate”

  	
   

  	
  11

  
	
  1.86.   “Stock Purchase Agreement”

  	
   

  	
  11

  



 






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  1.87.   “Supply Agreement”

  	
   

  	
  11

  
	
  1.88.   “Term”

  	
   

  	
  11

  
	
  1.89.   “Territory”

  	
   

  	
  12

  
	
  1.90.   “Territory Specific Studies”

  	
   

  	
  12

  
	
  1.91.   “Third Party”

  	
   

  	
  12

  
	
  1.92.   “Third Party Infringement Claim”

  	
   

  	
  12

  
	
  1.93.   “Transfer Price”

  	
   

  	
  12

  
	
  1.94.   “Unlicensed Product”

  	
   

  	
  12

  
	
  1.95.   “Unlicensed Sales Threshold”

  	
   

  	
  12

  
	
  1.96.   “Valid Claim”

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2. PRODUCT RIGHTS AND RIGHTS OF FIRST
  NEGOTIATION

  	
   

  	
  12

  
	
  2.1.   Product Rights

  	
   

  	
  12

  
	
  2.2.   Licenses to Chiron

  	
   

  	
  12

  
	
  2.3.   Licenses to Cubist

  	
   

  	
  13

  
	
  2.4.   Existing Related Intellectual Property of
  Chiron

  	
   

  	
  14

  
	
  2.5.   Field

  	
   

  	
  14

  
	
  2.6.   Use of Patents and Know-How

  	
   

  	
  14

  
	
  2.7.   Exclusivity

  	
   

  	
  14

  
	
  (a)  Chiron

  	
   

  	
  14

  
	
  (b)  Cubist

  	
   

  	
  15

  
	
  2.8.   Sublicenses and Transfers of Chiron
  Technology or Chiron Joint Technology Rights

  	
   

  	
  15

  
	
  2.9.   Rights of First Negotiation

  	
   

  	
  15

  
	
  2.10.   Right of Co-Negotiation

  	
   

  	
  15

  
	
  2.11.   Marketing a Directly Competitive Product

  	
   

  	
  16

  
	
  2.12.   Mechanism to Determine Fair Market Value

  	
   

  	
  17

  
	
  2.13.   Subcontracting

  	
   

  	
  17

  
	
  2.14.   Rights of Last of Refusal for Canada

  	
   

  	
  18

  
	
  2.15.   Applicable Supply Agreement Provisions

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. COORDINATION

  	
   

  	
  19

  
	
  3.1.   General

  	
   

  	
  19

  
	
  3.2.   Joint Coordination Team

  	
   

  	
  20

  
	
  (a)  Formation

  	
   

  	
  20

  
	
  (b)  Membership

  	
   

  	
  20

  
	
  (c)  Meetings

  	
   

  	
  20

  
	
  (d)  Specific Activities

  	
   

  	
  20

  
	
  (e)  Limited Authority; Not a Decision-Making
  Body

  	
   

  	
  21

  
	
  (f)  Meeting Agendas

  	
   

  	
  22

  
	
  3.3.   JCT Coordinators

  	
   

  	
  22

  
	
  3.4.   Independence

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. DEVELOPMENT

  	
   

  	
  22

  
	
  4.1.   Key Development Studies; Diligence Obligations

  	
   

  	
  22

  
	
  4.2.   Cubist Development Plan

  	
   

  	
  24

  
	
  4.3.   Development by Chiron

  	
   

  	
  25

  



 






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  (a)  Territory Specific Studies

  	
   

  	
  25

  
	
  (b)  Proposed Indications

  	
   

  	
  25

  
	
  (c)  Medical Affairs Studies

  	
   

  	
  25

  
	
  (d)  Chiron Development Plan

  	
   

  	
  26

  
	
  (e)  Limitation on Chiron’s Development Rights

  	
   

  	
  26

  
	
  4.4.   Access to Chiron Data

  	
   

  	
  27

  
	
  (a)  Information Sharing

  	
   

  	
  27

  
	
  (b)  Reciprocating Licensee

  	
   

  	
  27

  
	
  (c)  License Option

  	
   

  	
  27

  
	
  4.5.   No Debarred Personnel

  	
   

  	
  28

  
	
  4.6.   Chiron Compliance

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5. REGULATORY

  	
   

  	
  28

  
	
  5.1.   Regulatory Plan; Diligence Obligation

  	
   

  	
  28

  
	
  (a)  Cubist’s and Other Licensees’ Activities

  	
   

  	
  28

  
	
  (b)  Regulatory Plan

  	
   

  	
  28

  
	
  (c)  Specific Regulatory Activities

  	
   

  	
  30

  
	
  (d)  Costs and Expenses

  	
   

  	
  32

  
	
  (e)  Limitation on Activities

  	
   

  	
  32

  
	
  5.2.   Ownership of Regulatory Approvals

  	
   

  	
  32

  
	
  5.3.   Chiron Access to Cubist and Other Licensee
  Data

  	
   

  	
  33

  
	
  (a)  Information Sharing

  	
   

  	
  33

  
	
  (b)  Chiron Use of Cubist Data

  	
   

  	
  33

  
	
  (c)  License Option

  	
   

  	
  33

  
	
  (d)  Manufacturing Information

  	
   

  	
  33

  
	
  5.4.   Free Sales Certificates

  	
   

  	
  34

  
	
  5.5.   Safety; Adverse Event Reporting

  	
   

  	
  34

  
	
  (a)
   General

  	
   

  	
  34

  
	
  (b)  Reporting
  Outside the Territory

  	
   

  	
  35

  
	
  (c)
   Reporting in the Territory

  	
   

  	
  35

  
	
  (d)  Global
  Database

  	
   

  	
  35

  
	
  5.6.   Communications

  	
   

  	
  35

  
	
  (a)
   Communications Relating to Regulatory Approval

  	
   

  	
  35

  
	
  (b)
   Communications Relating to Development

  	
   

  	
  35

  
	
  5.7.   Recalls and Voluntary Withdrawals

  	
   

  	
  36

  
	
  5.8.   Label

  	
   

  	
  37

  
	
  5.9.   Governmental Inspections

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. COMMERCIALIZATION; DILIGENCE

  	
   

  	
  37

  
	
  6.1.   Marketing Plan; Diligence Obligation

  	
   

  	
  37

  
	
  (a)
   Marketing Plan

  	
   

  	
  37

  
	
  (b)
   Marketing Activities

  	
   

  	
  38

  
	
  (c)  Costs
  and Expenses

  	
   

  	
  39

  
	
  (d)  Ownership
  of Marketing Information

  	
   

  	
  39

  
	
  6.2.   Prohibited Marketing and Sales Activities

  	
   

  	
  40

  
	
  6.3.   Discounting

  	
   

  	
  40

  



 






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  6.4.   Marketing and Promotional Literature

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. COMPENSATION

  	
   

  	
  40

  
	
  7.1.   Upfront Consideration

  	
   

  	
  40

  
	
  7.2.   Milestone Payments

  	
   

  	
  41

  
	
  (a)  Development Milestone Payments

  	
   

  	
  41

  
	
  (b)  Sales Milestone Payments

  	
   

  	
  42

  
	
  7.3.   Royalties

  	
   

  	
  42

  
	
  (a)  Royalty

  	
   

  	
  42

  
	
  (b)  Know-How Step-Down

  	
   

  	
  43

  
	
  (c)  Competition Step-Down

  	
   

  	
  43

  
	
  (d)  Competition Step-Down Procedures

  	
   

  	
  44

  
	
  (e)  Holdback of Royalties Upon Certain Cubist
  Enforcement Actions

  	
   

  	
  44

  
	
  (f)  Chiron Enforcement Action

  	
   

  	
  45

  
	
  (g)  Clinical Supplies

  	
   

  	
  45

  
	
  7.4.   Adjustments

  	
   

  	
  46

  
	
  7.5.   Third Party Royalties and Other Payments

  	
   

  	
  46

  
	
  7.6.   Royalty Payments and Reports

  	
   

  	
  46

  
	
  7.7.   No Reductions or Offsets

  	
   

  	
  46

  
	
  7.8.   Tax Matters

  	
   

  	
  47

  
	
  7.9.   Foreign Exchange

  	
   

  	
  47

  
	
  7.10.   Late Payments

  	
   

  	
  47

  
	
  7.11.   Exports of Licensed Product from the
  Territory; [*]

  	
   

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8. INTELLECTUAL PROPERTY

  	
   

  	
  47

  
	
  8.1.   Ownership of Inventions

  	
   

  	
  47

  
	
  8.2.   Prosecution of Patents

  	
   

  	
  48

  
	
  (a)  Cubist
  Patents

  	
   

  	
  48

  
	
  (b)  Chiron
  Patents

  	
   

  	
  48

  
	
  (c)  Joint
  Patents

  	
   

  	
  49

  
	
  8.3.   Patent Term Extensions

  	
   

  	
  49

  
	
  8.4.   Infringement of Patents by Third Parties

  	
   

  	
  50

  
	
  (a)  Notification

  	
   

  	
  50

  
	
  (b)  Infringement of Patents in the Territory

  	
   

  	
  50

  
	
  (c)  Other Infringement of Cubist Patents

  	
   

  	
  50

  
	
  (d)  Infringement of Chiron Patents and Joint
  Patents outside the Territory

  	
   

  	
  50

  
	
  (e)  Settlement; Allocation of Proceeds

  	
   

  	
  51

  
	
  8.5.   Infringement of Third Party Rights

  	
   

  	
  51

  
	
  (a)  Notice

  	
   

  	
  51

  
	
  (b)  Avoidance of Infringement

  	
   

  	
  52

  
	
  (c)  Licensing to Resolve Infringement by Cubist
  Technology

  	
   

  	
  52

  
	
  (d)  Determination of Relative Financial Benefits

  	
   

  	
  52

  
	
  (e)  Limitation of Obligation to Sublicense

  	
   

  	
  53

  
	
  (f)  Defense

  	
   

  	
  53

  
	
  (g)  Settlement

  	
   

  	
  53

  



 






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  8.6.   Patent Oppositions.

  	
   

  	
  53

  
	
  (a)  Third Party Patent Rights

  	
   

  	
  53

  
	
  (b)  Parties’ Patent Rights

  	
   

  	
  54

  
	
  (c)  Noncontravention

  	
   

  	
  54

  
	
  8.7.   Sublicensed Technology

  	
   

  	
  54

  
	
  (a)  Generally

  	
   

  	
  54

  
	
  (b)  Lilly License

  	
   

  	
  55

  
	
  (c)  Decision to License Third Party Technology

  	
   

  	
  55

  
	
  (d)  Licensing of Third Party Technology

  	
   

  	
  55

  
	
  (e)  Limitation of Obligation to Sublicense

  	
   

  	
  56

  
	
  (f)  Determination of Relative Financial Benefits

  	
   

  	
  56

  
	
  8.8.   Patent Marking

  	
   

  	
  56

  
	
  8.9.   Applicability to Chiron Patents

  	
   

  	
  56

  
	
  8.10.   Trademarks

  	
   

  	
  56

  
	
  (a)  Trademark License

  	
   

  	
  56

  
	
  (b)  Selection and Registration of Product
  Trademarks

  	
   

  	
  57

  
	
  (c)  Infringement of Trademarks by Third Parties

  	
   

  	
  57

  
	
  (d)  Product Trademarks Infringe Third Party
  Rights

  	
   

  	
  58

  
	
  8.11.   Subordination to Lilly Rights

  	
   

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9. REPRESENTATIONS AND WARRANTIES

  	
   

  	
  58

  
	
  9.1.   Mutual Representations and Warranties

  	
   

  	
  58

  
	
  (a)  Corporate Existence and Power

  	
   

  	
  58

  
	
  (b)  Authority and Binding Agreement

  	
   

  	
  59

  
	
  (c)  No Conflict

  	
   

  	
  59

  
	
  (d)  Validity

  	
   

  	
  59

  
	
  (e)  Consents

  	
   

  	
  59

  
	
  9.2.   Cubist Representations and Warranties

  	
   

  	
  59

  
	
  (a)  Ownership of Intellectual Property

  	
   

  	
  59

  
	
  (b)  Claims Related to Use of Intellectual
  Property

  	
   

  	
  59

  
	
  (c)  Notice to Third Persons

  	
   

  	
  60

  
	
  (d)  Effective Date Third Party Licenses

  	
   

  	
  60

  
	
  (e)  No Misappropriation

  	
   

  	
  60

  
	
  (f)  Regulatory Filings

  	
   

  	
  60

  
	
  (g)  Regulatory Data and Affairs

  	
   

  	
  60

  
	
  (h)  Non-Infringement of Cubist Technology by Third
  Parties

  	
   

  	
  61

  
	
  (i)  Litigation

  	
   

  	
  61

  
	
  (j)  Restrictive Agreements

  	
   

  	
  61

  
	
  (k)  Patent Prosecution

  	
   

  	
  61

  
	
  9.3.   Chiron Representation and Warranty - No
  Intellectual Property

  	
   

  	
  61

  
	
  9.4.   Disclaimer

  	
   

  	
  61

  
	
  9.5.   No Other Representations

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10. INDEMNIFICATION

  	
   

  	
  62

  
	
  10.1.   Indemnification by Cubist

  	
   

  	
  62

  
	
  10.2.   Indemnification by Chiron

  	
   

  	
  62

  



 






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REQUESTED: MATERIAL HAS BEEN OMITTED AND FILED WITH THE COMMISSION


 


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  10.3.   Liability for Third Party Products
  Liability Claims

  	
   

  	
  63

  
	
  10.4.   Procedure

  	
   

  	
  66

  
	
  10.5.   Insurance

  	
   

  	
  66

  
	
  10.6.   Limitation of Liability

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11. RECORDS; PUBLICATIONS

  	
   

  	
  68

  
	
  11.1.   Records

  	
   

  	
  68

  
	
  11.2.   Publications

  	
   

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12. CONFIDENTIALITY

  	
   

  	
  69

  
	
  12.1.   Treatment of Confidential Information

  	
   

  	
  69

  
	
  12.2.   Authorized Disclosure

  	
   

  	
  69

  
	
  12.3.   Publicity

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13. TERM AND TERMINATION

  	
   

  	
  70

  
	
  13.1.   Term

  	
   

  	
  70

  
	
  13.2.   Termination For Convenience by Chiron

  	
   

  	
  71

  
	
  13.3.   Termination By Either Party Upon Bankruptcy
  or Insolvency

  	
   

  	
  71

  
	
  13.4.   Termination for Breach

  	
   

  	
  71

  
	
  (a)  Notice

  	
   

  	
  71

  
	
  (b)
   Failure to Cure

  	
   

  	
  71

  
	
  (c)
   Disputes

  	
   

  	
  71

  
	
  (d)
   Termination as to Certain Licensed Products

  	
   

  	
  72

  
	
  (e)  Right
  to Sell

  	
   

  	
  72

  
	
  13.5.   INTENTIONALLY OMITTED

  	
   

  	
  72

  
	
  13.6.   Consequences of Termination

  	
   

  	
  72

  
	
  13.7.   Survival

  	
   

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14. DISPUTE RESOLUTION

  	
   

  	
  75

  
	
  14.1.   Disputes

  	
   

  	
  75

  
	
  14.2.   Arbitration

  	
   

  	
  75

  
	
  14.3.   Governing Law; Judicial Resolution

  	
   

  	
  76

  
	
  14.4.   Equitable Remedies; Injunctive Relief

  	
   

  	
  77

  
	
  14.5.   [*].

  	
   

  	
  77

  
	
  14.6.   Interest

  	
   

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15. MISCELLANEOUS

  	
   

  	
  77

  
	
  15.1.   Entire Agreement; Amendment

  	
   

  	
  77

  
	
  15.2.   Force Majeure

  	
   

  	
  77

  
	
  15.3.   Notices

  	
   

  	
  78

  
	
  15.4.   Maintenance of Records

  	
   

  	
  79

  
	
  15.5.   No Strict Construction

  	
   

  	
  79

  
	
  15.6.   Assignment

  	
   

  	
  79

  
	
  (a)
   Assignment by Cubist

  	
   

  	
  79

  
	
  (b)  Assignment
  by Chiron

  	
   

  	
  79

  
	
  (c)
   Restrictions on Payments

  	
   

  	
  80

  
	
  (d)
   Injunctive Relief

  	
   

  	
  80

  



 






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  15.7.   Performance by Affiliates

  	
   

  	
  81

  
	
  15.8.   Guaranty

  	
   

  	
  81

  
	
  15.9.   Counterparts

  	
   

  	
  81

  
	
  15.10.   Further Actions

  	
   

  	
  81

  
	
  15.11.   Severability

  	
   

  	
  81

  
	
  15.12.   Headings

  	
   

  	
  81

  
	
  15.13.   No Waiver

  	
   

  	
  81

  



 






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LICENSE AGREEMENT


 


THIS
LICENSE AGREEMENT (the “Agreement”)  is made effective as of the 2nd day of October, 2003 (the “Effective Date”) by and between CHIRON
HEALTHCARE IRELAND LTD., a company organized under the laws of
Ireland with offices at United Drug House, Belgard Road, Tallaght, Dublin,
Ireland (“Chiron”) and CUBIST
PHARMACEUTICALS, INC., a Delaware corporation having its principal
place of business at 65 Hayden Avenue, Lexington, Massachusetts 02421 (“Cubist”).  Cubist and
Chiron are sometimes referred to herein individually as a “Party”
and collectively as the “Parties”.  CHIRON CORPORATION,
a Delaware corporation having its principal place of business at 4560 Horton
Street, Emeryville, California 94608 (the “Chiron Parent Company”),
is a party to this Agreement only with respect to certain selected provisions
of this Agreement as specified herein.


 


RECITALS


 


WHEREAS,
Cubist is developing a proprietary compound known under the generic name of
daptomycin, and in particular a form of daptomycin which is administered by
intravenous injection;


 


WHEREAS,
Cubist has filed a New Drug Application with the United States Food and Drug
Administration for an intravenous formulation of daptomycin for the treatment
of complicated skin and skin structure bacterial infections;


 


WHEREAS,
Chiron possesses capabilities in the promotion and marketing of anti-infective
pharmaceutical products throughout Europe and certain other countries (as
further defined below as the “Territory”) and
desires to seek regulatory approval for and market an injectable form of
daptomycin in the Territory;


 


WHEREAS,
Chiron wishes to obtain (i) exclusive (even as to Cubist) rights to
commercialize all injectable forms of daptomycin in the Territory, and (ii) a
right of first negotiation for rights in the Territory to all other forms of
daptomycin, including oral formulations and combination products, and Cubist
wishes to grant such rights to Chiron as set forth herein;


 


WHEREAS,
the parties have executed a Manufacturing and Supply Agreement (the “Supply Agreement”) contemporaneously with this Agreement
pursuant to which Cubist has agreed to manufacture or have manufactured
Licensed Products for use by Chiron in connection with Commercialization of
Daptomycin Products;


 


WHEREAS, Chiron
wishes for Cubist to complete the Required Studies (as defined below)  in order to enable Chiron to obtain
regulatory approval to market in the Territory an injectable form of daptomycin
for complicated skin and skin structure bacterial infection and for a second


 






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indication, and Cubist
has agreed to use commercially reasonable efforts to complete the Required
Studies; and


 


WHEREAS, the
parties wish to establish a mechanism for exchanging information and providing
one another an opportunity to discuss and comment upon activities relating to
daptomycin products in their respective territories, it being understood that
such mechanism is for transparency purposes only.


 


NOW
THEREFORE, based on the foregoing premises and the mutual
covenants and obligations set forth below, the Parties agree as follows:


 


ARTICLE 1.


 


DEFINITIONS


 


The following terms shall
have the following meanings as used in this Agreement:


 


1.1.  “Additional
Daptomycin Product” shall mean any pharmaceutical
composition containing Daptomycin other than a Daptomycin IV Product.  For the avoidance of doubt, “Additional Daptomycin Product” shall
include, without limitation, any pharmaceutical composition containing
Daptomycin formulated for oral delivery and any pharmaceutical composition
containing Daptomycin and one or more active pharmaceutical ingredient other
than Daptomycin.


 


1.2.  “Affiliate”
shall mean, with respect to any Person,  (i) any other Person of which fifty
percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or, if applicable, general
partnership interest of such other Person are owned, controlled, or held,
directly or indirectly by, or under common ownership or control with, such
Person; or (ii) any other Person that, directly or indirectly, owns,
controls, or holds fifty percent (50%) or more of the securities or other
ownership interests representing the equity, the voting stock or, if applicable,
the general partnership interest, of such Person.


 


1.3.  “Approved
New Trademark” shall have the meaning assigned to such
term in Section 8.10(b) hereof.


 


1.4.  “Chiron
Data” shall have the meaning assigned to such term in Section 4.4(a) hereof.


 


1.5.  “Chiron
Development Plan” shall have the meaning assigned such
term in Section 4.3(d).


 


1.6.   “Chiron Interest” shall
have the meaning assigned to such term in Section 15.6(b) hereof.


 


1.7.   “Chiron Inventions” shall
have the meaning assigned to such term in Section 8.1.


 


1.8.  “Chiron
Joint Technology Rights” shall mean all of Chiron’s
right, title and interest in the Joint Patents, the Joint Know-How and the
Joint Inventions.


 






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1.9.   “Chiron Know-How” shall
mean all Information (i) that (A) is owned or Controlled by Chiron
after the Effective Date, (B) is not generally known and is not disclosed
in any published Chiron Patents, (C) is necessary or useful in connection
with the development, manufacture, use, sale, import or export of Licensed
Products, including, without limitation, all data and information regarding the
safety and efficacy of Licensed Products, and (D) is created, conceived,
invented, developed or reduced to practice during the Term in the course of
performing research and development activities undertaken or carried out for
the specific purpose of developing Licensed Products or of developing any
invention necessary or useful to the development, manufacture, use, sale,
import or export of Licensed Products, or (ii) that is included in “Chiron Know-How” pursuant to the provisions
of Section 2.4 hereof. Notwithstanding the foregoing, the term “Chiron Know-How” shall not include any
Chiron Marketing Information, Chiron Data (other than data generated from
Medical Affairs Studies), Joint Know-How or any interest of Chiron in any of the
foregoing.


 


1.10.  “Chiron
Marketing Information” shall have the meaning assigned
to such term in Section 6.1(d).


 


1.11.  “Chiron
Patent” shall mean (i) any Patent that is owned
or Controlled by Chiron, that has a filing date after the Effective Date and
that covers any invention owned or Controlled by Chiron that is created,
conceived, invented, developed or reduced to practice during the Term in the
course of performing research and development activities undertaken or carried
out for the specific purpose of developing Licensed Products or of developing
any invention useful to the development, manufacture, use, sale, import or
export of Licensed Products, and (ii) any Patent that becomes a “Chiron Patent” pursuant to the provisions
of Section 2.4 hereof. 
Notwithstanding the foregoing, the term “Chiron Patent” shall not include any Joint Patents or any
interest of Chiron in any Joint Patents.


 


1.12.  “Chiron
Related Know-How” shall mean all Information that (i) is
not Chiron Marketing Information, Chiron Data, Chiron Know-How or Joint
Know-How, (ii) is owned or Controlled by Chiron on the Effective Date, (iii) is
not generally known and is not disclosed in any published patents or patent
applications of Chiron, (iv) is necessary or useful in connection with the
development, manufacture, use, sale, import or export of Licensed Products, and
(v) is created, conceived, invented, developed or reduced to practice
prior to the Effective Date.


 


1.13.  “Chiron
Related Patent” shall mean any Patent (i) that is
not a Chiron Patent or a Joint Patent, (ii) that is owned or Controlled by
Chiron on or at any time after the Effective Date, and (iii) that covers
any invention, compound, improvement, method, apparatus, material, method or
technique of manufacture created, conceived, invented, developed or reduced to
practice prior to the Effective Date that is necessary or useful to the
development, manufacture, use, sale, import or export of Licensed Products.


 


1.14.  “Chiron
Technology” shall mean Chiron Patents and Chiron
Know-How.


 


1.15.  “Commercial
Launch” shall mean the first commercial sale of a
Licensed Product to a Third Party in a given country after obtaining Regulatory
Approval to Commercialize such Licensed Product in such country.  For the purposes of determining whether


 






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or not Commercial
Launch has occurred, sales of Licensed Product for use in clinical trials and
named patient sales shall not be considered.


 


1.16.  “Commercialize”
shall mean all activities relating to the
commercialization of a Licensed Product including, without limitation,
promotion, marketing, sales, distribution, development for label extensions,
and conducting Medical Affairs Studies, whether conducted by a Party or for
such party by another, and “Commercialization”
shall be interpreted accordingly.


 


1.17.  “Commercially
Important Indications” shall mean, with respect to a
given Licensed Product on any given date of determination, those indications
that are included in the label approved by a Regulatory Authority in the
Territory for such Licensed Product and that each account for [*] of such
Licensed Product for the four calendar quarters immediately preceding such date
of determination, or, in the event that [*] in the Territory occurred within
twelve months of such date of determination, then for the period from [*]
through such date of determination, or if there is no indication that [*], then
those three indications that account for the [*].


 


1.18.  “Commercially
Reasonable Efforts” shall mean, with respect to a
Party’s obligation under this Agreement, the level of efforts required to carry
out such obligation in sustained manner consistent with the efforts a similarly
situated pharmaceutical company devotes to a product of similar market
potential, profit potential and strategic value and similar scientific,
technical, development and regulatory risks, based on conditions then
prevailing.


 


1.19.  “Confidential
Information”  shall mean all Information, and other
information and materials, received by either Party from the other Party
pursuant to this Agreement, other than that portion of such information or
materials which:


 


(a)           is publicly disclosed by the
disclosing Party, either before or after it becomes known to the receiving
Party;


 


(b)           was known to the
receiving Party, without obligation to keep it confidential, prior to when it
was received from the disclosing Party;


 


(c)           is subsequently
disclosed to the receiving Party by a Third Party lawfully in possession
thereof without obligation to keep it confidential;


 


(d)           has been publicly disclosed other
than by the disclosing Party and without breach of an obligation of
confidentiality with respect thereto; or


 


(e)           has been independently developed by the
receiving Party without the aid, application or use of Confidential
Information, as demonstrated by competent written proof.


 


1.20.  “Contract
Manufacturing Agreements” means any and all agreements
pursuant to which Licensed Products are manufactured on behalf of Cubist
(including any such agreements for any step in the manufacturing process),
including without limitation, the Abbott


 






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Laboratories, ACS
Dobfar S.p.A. and DSM Capua S.p.A. contracts, together with all amendments and
extensions of such agreements.


 


1.21.  “Control”
shall mean possession of the ability to grant a
license or sublicense as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party, and “Controlled” shall be interpreted
accordingly.


 


1.22.  “cSSSI”
shall mean complicated skin and skin structure
bacterial infection.


 


1.23.  “Cubist
Data” shall mean all Information (other than Other
Licensee Data) owned or Controlled by Cubist pertaining to Licensed Products
that is necessary or useful for making applications for Regulatory Approval or
other regulatory filings for, or Commercializing, Licensed Products in the
Territory.


 


1.24.  “Cubist
Development Plan” shall have the meaning assigned such
term in Section 4.2(a).


 


1.25.  “Cubist
Inventions” shall have the meaning assigned to such
term in Section 8.1.


 


1.26.  “Cubist
Joint Technology Rights” shall mean all of Cubist’s
right, title and interest in the Joint Patents, the Joint Know-How and the
Joint Inventions.


 


1.27.  “Cubist
Know-How” shall mean all Information (i) that (A) is
owned or Controlled by Cubist on the Effective Date or at any time during the
Term, (B) is not generally known and is not disclosed in any published
Cubist Patents, and (C) is necessary or useful in connection with the
development, manufacture, marketing, promotion, use, sale, import or export of
Licensed Products, including, without limitation, all data and information
regarding the safety and efficacy of Licensed Products.  Notwithstanding the foregoing, the term “Cubist Know-How” shall not include any
Joint Know-How or any interest of Cubist in any Joint Know-How.


 


1.28.  “Cubist
Marks” shall mean (i) all registered trademarks
issued or that have issued on the application listed at Exhibit A; (ii) all pending trademark applications listed
at Exhibit A, as amended by Cubist from time to time; (iii) the
Cubist name and mark; and (iv) any and all Approved New Trademarks.


 


1.29.  “Cubist
Patent” shall mean any Patent that is owned or
Controlled by Cubist on the Effective Date, including those set forth on Exhibit B, or at any time during the
Term, and that covers any Licensed Product or covers any invention, compound,
improvement, method, apparatus, material, method or technique of manufacture
necessary or useful in the development, manufacture, use, sale, import or
export of Licensed Products, including without limitation, any and all Cubist
Inventions.  Notwithstanding the
foregoing, the term “Cubist Patent”
shall not include any Joint Patents or any interest of Cubist in any Joint
Patents.


 


1.30.  “Cubist
Technology” shall mean all Cubist Patents and Cubist
Know-How.


 






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1.31.  “Daptomycin”
shall mean the molecule set forth and identified as
the daptomycin molecule on Exhibit C,
and all acids, salts and esters of such daptomycin molecule.


 


1.32.  “Daptomycin
IV Product” shall mean any pharmaceutical composition
containing Daptomycin in all current and future formulations, but only if such
pharmaceutical composition is formulated for delivery via Injection. The term “Daptomycin IV Product” shall not include (i) any
pharmaceutical composition formulated for delivery by any means other than via
Injection or (ii) any pharmaceutical composition that includes one or more
active pharmaceutical ingredients other than Daptomycin.


 


1.33.  “Defective
Manufactured Product” shall have the meaning assigned
to such term in the Supply Agreement.


 


1.34.  “Directly
Competitive Product” shall mean, with respect to a
given Licensed Product, (A) [*] or (B) any other pharmaceutical
composition (other than a Licensed Product) formulated for delivery [*] and
that is marketed and sold (i) primarily for [*], and (ii) solely to
treat [*], and which other pharmaceutical composition has a label approved by a
Regulatory Authority in the Territory which includes as indications for such
other pharmaceutical composition [*]. 
Commercially Important Indications that are included in the label
approved by a Regulatory Authority in the Territory for such Licensed
Product.  Notwithstanding the foregoing,
the term “Directly Competitive Product” shall
not include [*.]


 


1.35.  “Dollar”
shall mean a United States dollar, and “$” shall be
interpreted accordingly.


 


1.36.  “Drug
Approval Application” shall mean an application for
Regulatory Approval required before commercial sale or use of a Licensed
Product as a drug in a regulatory jurisdiction, including without limitation an
NDA and a Biologics License Application (BLA) filed in the United States.


 


1.37.  “Drug
Master File,” or “DMF”
shall mean a voluntary submission that may be used to provide confidential,
detailed information about the active pharmaceutical ingredient, daptomycin,
and facilities, processes or articles used during the manufacturing,
processing, packaging and storing of daptomycin or one or more other drug
products.


 


1.38.  “Effective
Date Third Party Licenses” shall have the meaning
assigned to such term in Section 8.7(a).


 


1.39.  “EMEA”
shall mean the European Medicines Evaluation Agency,
or any successor thereto, which coordinates the scientific review of human
pharmaceutical products under the centralized licensing procedures of the
European Community.


 


1.40.  “Fair
Market Value” shall have the meaning assigned to such
term in Section 2.12 hereof.


 


1.41.  “FDA”
shall mean the United States Food and Drug
Administration, or any successor thereto.


 






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1.42.  “Global
Harm” shall mean [*].


 


1.43.  “IND”
shall mean an Investigational New Drug application.


 


1.44.  “Indemnify”
shall have the meaning assigned to such term in Section 10.1
hereof.


 


1.45.  “Information”
shall mean (i) techniques, information and data
specifically relating to development, manufacture, use, sale, import or export
of Licensed Products, including, but not limited to, inventions, practices,
methods, knowledge, know-how, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical and quality
control data, regulatory submissions, correspondence and communications,
marketing, pricing, distribution, cost, sales, manufacturing, patent and legal
data or descriptions and (ii) compositions of matter, assays and
biological materials specifically relating to development, manufacture, use,
sale, import or export of Licensed Products.


 


1.46.  “Infringement”
or “Infringe”
shall have the meaning assigned to such term in Section 8.4(a) hereof.


 


1.47.  “Injection”
shall mean all means of delivering a pharmaceutical
composition by injection and includes, without limitation, delivery by
intravenous, intramuscular and subcutaneous injection.


 


1.48.  “Joint
Coordination Team” or “JCT” shall mean the committee
formed as described in Section 3.2(a).


 


1.49.  “Joint
Inventions” shall have the meaning assigned in Section 8.1.


 


1.50.  “Joint
Know-How” shall mean all Information that (i) consists
of Joint Inventions, (ii) is not generally known and is not disclosed in
any published Joint Patents, and (iii) is necessary or useful in
connection with the development, manufacture, marketing, promotion, use, sale,
import or export of Licensed Products, including, without limitation, all data
and information regarding the safety and efficacy of Licensed Products.


 


1.51.  “Joint
Patents” shall have the meaning assigned such term in Section 8.2(c).


 


1.52.  “Joint
Technology” shall mean all Joint Patents and Joint
Know-How.


 


1.53.  “Key
Development Studies” means [*.]


 


1.54.  “Knowable
Patent” shall have the meaning assigned to such term
in Section 8.5(c) hereof.


 


1.55.  “Launch
Indication(s)” shall mean cSSSI and [*], but if at the
relevant time Cubist has [*,] then the term “Launch
Indication(s)” shall at such time mean cSSSI only.


 


1.56.  “Licensed
Products” shall mean all Daptomycin IV Products, and
all Additional Daptomycin Products that become Licensed Products pursuant to Section 2.9
hereof.


 






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1.57.  “Lilly”
shall mean Eli Lilly and Company.


 


1.58.  “Lilly
License” shall mean that certain Licensing Agreement
between Cubist and Lilly, dated October 6, 2000, as amended by the
amending agreement dated July 1, 2003, and as further amended and in
effect from time to time, which License Agreement replaced the prior agreement
between such parties, dated November 7, 1997.


 


1.59.  “Lilly
Patent” shall have the meaning assigned to such term
in Section 8.11.


 


1.60.  “Losses”
shall have the meaning assigned such term in Section 10.1.


 


1.61.  “MAA”
shall mean an application filed with the EMEA for
regulatory approval to market and sell Licensed Products in the European Union,
or an application filed through the mutual recognition procedures in the
European Union having a similar purpose to the NDA in the United States.


 


1.62.  “Major
Market Countries” shall mean, collectively, France,
Germany, Italy, Spain, and the United Kingdom. 
The term “Major Market Country”
shall mean any of the Major Market Countries.


 


1.63.  “Manufacturing
Information” shall have the meaning assigned to such
term in Section 5.3(d) hereof.


 


1.64.  “Manufacturing
Plan” shall have the meaning assigned to such term in Section 2.5
of the Supply Agreement.


 


1.65.  “Marketing
Plan” shall have the meaning assigned such term in Section 6.1(a).


 


1.66.  “Marketing
Plan Trigger Event” shall have the meaning assigned
such term in Section 6.1(a).


 


1.67.  “Medical
Affairs Studies” shall mean those clinical studies
conducted after Regulatory Approval of Licensed Product has been obtained which
are neither intended nor designed to support an application for Regulatory
Approval, including but not limited to, pharmaco-economic studies,
pharmaco-epidemiology studies, and investigator-sponsored clinical studies.


 


1.68.  “NDA”
shall mean a New Drug Application for Regulatory
Approval filed in the United States.


 


1.69.  “Net
Sales” shall mean,
with respect to a particular time period, the aggregate gross sales invoiced by
Chiron and its Affiliates for Licensed Products sold directly by Chiron and its
Affiliates to a Third Party (including, without limitation, any Third Party
that is a distributor of Chiron and its Affiliates in any country within the
Territory) during such time period, less:


 


(i)            discounts, including cash and
quantity discounts, charge-back payments and rebates granted to managed health
care organizations or to domestic and foreign


 






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governments (including any subdivision thereof), their agencies, purchasers
and reimbursers or to trade customers, in each case to the extent actually
allowed in amounts customary in the trade;


 


(ii)           credits or allowances actually
granted upon returns of damaged, spoiled or Non-Conforming (as defined in the
Supply Agreement) units of Licensed Products or upon recalls of units of
Licensed Products, in each case in amounts customary in the trade;


 


(iii)         freight, postage, shipping,
transportation and insurance charges actually allowed or paid by Chiron or any
of its Affiliates for delivery of Licensed Products sold by Chiron or any of
its Affiliates to a Third Party; and


 


(iv)          taxes, duties and other governmental
charges levied on, absorbed or otherwise imposed on import, export, sale,
distribution and use of such Licensed Products that are paid by Chiron
(including, without limitation, any taxes paid by Chiron pursuant to Section 7.5
of the Supply Agreement), all as adjusted for rebates and refunds actually
granted or reasonably anticipated to be granted if application therefor is
made; provided, however, that in no event shall any of the
following taxes or governmental charges paid or required to be paid by Chiron
constitute a permitted deduction in calculating Net Sales: any taxes or
governmental charges calculated based on, or levied or imposed on any profit or
income earned by Chiron or any of its Affiliates or distributors.


 


Amounts
received by Chiron and its Affiliates for the sale of Licensed Products among
Chiron and its Affiliates for resale shall not be included in the computation
of Net Sales hereunder.


 


[*] or otherwise in
connection with any Licensed Products or in connection with any rights to any
Licensed Products, then the amount of such payment to Chiron or its Affiliates
shall be included in Net Sales in the calendar quarter in which Chiron or its
Affiliates received such payment for purposes of calculating the royalty due to
Cubist pursuant to Article 7. 
Without limiting the applicability of the provisions of the foregoing
sentence and without limiting any remedy or choice of remedies that Cubist may
have under applicable law in connection with any breach by Chiron of the
provisions of [*] hereof, [*] makes any payment or payments to Chiron or its
Affiliates [*] Chiron or its Affiliates of any of the [*] then such payment or
payments made to Chiron or its Affiliates shall be included in Net Sales in the
calendar quarter in which Chiron or its Affiliates performed such actions or
activities.


 


For the avoidance of
doubt, any payments made by [*] (other than Licensed Products and other than
products that are subject to the provisions of [*], or for customary services
provided for customary consideration, [*] shall not be included in Net Sales.


 


1.70.  “Other
Licensee” shall mean any Third Party to whom Cubist
has granted or grants a license and/or sublicense to develop or Commercialize a
Licensed  Product outside the
Territory.


 


1.71.  “Other
Licensee Data” shall mean all Information that results
from any development activities conducted by any Other Licensee with respect to
Licensed Products and


 






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that is necessary
or useful for making regulatory filings for, or Commercializing, Licensed
Products in the Territory.


 


1.72.  “Patent”
shall mean (i) unexpired letters patent
(including inventor’s certificates) 
which have not been held invalid or unenforceable by a court of
competent jurisdiction from which no appeal can be taken or has been taken
within the required time period, including without limitation any substitution,
extension, registration, confirmation, reissue, re-examination, renewal or any
like filing thereof and (ii) pending applications for letters patent,
including without limitation any provisional, converted provisional, continued
prosecution application, continuation, divisional or continuation-in-part
thereof.


 


1.73.  “Price
Approval” shall mean, with respect to any country in
which the price at which Chiron sells Licensed Product must be approved by a
governmental authority for reimbursement or payment purposes, the receipt of
approval by the applicable governmental authority with respect to such price.


 


1.74.  “Primary
Endpoint” shall mean, with respect to a clinical
trial, the point at which the primary efficacy objective has been achieved with
respect to a clinical or microbiological outcome as specified in the protocol
for such trial, unless otherwise agreed by the Parties in writing.


 


1.75.  “Reasonable
Buyer” shall mean, with respect to the sale,
assignment, sublicense or other transfer of the Chiron Interest in accordance
with the provisions of Section 15.6(b) hereof, a Third Party that,
both at the time a definitive agreement is entered into by Chiron and such
Third Party in connection any such transfer and at the time of the closing of
such transfer:


 




	
  (i)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
  [*]:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  [*]*;

  
	
   

  	
   

  	
   

  
	
  (v)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
  [*];

  	
   

  






 






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  (ix)

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  
	
  (x)

  	
  [*.]

  	
   

  






 


1.76.  “Reciprocating
Licensee” shall have the meaning assigned to such term
in Section 4.4(b).


 


1.77.  “Regulatory
Approval” shall mean any approvals (including
supplements, variations, amendments, pre- and post-approvals and Price
Approvals), licenses, registrations or authorizations of any national,
supra-national (e.g., the FDA, the European Commission or the Council of the
European Union, or other similar body in any country), regional, state or local
regulatory agency, department, bureau, commission, council or other
governmental entity, necessary for the manufacture, distribution, use, sale,
import or export of Licensed Products in a regulatory jurisdiction.


 


1.78.  “Regulatory
Authority” shall mean a foreign counterpart of the
FDA.


 


1.79.  “Regulatory
Plan” shall have the meaning assigned to such term in Section 5.1(b) hereof.


 


1.80.  “Replacement
Indication” shall have the meaning assigned to such
term in Section 4.1(d) hereof.


 


1.81.  “Replacement
Indication Study” shall have the meaning assigned to
such term in Section 4.1(d) hereof.


 


1.82.  “Replacement
Study” shall have the meaning assigned to such term in
Section 4.1(c).


 


1.83.  “Required Study” shall
have the meaning assigned to such term in Section 4.1.


 


1.84.  “Restricted Period” shall mean, with respect to either Party, the
period of time commencing on the Effective Date and ending on the earlier of (i) the
expiration or termination of the Term and (ii) the date when such Party
sells, assigns, sublicenses or otherwise transfers all of its rights in this
Agreement pursuant to, and in accordance with, the provisions of Section 15.6.


 


1.85.  “Royalty
Rate” shall have
the meaning assigned to such term in Section 7.3(a) hereof.


 


1.86.  “Stock
Purchase Agreement” shall mean that certain Stock
Purchase Agreement, dated as of the Effective Date, by and between Cubist and
the Chiron Parent Company.


 


1.87.  “Supply
Agreement” shall mean that certain Manufacturing and
Supply Agreement, dated as of the Effective Date, by and between Cubist and
Chiron.


 


1.88.  “Term”
shall mean the term of this Agreement.


 






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1.89.  “Territory”
shall mean the countries listed in Exhibit D, and the possessions and
territories of each such country. 
Whenever, in accordance with the terms of this Agreement, Chiron’s
rights under this Agreement shall terminate with respect to any country or
countries initially included in the definition of Territory, any reference in
this Agreement to the term Territory shall, from and after such termination, be
deemed not to refer to any such country or countries as to which Chiron’s
rights under this Agreement have so terminated.


 


1.90.  “Territory
Specific Studies” shall have the meaning mean assigned
to such term in Section 4.3(a).


 


1.91.  “Third
Party” shall mean any entity other than Cubist or Chiron
or an Affiliate of either of them.


 


1.92.  “Third
Party Infringement Claim” shall have the meaning
assigned such term in Section 8.5(a).


 


1.93.  “Transfer
Price” shall have the meaning assigned to such term in
Section 7.1 of the Supply Agreement.


 


1.94.  “Unlicensed
Product” shall mean,
with respect to any given Licensed Product in any given country within the
Territory, any pharmaceutical composition containing Daptomycin that (A) is
commercially available in such country other than [*] and other than [*] (B) has
the same [*], such Licensed Product, and (C) [*] as such Licensed
Product.  If Chiron’s rights under this
Agreement are expanded to include rights in Additional Daptomycin Products,
then the foregoing definition of “Unlicensed Product” shall be deemed to be
expanded to include those formulations of pharmaceutical compositions
containing Daptomycin which have been so added to the scope of Licensed
Products and the marketing and other rights of Chiron under this Agreement.


 


1.95.  “Unlicensed
Sales Threshold” shall have the meaning assigned to
such term in Section 7.3(e) hereof.


 


1.96.  “Valid
Claim” shall mean (i) an unexpired claim of an
issued patent within the Cubist Patents or Joint Patents which has not been
found to be unpatentable, invalid or unenforceable by a court or other
authority in the subject country, from which decision no appeal is taken or can
be taken; or (ii) a claim of a pending patent application within the
Cubist Patents or Joint Patents.


 


ARTICLE 2.


 


PRODUCT
RIGHTS AND RIGHTS OF FIRST NEGOTIATION


 


2.1.  Product
Rights. Subject to and upon the terms and conditions
set forth in this Agreement, Chiron shall have exclusive rights (even as to
Cubist) to Commercialize the Licensed Products in all countries of the
Territory.


 


2.2.  Licenses
to Chiron. Subject to, and in accordance with, the
terms and conditions of this Agreement:


 






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(a)           Cubist grants to Chiron the exclusive
(even as to Cubist) license, under the Cubist Technology and the Cubist Joint
Technology Rights, to sell, offer for sale, have sold, import, export and
Commercialize Licensed Products in the Territory. Except to the extent otherwise
provided in this Agreement, the rights granted to Chiron pursuant to this Section 2.2(a) may
not be sublicensed or transferred.


 


(b)           Cubist grants to Chiron the
nonexclusive license, under the Cubist Technology, to practice and use the
Cubist Technology and the Licensed Products anywhere in the world for the sole
purpose of engaging in those research and development activities that Chiron is
expressly required or permitted to perform pursuant to this Agreement. Except
to the extent otherwise provided in this Agreement, the rights granted to
Chiron pursuant to this Section 2.2(b) may not be sublicensed or
transferred.


 


(c)           Cubist grants to Chiron a
nonexclusive license, under the Cubist Technology, to make, have made,
manufacture and have manufactured anywhere in the world Licensed Products for
sale in the Territory, provided that such right to make, have made,
manufacture and have manufactured shall not be exercised by Chiron so long as
the Supply Agreement remains in effect. Except to the extent otherwise provided
in this Agreement, the rights granted to Chiron pursuant to this Section 2.2(c) may
not be sublicensed or transferred.


 


(d)           In addition to any rights
expressly retained by Cubist in the foregoing provisions of this Section 2.2,
Cubist shall retain any and all rights in and to the Cubist Technology and the
Cubist Joint Technology Rights that are not expressly granted to Chiron
pursuant to this Section 2.2.


 


2.3.  Licenses
to Cubist. Subject to the terms and conditions of this
Agreement:


 


(a)           Chiron grants to Cubist the exclusive
(even as to Chiron) license, under the Chiron Technology and the Chiron Joint
Technology Rights, to sell, offer for sale, have sold, import, export and
Commercialize Licensed Products outside of the Territory. Except to the extent
otherwise provided in this Agreement, the rights granted to Cubist pursuant to
this Section 2.3(a) may not be sublicensed or transferred.


 


(b)           Chiron grants to
Cubist the nonexclusive license, under the Chiron Technology, to practice and
use the Chiron Technology and the Licensed Products anywhere in the world for
the sole purpose of engaging in research and development activities with
respect to Licensed Products pursuant to this Agreement. Except to the extent
otherwise provided in this Agreement, the rights granted to Cubist pursuant to
this Section 2.3(b) may not be sublicensed or transferred.


 


(c)           Chiron grants to
Cubist a nonexclusive license, under the Chiron Technology, to make, have made,
manufacture and have manufactured anywhere in the world Licensed Products.
Except to the extent otherwise provided in this Agreement, the rights granted
to Cubist pursuant to this Section 2.3(c) may not be sublicensed or
transferred.


 


(d)           In addition to any
rights expressly retained by Chiron in the foregoing provisions of this Section 2.3,
Chiron shall retain any and all rights in and to the Chiron


 






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Technology and the
Chiron Joint Technology Rights that are not expressly granted to Cubist
pursuant to this Section 2.3.


 


(e)           Notwithstanding any
provision of this Agreement to the contrary, the provisions of this Section 2.3
shall apply to any Chiron Patent only to the extent that the Parties have not
otherwise agreed on the scope of rights granted and reserved in respect of any
such Chiron Patent.


 


2.4.  Existing
Related Intellectual Property of Chiron. If Chiron
decides to use or apply any Chiron Related Patent or any Chiron Related
Know-How, Chiron shall notify Cubist and provide any information concerning any
such Chiron Related Patent or Chiron Related Know-How that Cubist reasonably
requests.  In the event that either Party
sends a written request to the other Party requesting a discussion at a JCT
meeting concerning the need, usefulness and advisability of using any Chiron
Related Patent or Chiron Related Know-How in connection with the development,
manufacture, use or Commercialization of Licensed Products within and/or
outside the Territory, then a meeting of the JCT shall be convened as promptly
as practicable and the Parties shall discuss same.  If consensus is reached at the JCT that any
such Chiron Related Patent and/or Chiron Related Know-How should be used for
such purpose, then the Parties shall discuss the compensation that Chiron would
require in order to license to Cubist any such Chiron Related Patent and/or
Chiron Related Know-How.  If Cubist and
Chiron agree on the terms of any such compensation, then the Parties may enter
into an appropriate technology license agreement which license agreement shall
address the scope of the license granted, compensation and responsibilities of
the Parties on matters such as further research and development, prosecution,
maintenance and enforcement of relevant Patents, and other customary provisions
contained in such agreements.  If the
Parties elect not to enter into a specific technology license agreement, any
such Chiron Related Patent shall be included within the Chiron Patents and
shall become subject to the licenses granted to Cubist pursuant to Section 2.3
hereof and/or any such Chiron Related Know-How shall be included within the
Chiron Know-How and shall become subject to the licenses granted to Cubist pursuant
to Section 2.3 hereof.


 


2.5.  Field.
Notwithstanding anything in this Agreement to the
contrary, it is acknowledged and agreed by the Parties that the licenses
granted by Cubist to Chiron under this Agreement with respect to the Cubist
Patents and Cubist Know-How that are licensed to Cubist pursuant to the Lilly
License shall be solely for application to the treatment of infectious
diseases.


 


2.6.  Use
of Patents and Know-How. Each Party covenants to the
other that it will not practice the Patents or Know-How of the other Party
except as expressly permitted in the licenses granted to it in this Agreement.


 


2.7.  Exclusivity.


 


(a)  Chiron.  Chiron shall not
develop, promote, sell or offer for sale Licensed Products for use outside of
the Territory.  Chiron shall require its
distributors who sell Licensed Products to make a covenant similar to that
provided in this Section 2.7(a) with respect to Licensed Products.


 






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(b)  Cubist.  Cubist shall not
promote, sell, or offer for sale a Licensed Product for use within the
Territory (except for sales to Chiron pursuant to this Agreement or the Supply
Agreement).  Cubist shall require any of
its Other Licensees and distributors of Licensed Products to make a covenant
similar to that provided in this Section 2.7(b) with respect to
Licensed Products.


 


2.8.  Sublicenses
and Transfers of Chiron Technology or Chiron Joint Technology Rights.  Chiron shall not
sublicense or transfer any interest in the Chiron Technology or the Chiron
Joint Technology Rights to any Third Party unless such Third Party shall have
acknowledged and agreed in writing that any such sublicense or transfer to such
Third Party, and the rights acquired by any such Third Party in and to the
Chiron Technology and the Chiron Joint Technology Rights as a result of such
sublicense or transfer, shall be subject to any and all rights that Chiron may
have granted to Cubist pursuant to this Agreement and the Supply Agreement.


 


2.9.  Rights
of First Negotiation.  Cubist
hereby grants Chiron (a) a right of first negotiation to obtain
Commercialization rights in the Territory with respect to any and all
Additional Daptomycin Products, and (b) a right of first negotiation to
obtain Commercialization rights in the Territory to any and all Directly
Competitive Products, in each case, on the following terms:  In the event that Cubist proposes to grant,
sell, assign or otherwise transfer to a Third Party all or any portion of any
such Commercialization rights, regardless of whether Cubist or a Third party
makes the initial proposal, then
Cubist will promptly notify Chiron in writing thereof. As soon as practicable,
Chiron will respond to Cubist in writing regarding its interest in entering
into negotiations to obtain such rights and the Parties will promptly [*]
following the date that Cubist gives such written notice to Chiron. Upon
commencement of such negotiations, [*] to grant Commercialization rights with
respect to such Additional Daptomycin Product or Directly Competitive
Product.  If Chiron and Cubist are unable
to agree on material terms within [*] after receipt by Chiron of Cubist’s
notice of its intent to transfer Commercialization rights, then Cubist will
[*].  Chiron shall have an exclusive [*]
period to present (but shall not be obligated to present) to Cubist a revised
proposal.  If Cubist does not accept
Chiron’s revised proposal upon expiration of such exclusive period, in its sole
discretion, Cubist will be free to enter into negotiations with any Third
Party, provided, however, Chiron
shall have the non-exclusive right to continue discussions with Cubist.  If Cubist determines that it is likely to
accept terms with a Third Party for such Commercialization rights, Cubist will
offer Chiron an opportunity for [*], at Chiron’s headquarters or at any other
location that the Parties may mutually agree upon, within [*] of Cubist’s
notification to Chiron that it is affording Chiron such opportunity to meet,
for the purpose of explaining in reasonable detail the reasons that Cubist is
likely to accept such terms.  Chiron
shall have a period of [*] from the date of such meeting to present to Cubist
[*] and Cubist hereby agrees that it will not accept the Third Party terms
until the earlier of (a) the expiration of such [*] period, (b) the
date that Chiron affirmatively declines to make an offer, and (c) the date
that Chiron proposes, and Cubist rejects, such offer.  For the avoidance of doubt, Cubist is not
obligated to offer the foregoing opportunity for [*].  Cubist will select the party with which it
wishes to enter into negotiations for a definitive agreement in its sole
discretion, provided, however, in
making its determination, [*].  Chiron
hereby acknowledges and agrees that [*]


 


2.10.  Right
of Co-Negotiation.  Chiron
hereby grants Cubist a right of co-negotiation to obtain all or any portion of
the Commercialization rights in the Territory with respect to any and


 






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all Directly
Competitive Products on the following terms: 
In the event that Chiron proposes to grant, sell, assign or otherwise
transfer to a Third Party all or any portion of such Commercialization rights
in the Territory for a Directly Competitive Product, regardless of whether
Chiron or a Third Party makes the initial proposal, then Chiron will promptly
notify Cubist in writing thereof and thereafter, Cubist, to the extent that it
remains so interested, shall be included among the interested parties with whom
Chiron holds discussions for the transfer of such rights until such time as
Chiron selects the party with whom it wishes to enter into negotiations for a
definitive agreement for such rights. Cubist acknowledges that [*].  Without limiting the generality of the
foregoing, Cubist acknowledges that Chiron shall have [*] for the Territory as
Chiron sees fit.  Except as expressly
provided in Section 2.11, Chiron shall have no obligation or liability to
Cubist for selecting a Third Party as its Commercialization partner for
Directly Competitive Products in the Territory.


 


2.11.  Marketing
a Directly Competitive Product.  Subject
to the right of first negotiation in favor of Chiron in Section 2.9, and
the right of co-negotiation in favor of Cubist in Section 2.10, the
Parties acknowledge that either Party may, at any time during the Restricted
Period applicable to such Party, market a Directly Competitive Product in the
Territory.  In the event that either
Party launches, either directly or indirectly, a Directly Competitive Product
in the Territory at any time during the Restricted Period applicable to such
launching Party, then the other Party (the “Aggrieved
Party”) shall have recourse to the remedies provided herein.  The Parties acknowledge and agree that the
objective of the remedies provided in this Section 2.11 is to have the
Party launching the Directly Competitive Product compensate the Aggrieved Party
for the [*] [*] of its interest in the Licensed Products resulting from such
action.  If Cubist is the Aggrieved
Party, Cubist may elect to:


 


(a)           require Chiron to [*] to receive
royalties for the sale of Licensed Products in the Territory (“Cubist Royalty Interest”) at the [*] as it existed
immediately prior to Chiron’s launch of the Directly Competitive Product in the
Territory, following which Chiron shall be entitled to continue to sell
Licensed Products in the Territory without any further obligation to pay
royalties to Cubist; or


 


(b)           require Chiron to pay the [*] of the
Cubist Royalty Interest attributable to Chiron’s launch of the Directly
Competitive Product in the Territory but following which Chiron shall be
entitled to continue to sell Licensed Products in the Territory subject to
payment of the royalties as provided herein.


 


If Chiron is the
Aggrieved Party, then Chiron may elect to:


 


(c)           require Cubist to purchase the Chiron
Interest at its [*] as it existed immediately prior to Cubist’s launch of the
Directly Competitive Product in the Territory, following which Chiron shall
have no further right to sell Licensed Products in the Territory; or


 


(d)           require Cubist to pay to Chiron the
[*] of the Chiron Interest attributable to Cubist’s launch of the Directly
Competitive Product in the Territory but following which Chiron shall be
entitled to continue to sell Licensed Products in the Territory subject to
payment of royalties as provided herein.


 






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In each of the
foregoing [*] shall be determined in accordance with the [*].  In each instance in which a Party is required
to make payment of compensation to the Aggrieved Party pursuant to the
provisions of this Section 2.11, the Party required to pay compensation
shall have the option of paying such amount due as a one-time lump sum or by
installments paid over a period of time not to exceed [*], provided
that, in the event that a compensating Party elects to make payment over a
period of time, such compensating Party shall pay interest on all amounts due
at the rate stipulated in Section 7.10 for late payments.


 


2.12.  Mechanism
to Determine Fair Market Value.  [*]
of this Agreement “Fair Market Value”
(including any diminution thereof) shall mean the fair market value of the
Cubist Royalty Interest or the Chiron Interest, as the case may be, determined
as follows:  If the Parties cannot agree
on the Fair Market Value within 30 days after the launch of the Directly
Competitive Product, each Party shall promptly designate a reputable investment
banking or appraisal firm of its choice (which in the case of an investment bank
shall not be the regular banker of the Party) (the “Appraisers” or each an “Appraiser”),
who will each be asked to provide its best, single number estimate of the
applicable Fair Market Value (the “Estimate”),
using a common set of assumptions provided by the Parties, or if the Parties
cannot agree, determined by the Appraisers. 
Each Party shall use its best efforts to cause its designated Appraiser
to provide the Estimate not later than 30 days after the Parties or the
Appraiser, as the case may be, have determined the common set of assumptions to
be used.


 


If the Estimate submitted by one of the
Appraisers exceeds the Estimate submitted by the other Appraiser by 10% or
less, the Fair Market Value shall be deemed to be the arithmetic mean of the
two Estimates.


 


If the Estimate submitted by one of the
Appraisers exceeds the Estimate submitted by the other Appraiser by more than
10%, the Parties, or if the Parties cannot agree, the Appraisers, shall
designate a third appraiser (which in the case of an investment bank shall not
be the regular banker of either Party) (the “Third
Appraiser”) to prepare an estimate of Fair Market Value using the
same common set of assumptions but without access to the earlier
Estimates.  The Third Appraiser shall be
directed to provide its estimate of Fair Market Value within 30 days of its
designation.  If the estimate of Fair
Market Value submitted by the Third Appraiser falls between the Estimates of
the Appraisers, the Fair Market Value shall be deemed to be the arithmetic mean
of all three estimates of Fair Market Value. 
If the estimate of Fair Market Value submitted by the Third Appraiser
does not fall in between the Estimates of the Appraisers, the Estimate
submitted by one of the two Appraisers that is closest to the estimate of Fair
Market Value submitted by the Third Appraiser shall be deemed to be the Fair
Market Value.


 


Each party shall bear the
costs and expenses of its own Appraiser as well as 50% of the costs and
expenses of the Third Appraiser, if necessary.


 


2.13.  Subcontracting.
 Each Party may
exercise any of the rights or obligations that such Party may have under this
Agreement or the Supply Agreement to engage in research and development
activities, manufacturing activities or testing activities with respect to
Licensed Products by subcontracting all or any portion of such research and
development activities, manufacturing activities or testing activities, and, in
connection with any such subcontracting, to grant such sublicenses as may be
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the activities
subcontracted to such Third Party subcontractor.  Each Party may also exercise any of its
rights or obligations under this Agreement to Commercialize Licensed Products
by subcontracting all or any portion of such rights or obligations to
distributors, and, in connection with any such subcontracting, to grant such
sublicenses as may be necessary to permit any such distributor to perform the
activities subcontracted to such distributor, provided, however,
that Chiron shall not grant to any such distributor any right other than the
right to Commercialize in the Territory Licensed Products supplied to such
distributor by or on behalf of Chiron, and, specifically, Chiron shall not
grant to such distributor any right to engage in research or development
activities with respect to, or to manufacture or have manufactured, Licensed
Products anywhere in the world. Any sublicenses granted pursuant to this Section 2.13
shall be consistent with all of the terms and conditions of this Agreement and
the Supply Agreement that are applicable. 
The scope of any such sublicenses shall be no greater than the scope of
the rights under this Agreement or the Supply Agreement held by the Party
granting such sublicenses and such sublicenses shall be subject to all of the
limitations imposed on the rights under this Agreement and the Supply Agreement
of the Party granting such sublicenses. 
Subcontracting as contemplated by this Section 2.13 by either Party
of any of the rights or obligations that such Party may have under this
Agreement or the Supply Agreement shall not relieve such Party from any of its
obligations under this Agreement or the Supply Agreement.


 


2.14.  Rights
of Last of Refusal for Canada.  Cubist
hereby grants Chiron a right of last refusal to obtain rights to sell any and
all Licensed Products in Canada (the “Canadian
Marketing Rights”), on the following terms:   In the event that Cubist proposes to grant,
sell, assign or otherwise transfer all or any portion of the Canadian Marketing
Rights to a Third Party (other than a distributor appointed by Cubist, directly
or indirectly, who sells Licensed Products) who is not the party who has
licensed or holds or will be licensed or hold the Commercialization rights with
respect to all Licensed Products in the United States (the “U.S. Rights Holder”), then Cubist acknowledges and agrees that
prior to entering into any agreement for the grant of the Canadian Marketing
Rights with any Third Party (other than the U.S. Rights Holder or a distributor
appointed by Cubist, directly or indirectly, who sells Licensed Products),
Cubist will provide to Chiron a copy of the fully negotiated final draft of
such proposed agreement with such Third Party and offer to Chiron the
opportunity to enter into an agreement with Cubist for the same rights and on
the same terms as set forth in such draft.  Provided that Cubist has given Chiron [*]
notice of the possibility of such transaction, Chiron shall have [*] to provide
Cubist written notice of its decision. 
If and only if Chiron declines such offer, or fails to accept such offer
within such [*], will Cubist then be free to enter into such agreement with
such Third Party, it being understood and acknowledged by Cubist that any
material modification of the terms of such proposed agreement with the Third
Party after it had been declined by Chiron shall constitute a breach of Cubist’s
obligations under this Section 2.14 and a violation of Chiron’s right of
last refusal hereunder.  The provsions of
this Section 2.14 shall not apply if Chiron is in material breach of this
Agreement or the Supply Agreement.


 


2.15.  Applicable
Supply Agreement Provisions.  The
following provisions of the Supply Agreement are incorporated herein by
reference and shall apply to this Agreement in the same manner as which they
apply to the Supply Agreement:  Sections
2.4 (Second Manufacturing Source(s)), 2.5 (Global Manufacturing Plan), 7.1
(Transfer Pricing), 8.1 (Allocation in the Event of Shortages) and 11.6
(Back-up Supply Rights of Chiron).


 






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ARTICLE 3.


 


COORDINATION


 


3.1.  General.  The Parties desire
to establish a committee to review the Parties’ activities under this
Agreement, to exchange information regarding, and to discuss the Parties’
development and commercialization of, Licensed Products within and outside of
the Territory.  It is the intent of the
Parties that such committee would serve as a forum for discussion and exchange
of ideas and that the Parties shall endeavor to reach consensus on matters
discussed in this forum.  Such committee
shall operate as set forth in this Article 3 and in other provisions of
this Agreement.


 






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3.2.  Joint
Coordination Team.


 


(a)  Formation.  Within
thirty (30) days after the Effective Date, Cubist and Chiron shall
establish the Joint Coordination Team (the “JCT”),
which shall (i) serve as a forum for the review and discussion of the
Parties’ efforts under this Agreement including the development and marketing
and sales activities in the Territory and outside the Territory with respect to
Licensed Products, and (ii) serve as a forum for the resolution of
disputes between the Parties in accordance with the provisions of Article 15
of this Agreement.


 


(b)  Membership.  Cubist and Chiron
each shall designate an equal number of representatives (but in no event more
than four (4) representatives each) with appropriate expertise to serve as
members of the JCT.  Of the initial
representatives to be designated by each Party, there shall be expertise in
regulatory matters, clinical development matters, and sales and marketing
matters.  The Parties shall be free to
change their representatives over time as the needs evolve over time.  Each representative serving on the JCT shall
have appropriate technical credentials, experience and knowledge, and ongoing
familiarity in the specific area of such representative’s expertise.  A Party may replace its representatives serving
on the JCT from time to time by written notice to the other Party specifying
the prior representative(s) to be replaced and the replacement(s) therefor.  Each Party shall select one (1) person
appointed by it to the JCT to serve as co-chair.  The co-chairpersons shall be responsible for
calling meetings, preparing and circulating an agenda in advance of each
meeting, and preparing and issuing minutes of each meeting within thirty (30)
days thereafter.


 


(c)  Meetings.  The JCT shall hold
meetings at such times as it elects to do so, but in no event shall such
meetings be held less frequently than once every three (3) months unless
otherwise agreed by the Parties.  The
first meeting of the JCT shall be held no earlier than 60 days after the
Effective Date and no later than 90 days after the Effective Date.  The JCT shall meet alternately at Cubist’s
facility and at Chiron’s facility, or at such location(s) as the Parties
may otherwise agree.  With the consent of
the representatives of each Party serving on the JCT, other representatives of
each Party or of Third Parties involved in the manufacture, development or
commercialization of the Licensed Products may attend meetings of the JCT.  Meetings of the JCT may be held by audio or
video teleconference with the consent of each Party, provided that at least one
(1) meeting per year shall be held in person.  Each Party shall be responsible for all of
its own expenses of participating in the JCT. 
Meetings of the JCT shall be effective only if at least two (2) representatives
of each Party are present or participating. 
The co-chairpersons will alternate responsibility for preparing minutes
of each meeting of the JCT, which minutes will not be finalized until the
co-chairperson that did not prepare such minutes reviews and confirms the
accuracy of such minutes in writing.


 


(d)  
Specific Activities.  In
addition to its functions described in Section 3.2(a), the JCT shall in
particular review, consider, discuss and comment upon where appropriate:


 


(i)            the overall strategy
for the development of Licensed Products for sale within and outside the
Territory, and the design of all pre-clinical trials and clinical trials in
connection with the development of Licensed Products for sale within and
outside the Territory;


 






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(ii)           the development
activities of Cubist with respect to Licensed Products, and the development
activities of Chiron with respect to Licensed Products;


 


(iii)         the Cubist
Development Plan and Chiron’s development plan (if any), each updated annually;


 


(iv)          the strategies for
obtaining and maintaining Regulatory Approvals within and outside the
Territory;


 


(v)            the regulatory
activities of Cubist for obtaining and maintaining Regulatory Approvals of
Licensed Products in the United States, and the regulatory activities of Chiron
for obtaining and maintaining Regulatory Approvals of Licensed Products in the
Territory;


 


(vi)          the Regulatory Plan
and the corresponding plan of Cubist for obtaining Regulatory Approval outside
of the Territory updated annually;


 


(vii)         the general strategy
for the manufacturing and supply of Licensed Products and the corresponding
Manufacturing Plan, updated annually;


 


(viii)        the general strategy
for the Commercialization of Licensed Products within and outside the
Territory;


 


(ix)          the
Commercialization activities of Cubist with respect to Licensed Products in the
United States, and the Commercialization activities of Chiron with respect to
Licensed Products in the Territory;


 


(x)           the Marketing Plan
and the corresponding plan of Cubist for Commercializing the Licensed Products
outside of the Territory updated annually;


 


(xi)          the Manufacturing
Plan for the manufacture and supply of Licensed Products worldwide updated
annually;


 


(xii)         the Parties’
scientific presentation and publication strategy relating to Licensed Products;
and


 


(xiii)       such other materials as
are specifically provided for review at the JCT elsewhere in this Agreement or
in the Supply Agreement.


 


(e)  
Limited Authority; Not a Decision-Making Body.


 


(i)            Except for its
function as a dispute resolution forum, the role of the JCT shall be
facilitative.  The JCT shall serve as a
forum for the sharing of information.  In
addition, the JCT may serve the purpose of preventing, or informally resolving,
disputes between the Parties.  The rights
and responsibilities of each Party shall be governed by this Agreement,
including the exhibits hereto, and the JCT shall not have any power to amend,
modify or waive compliance with this Agreement.


 






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(ii)           Although it is not
the purpose of the JCT to make decisions that control the Parties’ respective
activities under this Agreement, the JCT shall at all appropriate times
endeavor to operate by consensus.  In the
event that one Party elects to deviate from a course of action for which
consensus was achieved in the JCT, as a courtesy to the other Party, the
deviating Party will notify the other Party in writing of the intended
deviation and the reasons therefor.  In
addition, when a Party brings a matter to the JCT for review and comment
(either as required by the provisions of this Agreement or voluntarily), if the
Party seeking comment elects not to incorporate the other Party’s comments,
then, as a courtesy to the other Party, the Party that sought comments will notify
the other Party in writing of the decision not to incorporate the comments and
the reasons therefor.  With respect to
matters to be discussed by the JCT, the representatives of each Party shall
endeavor to present a unified position on behalf of such Party.


 


(f)  
Meeting Agendas.  Each
Party will disclose to the other Party its final agenda items along with
appropriate related information at least ten (10) business days in advance
of each meeting of the JCT.


 


3.3.  JCT
Coordinators.  Each
Party shall appoint a designee (a “JCT
Coordinator”) to coordinate its activities under this
Agreement.  The JCT Coordinators shall
serve as primary contacts between the Parties with respect to this
Agreement.  Each Party shall notify the
other Party within thirty (30) days of the date of this Agreement of the
appointment of its JCT Coordinator and shall notify the other Party as soon as
practicable upon changing such appointment. 
The JCT Coordinator appointed by each Party shall be responsible for (i) preparing
such Party’s representatives serving on the JCT for meetings of the JCT, (ii) coordinating
the distribution and exchange of information to, from and among such Party’s
representatives serving on the JCT, and (iii) assisting in the
coordination of the day-to-day activities of such Party’s representatives
serving on the JCT so that the JCT can function effectively and such
representatives can more effectively discharge their responsibilities as
members of the JCT.


 


3.4.  Independence.  Subject to the terms
of this Agreement, the activities and resources of each Party shall be managed
by such Party, acting independently and in its individual capacity.  The relationship between Cubist and Chiron is
that of independent contractors, and neither Party shall have the power to bind
or obligate the other Party in any manner, other than as is expressly set forth
in this Agreement.


 


ARTICLE 4.


 


DEVELOPMENT


 


4.1.  Key
Development Studies; Diligence Obligations. 
Cubist  shall
use Commercially Reasonable Efforts to complete, subject to the provisions of
this Section 4.1, the Key Development Studies.  Cubist reserves the right to change or modify
any of the Key Development Studies, or to abandon or discontinue any of the Key
Development Studies, in accordance with the provisions set forth below:


 






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(a)           Cubist may change or modify any Key
Development Study if such change or modification is designed to improve the
probability of obtaining Regulatory Approval of the indication targeted by such
Key Development Study.


 


(b)           Cubist may change,
modify, abandon or discontinue any Key Development Study in response to (i) any
regulatory feedback, (ii) increases of [*] or more in the anticipated
costs of clinical trials for any reason other than due to an increase in the
size or scope of such clinical trials, or (iii) any significant adverse
event or condition relating to the safety or efficacy of a Licensed Product.


 


(c)           If Cubist abandons
or discontinues any Key Development Study, Cubist will use Commercially
Reasonable Efforts to replace such study with another clinical study that is
designed to improve the probability of obtaining Regulatory Approval of the
indication targeted by such abandoned or discontinued study (a “Replacement Study”). 
Following any such replacement, Cubist shall use Commercially Reasonable
Efforts to complete the Replacement Study provided that Cubist may change,
modify, abandon or discontinue such study to the same extent as provided in
this Section 4.1 for the Key Development Studies.


 


(d)           If Cubist abandons
or discontinues a Key Development Study or a Replacement Study, as the case may
be, and if Cubist is required but is unable, using Commercially Reasonable
Efforts, to replace such abandoned or discontinued study with another
Replacement Study that Cubist is able to complete using Commercially Reasonable
Efforts, then Cubist will use Commercially Reasonable Efforts to replace any
such abandoned or discontinued study [*] who treat infectious diseases as being
difficult to treat (such new indication, a “Replacement
Indication” and any such clinical study for a Replacement
Indication, a “Replacement Indication Study”).  In the event of, and following, any such
replacement, Cubist shall use Commercially Reasonable Efforts to complete such
Replacement Indication Study provided that Cubist may change, modify, abandon
or discontinue such study to the same extent as provided in this Section 4.1
for the Key Development Studies.


 


Notwithstanding
anything in this Section 4.1 to the contrary, prior to making any decision
to abandon or discontinue any of the Key Development Studies, any Replacement
Study or any Replacement Indication Study (each a “Required
Study”), or to change or modify any Required Study so as to
effectively abandon same, Cubist shall have first provided its reasons in
support of such decision to Chiron via the JCT and the JCT shall have met to
discuss the merits of such decision. 
Cubist shall bear all of the costs and expenses in connection with any
and all development activities engaged in by Cubist and its Affiliates in
connection with all Required Studies.


 






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4.2.  Cubist
Development Plan.


 


(a)           Cubist shall
prepare and update annually a development plan for Licensed Products (the “Cubist Development Plan”). 
The Cubist Development Plan may include, as appropriate and without
limitation, the following elements:


 


(i)            Cubist’s plan for
conducting and completing the Required Studies;


 


(ii)           Cubist’s general
strategy for developing indications other than the indications pursued in the
Required Studies for use of Licensed Products throughout the world;


 


(iii)         design and execution
of pre-clinical and clinical studies for indications other than the indications
pursued in the Required Studies;


 


(iv)          development of
improvements in formulation, presentation and other features of Licensed
Products considered desirable for life cycle management and maximizing sales of
Licensed Products throughout the world; and


 


(v)            an analysis of the
total costs and expenses incurred or to be incurred by Cubist in connection
with its development activities set forth in the Development Plan.


 


Cubist shall
update the Cubist Development Plan annually and provide such updated Cubist
Development Plan to Chiron prior to the JCT’s last scheduled meeting during the
then current year.  Chiron shall have the
right to review and comment, via the JCT, on the Cubist Development Plan and
any and all revisions and updates thereto, 
and Cubist shall, in good faith, consider all comments made by Chiron.


 


(b)           Subject to the provisions
of this Section 4.2(b), Cubist  shall use
Commercially Reasonable Efforts to carry out and perform during each calendar
year the activities set forth in the Cubist Development Plan as may be in
effect for such calendar year that are materially significant for obtaining
Regulatory Approval.  With the exception
of the Required Studies (which Cubist may not change, modify, abandon or
discontinue except in accordance with the provisions of Section 4.1
hereof), Cubist reserves the right at any time to change or modify the Cubist
Development Plan or any of the preclinical studies or clinical trials described
in the Cubist Development Plan, or to abandon any portion of the Cubist
Development Plan or discontinue any such preclinical studies or clinical trials,
in response to (i) changes in clinical or regulatory strategy, (ii) regulatory
feedback, (iii) scientific feasibility, (iv) increases in the
anticipated costs of clinical trials, (v) any significant adverse event or
condition relating to the safety or efficacy of a Licensed Product, (vi) manufacturing
feasibility, including, without limitation, changes in the anticipated costs of
manufacturing, (vii) significant adverse changes in market conditions or
in market potential of a drug candidate, or (viii) any other reason that
Cubist determines in its reasonable discretion justifies such change,
modification, abandonment or discontinuation; however, prior to making any
decision to abandon any development effort (or change or modify any such effort
so as to effectively abandon same), Cubist shall have first


 






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provided its
reasons in support of such decision to Chiron via the JCT and the JCT shall
have met to discuss the merits of such decision.


 


(c)           Except to the
extent otherwise provided in Section 4.2(d) below, Cubist shall bear
all of the costs and expenses in connection with any and all development
activities engaged in by Cubist and its Affiliates pursuant to, and in
accordance with, the provisions of this Section 4.2 and any Cubist
Development Plan made hereunder.


 


(d)           In the event that
Cubist and Chiron consider it appropriate to consolidate their efforts in the Territory
in the Cubist Development Plan and the Chiron Development Plan into common
clinical studies, the Parties shall discuss at the JCT an appropriate sharing
of resources, costs and expenses in connection with such studies.  If the Parties cannot agree to a sharing of
resources, costs and expenses, then neither Party shall be obligated to
consolidate its respective clinical activities with those of the other
Party.  Except pursuant to any such
agreement between Cubist and Chiron, Cubist shall have no obligation to
undertake any clinical studies or to make material protocol changes that are
not required by the FDA or any other Regulatory Authorities outside the
Territory but are proposed to be undertaken for the sole purpose of complying
with the requirements of any Regulatory Authority in the Territory.


 


4.3.  Development
by Chiron.


 


(a)  
Territory Specific Studies.  The
Parties acknowledge that Regulatory Authorities in the Territory may require
that certain clinical studies be conducted in connection with Regulatory
Approval sought in the Territory by Chiron, but which studies are not required
by the FDA or any other Regulatory Authorities outside the Territory (the “Territory Specific Studies” and each a “Territory Specific Study”).  Chiron shall use Commercially Reasonable
Efforts to conduct the Territory Specific Studies provided that Chiron shall be
entitled to decline to perform any Territory Specific Study if, in its sole
discretion, it considers the study to be prohibitively expensive, uneconomical
or not in its commercial interest.  If
Chiron elects not to conduct any particular Territory Specific Study, it will
notify Cubist in writing of its reasons therefor and discuss same at a meeting
of the JCT.  If the Parties are unable to
reach an agreement on cost sharing to conduct such Territory Specific Study,
Chiron shall have no further obligation to conduct such Territory Specific
Study.


 


(b)  
Proposed Indications.  Chiron
may, from time to time, propose to Cubist through the JCT that Cubist consider
pursuing development for a new indication (the “Proposed Indication”). 
Such proposal shall be in writing and contain such information as may be
readily gathered which will assist Cubist to evaluate the proposal on its
merits.  If after due consideration by
Cubist and Chiron at the JCT, consensus is reached to pursue development for
such new indication, Cubist shall add the Proposed Indication to the Cubist
Development Plan.  In the event that the
Parties are unable to reach consensus on adding the Proposed Indication then
Chiron shall be free to pursue, at its own expense, development of such
Proposed Indication.


 


(c)  
Medical Affairs Studies.  Chiron
may conduct Medical Affairs Studies of the Licensed Products at its sole cost
and expense.  Chiron shall provide to
Cubist via the JCT its proposal for any Medical Affairs Study it wishes to
conduct, for review and discussion purposes only.  Cubist shall supply Licensed Products to be
used in Medical Affairs Studies (i) at a


 






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purchase price
equal to the Transfer Price, and (ii) in an amount not to exceed [*],
during the first complete calendar year (and any part thereof) after Commercial
Launch, and for any calendar year thereafter, [*] by Chiron for the
corresponding period as reflected in the forecasts of purchase quantities
delivered by Chiron to Cubist pursuant to the Supply Agreement.


 


(d)  
Chiron Development Plan.  Chiron
will prepare and update annually a development plan for Chiron’s development
activities pursuant to this Section 4.3 (the “Chiron Development Plan”). Chiron shall update the Chiron
Development Plan each year to reflect the activities that Chiron expects to
conduct during the following calendar year and Chiron shall provide the updated
Chiron Development Plan to Cubist prior to the JCT’s last scheduled meeting
during the then current year.  Cubist
shall have the right to review and comment, via the JCT, on the Chiron
Development Plan and any and all revisions or updates thereto and Chiron shall,
in good faith, consider all comments made by Cubist. Subject to the provisions
set forth below in this Section 4.3(d), Chiron shall use Commercially Reasonable
Efforts to carry out and perform during each calendar year the activities set
forth in the Chiron Development Plan, as may be in effect for such calendar
year, that are materially significant for obtaining Regulatory Approval in the
Territory.  With the exception of the
Territory Specific Studies (which Chiron may decline to perform in accordance
with the provisions of Section 4.3(a) above), Chiron reserves the
right at any time to change or modify the Chiron Development Plan or any of the
preclinical studies or clinical trials described in the Chiron Development
Plan, or to abandon any portion of the Chiron Development Plan or discontinue
any such preclinical studies or clinical trials, in response to (i) changes
in clinical or regulatory strategy of either Chiron or Cubist, (ii) regulatory
feedback, (iii) scientific feasibility, (iv) increases in the
anticipated costs of clinical trials, (v) any significant adverse event or
condition relating to the safety or efficacy of a Licensed Product, (vi) manufacturing
feasibility, including, without limitation, changes in the anticipated costs of
manufacturing and/or procuring Licensed Product, (vii) significant adverse
changes in market conditions or in market potential of a drug candidate, or (viii) any
other reason that Chiron determines in its reasonable discretion justifies such
change, modification, abandonment or discontinuation; however, prior to making
any decision to abandon any development effort (or change or modify any such
effort so as to effectively abandon same), Chiron shall have first provided its
reasons in support of such decision to Cubist via the JCT and the JCT shall
have met to discuss the merits of such decision. The exercise by Chiron of any
right that it may have under this Section 4.3(d) to change, modify,
abandon or discontinue all or any portion of the Chiron Development Plan or any
of the preclinical studies or clinical trials described in the Chiron
Development Plan shall not relieve Chiron from its obligations to use
Commercially Reasonable Efforts under Section 5.1 or Section 6.1
hereof.


 


(e)  
Limitation on Chiron’s Development Rights.  Notwithstanding
anything in this Section 4.3 to the contrary, in the event that at any
time Cubist reasonably believes, on the basis of medical, clinical, scientific
and other data, facts and knowledge that have been published or are otherwise
documented and available or are known to subject matter experts, and presented
to Chiron, that any of the development activities being conducted or to be conducted
by Chiron pursuant to this Section 4.3 is substantially likely to result
in Global Harm, Cubist shall promptly convene a meeting of the JCT to discuss
same.  Prior to the meeting, Cubist will
provide to Chiron all relevant documents, materials and information suggesting
the likelihood of Global Harm as well as Cubist’s recommendations to Chiron on
the course of action (e.g. modify the


 






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study, terminate
the study, etc.).  At the JCT, the
Parties will discuss and attempt to reach consensus on the course of
action.  Following such discussion, in
the absence of consensus, Cubist shall have the right to require Chiron to
modify or discontinue those development activities that Cubist reasonably and
in good faith believes, based on the totality of the data, facts and knowledge
presented to Chiron and the data, facts and knowledge presented by Chiron in
response, are substantially likely to result in Global Harm.  In the event that there is no person
(including a successor-in-interest to Cubist) to carry out Cubist’s development
obligations under Section 4.1, then (i) the provisions of this Section 4.3(e) shall
not be applicable to the Licensed Product(s) as to which such development
obligations are not being performed, and (ii) Chiron shall be free from
its obligations to consult via the JCT under Sections 4.3(b) and 4.3(c) with
respect to the Licensed Product(s) as to which such development
obligations are not being performed.   In
the event that a successor-in-interest to Cubist shall be in material breach of
such development obligations, then (i) the provisions of this Section 4.3(e) shall
not be applicable to the Licensed Product(s) and the indication(s) as
to which such development obligations are not being performed, and (ii) Chiron
shall be free from its obligations to consult via the JCT under Sections 4.3(b) and
4.3(c) with respect to the Licensed Product(s) and the indications as
to which such development obligations are not being performed.


 


4.4.  Access
to Chiron Data.


 


(a)   Information
Sharing.  Chiron will provide
to Cubist all Information that results from any development activities
conducted pursuant to Section 4.3 above or the Chiron Development Plan
(the “Chiron Data”).  Subject to Section 4.4(c), any such
Chiron Data so provided shall be strictly for information purposes only and
Cubist shall have no right to use the Chiron Data for any purpose whatsoever,
including without limitation, to access, reference, interpret, disclose,
tabulate, analyze or otherwise use any such Chiron Data for the purpose of
supporting any Drug Approval Application anywhere in the world.


 


(b)   Reciprocating
Licensee.  Cubist may share
the Chiron Data with any Other Licensee who has agreed in writing to permit
reciprocal sharing by Cubist with Chiron of the results of such Other Licensee’s
own development activities in accordance with the provisions of Section 5.3
hereof (each a “Reciprocating Licensee”),
provided that Cubist has first communicated the restrictions set forth
in this Section 4.4 on use of the Chiron Data and obtained the
Reciprocating Licensee’s written agreement to abide by such restrictions.


 


(c)   License Option.  Chiron hereby grants to Cubist an
option to acquire a nonexclusive license on commercially reasonable terms (as
to which the Parties shall agree thereon at any time on or prior to the date of
the exercise of the option) to access, reference, interpret, disclose,
tabulate, analyze or otherwise use all Chiron Data for the purpose of
supporting Drug Approval Applications in any country outside the
Territory.  The Parties contemplate that
such license will include a right of Cubist to grant sublicenses to any
Reciprocating Licensee who agrees in writing to grant a reciprocal option to
Cubist to acquire a nonexclusive license on commercially reasonable terms (as
to which such Reciprocating Licensee and Cubist shall agree thereon at any time
on or prior to the date of the exercise of the option) to access, reference,
interpret, disclose, tabulate, analyze or otherwise use all similar development
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Applications in
any country within the Territory, with a right of Cubist to grant sublicenses
to Chiron.


 


4.5.  No
Debarred Personnel.  In
the course of the development of Licensed Products, neither Party shall use,
during the term of this Agreement, the services of any employee or consultant
that has been debarred by the FDA or Regulatory Authorities, or, to the best of
such Party’s knowledge, is the subject of debarment proceedings by the FDA or
Regulatory Authorities.


 


4.6.  Chiron
Compliance.  In
connection with any development activities undertaken by Chiron in connection
with any Licensed Product, Chiron shall comply with all applicable laws and
regulations regarding the care and use of experimental animals, as such laws
and regulations are in effect where such development activities are
undertaken.  All animals used by Chiron
to evaluate Daptomycin or any Licensed Product shall be provided humane care
and treatment in accordance with the most acceptable veterinary practices.


 


ARTICLE 5.


 


REGULATORY


 


5.1.  Regulatory
Plan; Diligence Obligation.


 


(a)   Cubist’s
and Other Licensees’ Activities.  Cubist
shall prepare and present to Chiron via the JCT, and update annually, its
regulatory plan for the Licensed Products outside of the Territory.  Cubist shall keep Chiron apprised of the
status of Cubist’s and the Other Licensees’ efforts to obtain Regulatory
Approval in countries outside of the Territory. 
Prior to making any decision to abandon any efforts and activities set
forth in such regulatory plan to obtain Regulatory Approval in the United
States for a Licensed Product (or for an indication or formulation of same),
Cubist shall have first provided its reasons in support of such decision to
Chiron via the JCT and the JCT shall have met to discuss the reasons for such
decision.


 


(b)  
Regulatory Plan.  Within
the time period set forth in Section 5.1(c)(i), Chiron shall prepare and
deliver to Cubist one regulatory plan for the Territory, which regulatory plan
shall set forth Chiron’s plan, strategy and proposed activities to obtain
Regulatory Approval in the Territory for the Launch Indication(s) (the “Regulatory Plan”).  The Regulatory Plan may include, as
appropriate and without limitation, the following elements:


 


(i)            Chiron’s general
strategy for seeking Regulatory Approval for the Launch Indication(s) in
the Major Market Countries;


 


(ii)           Chiron’s plans for
the preparation and filing of applications for Regulatory Approval for the
Launch Indication(s) in the Major Market Countries;


 


(iii)         Chiron’s general
strategy for seeking Regulatory Approval for the Launch Indication(s) in
the remaining countries of the Territory, however such outline may at Chiron’s
sole discretion deal with such remaining countries individually or in the
aggregate;


 






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(iv)          if known, a
description of any clinical studies or clinical data that will be necessary in
order to obtain Regulatory Approval in the countries referenced in the
foregoing clauses (i)-(iii) of this Section 5.1(b), with respect to
the Launch Indication(s), and a discussion of the impact of any such clinical
studies or clinical data requirement on the timing of obtaining Regulatory
Approval for the Launch Indication(s) in such country or countries; and


 


(v)            the proposed
timetable for obtaining anticipated Regulatory Approval for the Launch
Indication(s) in the countries referenced in the foregoing clauses (i) and
(ii) of this Section 5.1(b), and the countries referenced in the
foregoing clause (iii) of this Section 5.1(b), individually or in the
aggregate, and a discussion of the factors that could result in an acceleration
or a delay of such proposed timetable.


 


Chiron shall
update the Regulatory Plan annually and provide such updated Regulatory Plan to
Cubist prior to the JCT’s last scheduled meeting during the then current
year.  Such updated Regulatory Plan
shall, at such later time as and when considered appropriate by Chiron in its
sole discretion, cover, among other things, additional Licensed Products,
additional indications and additional countries, considered individually or in
the aggregate.  Cubist shall have the
right to review and comment, via the JCT, on the Regulatory Plan and any and
all revisions and updates thereto, and Chiron shall, in good faith, consider
all comments made by Cubist.  For the
avoidance of doubt, the foregoing provisions of this Section 5.1(b) shall
not impose any obligation on Chiron to have any plan, strategy or any proposed
activities, or to conduct any particular activities, with respect to any
specific country within the Territory (it being understood that Chiron may have
no such plan, strategy or any proposed activities with respect to any specific
country in the Territory) but shall only impose an obligation on Chiron to set
forth in the Regulatory Plan any such plan, strategy or proposed activities
with respect to any specific country within the Territory to the extent that
Chiron has any such plan, strategy or proposed activities. The provisions of
the foregoing sentence shall not relieve Chiron from its obligations to use Commercially
Reasonable Efforts under Section 5.1(c) below.


 


Subject to the
provisions of this Section 5.1(b), Chiron  shall
use Commercially Reasonable Efforts to carry out and perform during each
calendar year the plan, strategy and proposed activities set forth in the
Regulatory Plan, as may be in effect for such calendar year, that are
materially significant for obtaining Regulatory Approval in the Territory.  Chiron reserves the right at any time to
change or modify the Regulatory Plan in response to (i) changes in
clinical strategy or regulatory strategy of either Chiron or Cubist, (ii) regulatory
feedback, (iii) scientific feasibility, (iv)  increases in
anticipated costs of any Territory Specific Studies, (v) any significant
adverse event or condition relating to the safety or efficacy of a Licensed
Product, (vi) manufacturing feasibility, including, without limitation,
changes in the anticipated costs of manufacturing and/or procuring Licensed
Product, (v) significant adverse changes in market conditions or a market
potential of a drug candidate, or (vi) any other reason that Chiron
determines in its reasonable discretion justifies such change or modification;
however, prior to making any decision to change or modify the Regulatory Plan
(other than the annual updates), Chiron shall have first provided its reasons
in support of such decision to Cubist via the JCT and the JCT shall have met to
discuss the merits of such decision.  The
exercise by Chiron of any right that it may have under this Section 5.1(b) to
change or modify all or any portion of the Regulatory Plan shall not relieve
Chiron from its obligations to use Commercially Reasonable Efforts under Section 5.1(c) below
or Section 6.1 hereof.


 






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(c)  
Specific Regulatory Activities.  Chiron
will use Commercially Reasonable Efforts to:


 


(i)            inform Cubist whether Chiron will
pursue a central filing strategy or a mutual recognition strategy in the
European Union as soon as practicable, but in no event later than [*] after the
date that Cubist provides Chiron with all information submitted by Cubist to
the FDA in connection with its application for Regulatory Approval of Licensed
Product in the United States;


 


(ii)           if Chiron has determined to pursue a
central filing strategy in the European Union, prepare and file an application
to obtain Regulatory Approval of Licensed Products for the Launch Indication(s) with
respect to all countries in the European Union within [*] after either (a) receiving
from Cubist, or (b) collection on its own, as the case may be, all data
and information required for such filing;


 


(iii)         if Chiron has determined to pursue a
mutual recognition strategy in the European Union, prepare and file an
application for Regulatory Approval of Licensed Products for the Launch
Indication(s) in the reference member state within [*] after either (a) receiving
from Cubist, or (b) collecting on its own, as the case may be, all data
and information required for such filings;


 


(iv)          if Chiron has determined to pursue a
mutual recognition strategy in the European Union, prepare and file
applications for Regulatory Approval of Licensed Products for the Launch Indication(s) in
all Major Market Countries within [*] of obtaining Regulatory Approval in the
reference member state;


 


(v)            if Chiron has determined to pursue a
mutual recognition strategy in the European Union, then no later than [*] after
obtaining Regulatory Approval in the reference member state, prepare and file
applications for Regulatory Approval of Licensed Products for the Launch
Indication(s) in at least [*] other countries to be selected by Chiron
from the countries listed under the caption “EUROPE” on Exhibit D
hereto that are not Major Market Countries;


 


(vi)          no later than [*] after obtaining
Regulatory Approval in the reference member state (if pursuing a mutual
recognition strategy in the European Union) or in all countries of the European
Union (if pursuing a central filing strategy in the European Union), prepare
and file an application for Regulatory Approval of Licensed Products for the
Launch Indication(s) in at least one country listed under the caption “LATIN
AMERICA” on Exhibit D hereto, provided, however,
that, in lieu of complying with the foregoing provisions of this clause (vii),
Chiron may elect, instead, to have at least [*] with the Regulatory Authorities
of at least [*] countries listed under the caption “LATIN AMERICA” on Exhibit D
hereto no later than such [*] period, and, if Chiron makes such election, then
the number of countries as to which Chiron must satisfy the requirements of
clause (v) above in this Section 5.1(c) shall be increased from
[*] other countries in the European Union to [*] other countries in the
European Union;


 


(vii)         respond in timely fashion to requests
for data and information from Regulatory Authorities, provided that such data
and information are in Chiron’s possession,


 






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given to Chiron by
Cubist or otherwise available to Chiron without having to incur any substantial
cost in order to acquire such data and information;


 


(viii)        meet with officials from Regulatory
Authorities at such times as may be requested by such Regulatory Authorities;


 


(ix)          subject to Chiron’s right under Section 4.3(a) to
decline to perform any given Territory Specific Study for economic reasons (and
subject to Cubist’s right under Section 4.3(e) to require Chiron to
modify or discontinue a specific study for substantial likelihood of Global
Harm), perform the following activities, as appropriate, with respect to any
Territory Specific Study:


 


(1)          prepare draft
protocols for the Territory Specific Study after the Regulatory Authority has
confirmed any such requirement for such study;


 


(2)          take such actions to
obtain approvals from appropriate Regulatory Authorities and other governmental
authorities of any draft protocol and corresponding clinical trial application
for the Territory Specific Study as soon as reasonably practicable after such
draft protocol has been prepared;


 


(3)          identify and engage
suitable investigators and study sites for the Territory Specific Study as soon
as reasonably practicable after the draft protocol for the Territory Specific
Study has been prepared and such protocol and corresponding clinical trial
application has been approved by the appropriate Regulatory Authorities and
other governmental authorities; and


 


(4)          commence enrollment
for the Territory Specific Study as soon as reasonably practicable after all
required approvals have been obtained, suitable investigators and study sites
have been engaged, suitable quantities of Licensed Product for clinical use
have been obtained by Chiron, and all other necessary or advisable steps have
been taken to prepare investigators and study sites to enroll patients;


 


(x)           conduct and complete any Territory
Specific Study in accordance with the approved protocol, subject to (X) Chiron’s
right under Section 4.3(a) to decline to perform any given Territory
Specific Study for economic reasons, (Y) Cubist’s right under Section 4.3(e) to
require Chiron to modify or discontinue a specific study for substantial
likelihood of Global Harm, and (Z) completion of the steps described in Section 5.1(c)(ix),
above.


 


Notwithstanding
any provision of this Section 5.1(c) to the contrary, Chiron shall
not be deemed to be in material breach of any of its obligations under this Section 5.1(c) to
prepare and file applications for Regulatory Approval for each Launch
Indication if and to the extent that Chiron cannot meet any of such obligations
solely by virtue of the fact that one or more Regulatory Authorities do not
permit Chiron to file such applications for Regulatory Approval for only a
single indication.  If a Regulatory
Authority in the Territory informs Chiron that it may not file applications for
Regulatory Approval for a single indication, then the Parties shall convene a
meeting of the JCT to discuss alternative strategies that could be pursued by
the


 






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Parties.  In the event that Chiron is not permitted to
file applications for Regulatory Approval in any country within the Territory
for a single indication, then the Parties agree that as soon thereafter as
Chiron is permitted to file for Regulatory Approval in such country (whether
because such filing will be for more than a single indication or because the
regulatory environment in such country has changed so as to permit a filing for
Regulatory Approval for a single indication), then Chiron shall at that time
again be obligated to comply with the requirements, if any, imposed by this Section 5.1(c) with
respect to preparing and making filings for Regulatory Approval in such
country, and, for purposes of applying the timelines in this Section 5.1(c) at
that time, the date on which Chiron is first permitted to make such filing in
such country shall be deemed to be the end of the [*] period after Cubist has
given to Chiron all of the information necessary to make such filing.


 


(d)  
Costs and Expenses.  Chiron
shall bear all of the costs and expenses in connection with any and all
regulatory activities within the Territory engaged in by Chiron and its
Affiliates pursuant to, and in accordance with, the provisions of this Section 5.1,
it being understood that the foregoing regulatory activities shall not include
any activities of Chiron to assist Cubist with its development obligations
under this Agreement or outlined in the Cubist Development Plan.  Cubist shall bear all of the costs and
expenses in connection with any and all regulatory activities engaged in by
Cubist and its Affiliates in connection with obtaining and maintaining
Regulatory Approval for Licensed Products outside the Territory, regardless of
whether such activities occur within the Territory or outside the Territory.


 


(e)  
Limitation on Activities.  Notwithstanding
anything in this Section 5.1 or elsewhere in this Agreement to the
contrary, in the event that at any time Cubist reasonably believes on the basis
of medical, clinical, scientific and other data, facts and knowledge that have
been published or are otherwise documented and available or are known to
subject matter experts, and presented to Chiron, that obtaining Regulatory
Approval in the Territory for any Licensed Product for any particular
indication either: (i) substantially increases the risk that an adverse
safety event will occur; or (ii) would result in the use of a Licensed
Product to treat an indication for which such Licensed Product is an
ineffective or inferior therapeutic alternative and such use would materially
adversely affect the development, marketing, distribution or Commercialization
of such Licensed Product or any other Licensed Product within or outside the
Territory for other indications; Cubist shall promptly convene a meeting of the
JCT to discuss same.  Prior to the
meeting, Cubist will provide to Chiron all relevant documents, materials and
information suggesting the likelihood of events described in clauses (i) and
(ii) above, as well as Cubist’s recommendations to Chiron on the course of
action (e.g., not seeking approval of a particular Licensed Product or not
seeking approval of a particular indication, etc.).  At the JCT, the Parties will discuss and
attempt to reach consensus on the course of action.  Following such discussion, in the absence of
consensus, Cubist shall have the right to require Chiron to modify or
discontinue those regulatory activities that Cubist reasonably and in good
faith believes, based on the totality of the data, facts and knowledge
presented to Chiron and the data, facts and knowledge presented by Chiron in
response, are substantially likely to result in the events described in clause (i) or
clause (ii) above in this Section 5.1(e).


 


5.2.  Ownership
of Regulatory Approvals.  Except
to the extent otherwise provided elsewhere in this Agreement, Chiron shall file
in its own name and own all Drug Approval Applications and Regulatory Approvals
for Licensed Products in the Territory, and shall be


 






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solely responsible
for all communications with regulatory authorities in such countries. All such
filings shall be made in such manner as may be required under the laws of the
applicable jurisdiction to allow for the expeditious transfer of such Drug
Approval Applications and Regulatory Approvals for Licensed Products to Cubist
if such transfer is required pursuant to Article 13 hereof upon
termination (but not expiration) of this Agreement.  Promptly following execution of this
Agreement, Cubist shall transfer and assign to Chiron any and all such Drug
Approval Applications or Regulatory Approvals held by Cubist as of the date
hereof.


 


5.3.  Chiron
Access to Cubist and Other Licensee Data.


 


(a)  Information Sharing.  Subject to the
provisions of Section 5.3(d) below, during the Term, Cubist will
provide to Chiron any Cubist Data and Other Licensee Data necessary or useful
for making regulatory filings for, or marketing of, Licensed Products in the
Territory as such Cubist Data and Other Licensee Data are or become available.
The Parties shall discuss, via their participation in the JCT, the form in
which Cubist shall provide Chiron Cubist Data and Other Licensee Data pursuant
to this Section 5.3(a).  Subject to
the provisions of Section 5.3(c) below, any such Other Licensee Data
so provided shall be strictly for information purposes only and Chiron shall
have no right to use the Other Licensee Data for any purpose whatsoever,
including without limitation, to access, reference, interpret, disclose,
tabulate, analyze or otherwise use any such Other Licensee Data for the purpose
of supporting any Drug Approval Application anywhere in the world.


 


(b)  Chiron Use of Cubist Data.  Chiron shall have a
right of access, a right of reference and the right to use and incorporate all
Cubist Data provided to it pursuant to this Section 5.3 in its Drug
Approval Applications for Regulatory Approvals of Licensed Products within the
Territory.


 


(c)  License Option.  Cubist shall use
Commercially Reasonable Efforts to obtain the written agreement of each Other
Licensee granting to Cubist an option to acquire a nonexclusive license to
access, reference, interpret, disclose, tabulate, analyze or otherwise use all
Other Licensee Data for the purpose of supporting Drug Approval Applications in
any country within the Territory.  Cubist
shall also use Commercially Reasonable Efforts to obtain the written agreement
of such Other Licensee that Cubist shall have the right to grant to Chiron a
sublicense to any such nonexclusive license such that Chiron can access,
reference, interpret, disclose, tabulate, analyze or otherwise use all the
Other Licensee Data of such Other Licensee for the purpose of supporting Drug
Approval Applications in any country within the Territory.  In the event that any such nonexclusive
license may be sublicensed to Chiron and that Chiron requests that Cubist
exercise any such option to acquire such nonexclusive license, then Chiron
shall pay for any and all of the costs of exercising such option to the extent
attributable to the grant of the sublicense to Chiron.


 


(d)  Manufacturing Information.  Cubist acknowledges
and agrees that certain Cubist Know-How and other Information pertaining to the
manufacture of the Licensed Products (the “Manufacturing
Information”) will be required to be provided or made available to
Chiron so as to permit Chiron to obtain Regulatory Approval in the Territory,
conduct quality assurance testing and release of Licensed Products for use in
the Territory and otherwise comply with the requirements of the Regulatory
Authorities in the Territory.  The right
of Chiron to


 






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receive and use
Manufacturing Information shall be as set forth in this Section 5.3(d) and
the Supply Agreement.


 


To the extent that Chiron
needs to submit and make available any Manufacturing Information in connection
with obtaining Regulatory Approval in the Territory, the Parties agree that, to
the fullest extent permissible under applicable law, rules and
regulations, such Manufacturing Information shall be made available to the
applicable Regulatory Authorities in the Territory via a Drug Master File
appropriately formatted for the country in which such DMF is filed and [*]
(i.e. upon Chiron’s [*] under the Supply Agreement to manufacture or have
manufactured Licensed Products).  Drug
Master Files will be maintained and kept up to date by Cubist or the Cubist
Suppliers.  Chiron will be notified of
changes proposed to the DMF [*] in accordance with change control procedures
set forth in Section 3.2 of the Supply Agreement.  Chiron shall be responsible for notifying the
Regulatory Authorities in the Territory, as required by applicable laws, of the
updating of the DMF by Cubist or the Cubist Suppliers.


 


Notwithstanding the
foregoing, the applicable Regulatory Authorities in the Territory shall have
full access to all of the Manufacturing Information in such DMF [*], to the
extent considered necessary by such applicable Regulatory Authorities to
consider and act upon any applications for Regulatory Approvals in the
Territory that are submitted by Chiron, and [*] to allow such Regulatory
Authorities to refer to all of the Manufacturing Information in such DMF to the
extent necessary to assess applications for Regulatory Approvals of Licensed
Products in the Territory and to obtain such Regulatory Approvals.


 


If and to the extent that
Chiron needs to submit and make available any Manufacturing Information in
connection with any submission by Chiron of any application for Regulatory
Approval of Licensed Product within the Territory and the applicable regulatory
requirements do not permit the submission of such Manufacturing Information via
a DMF, then the Parties agree that such Manufacturing Information shall be made
available to Chiron for the sole purpose of filing applications for Regulatory
Approvals of Licensed Products in the Territory and obtaining such Regulatory
Approvals, and that Chiron shall not be entitled to use such Manufacturing
Information for any other purpose whatsoever other than to manufacture or have
manufactured Licensed Products and conduct quality assurance testing and
release of Finished Products, but only if, when and to the extent that Chiron
is expressly authorized under the Supply Agreement to use such Information for
such manufacturing purposes.


 


5.4.  Free
Sales Certificates.  The
Parties agree to cooperate with each other to obtain free sale certificates
where appropriate.


 


5.5.  Safety;
Adverse Event Reporting.


 


(a)  General.  The Parties shall
promptly exchange any and all appropriate safety data, and the Parties shall
report, and take other appropriate actions in relation to, adverse events with
Licensed Products to each other, all in accordance with a reporting protocol
that will be established by the JCT.  In
addition, each Party shall have the right to review the other Party’s internal
processes and procedures for the collection and processing of safety data.  Without limiting the generality of the
foregoing, each Party shall maintain a record of all non-medical and medical
product-related complaints and reports of adverse events that it receives with
respect to


 






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any Licensed
Product and each Party shall notify the other Party of any complaint received
by it and, within [*] of the initial receipt, provide the other Party with a
copy of such complaint(s) and adverse event reports.


 


(b)  Reporting Outside the
Territory.  Cubist
shall be responsible for reporting to the FDA and Regulatory Authorities
outside of the Territory any adverse experience and safety issues for Licensed
Products in compliance with the requirements of the U.S. Food, Drug and
Cosmetic Act, 21 U.S.C. §321 et seq., the regulations promulgated thereunder,
and the equivalent laws, rules and regulations in countries other than the
United States outside of the Territory, and shall promptly thereafter provide
to Chiron a copy of such report.


 


(c)  Reporting in the Territory.  Chiron shall be
responsible for reporting to Regulatory Authorities in the Territory any
adverse experience and safety issues for Licensed Products in compliance with
the requirements of the applicable laws, rules and regulations, and shall
promptly thereafter provide to Cubist a copy of such report.  Cubist shall require each of its Other
Licensees to comply with obligations corresponding to those in this Section 5.5.


 


(d)  Global Database.  Cubist shall be
responsible for compiling a validated global database that captures all adverse
events reported to Cubist from any source and maintaining said database as
defined in the Supply Agreement (or any associated Quality Agreement referenced
in the Supply Agreement).  Cubist shall
also provide Chiron with [*] so as to support the applications for Regulatory
Approval and the maintenance of marketing authorizations in the Territory, provided that it is technically feasible to do so and that
Chiron makes payment of any incremental license fees that may be required in
order add Chiron as an authorized user.


 


5.6.  Communications.


 


(a)  Communications Relating to
Regulatory Approval.  Except
as may be required by law or as otherwise expressly provided in this Agreement
or the Supply Agreement, during the Term, Cubist shall not communicate with any
Regulatory Authority having jurisdiction in the Territory regarding Regulatory
Approval for any Licensed Product in the Territory unless requested to do so by
Chiron.  If Cubist is required by
applicable laws or regulations or a Regulatory Authority having jurisdiction in
the Territory to disclose such information directly to such Regulatory
Authority, Cubist shall notify Chiron in writing of the requirement and the
particulars of the information required to be disclosed, and Cubist shall
coordinate with Chiron in making any such disclosure.  [*] between Cubist and such Regulatory
Authority but Chiron shall lead any such face-to-face meetings or scheduled
conference calls.  Each party shall
advise the other party of material developments and events relating to their
respective regulatory responsibilities in writing within two (2) business
days after notice of such material development event.


 


(b)  Communications Relating to
Development.  Cubist
shall have the right to communicate with Regulatory Authorities in the
Territory regarding Licensed Products for the purpose of advancing its global
development activities in connection with Licensed Products, including, those
development activities as described in the Cubist Development Plan, provided
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advance of any
such communications and Chiron shall have the right to be present and to
participate at any face-to-face meetings or scheduled conference calls between
Cubist and such Regulatory Authority regarding such communications, but Cubist
shall lead any such face-to-face meetings or scheduled conference calls at
which Chiron is present and participating. 
Cubist shall consult with Chiron prior to any such face-to-face meeting
or scheduled conference calls at which Chiron is present and participating to
develop a strategy for the meeting.


 


5.7.  Recalls
and Voluntary Withdrawals.


 


(a)           The Parties shall
exchange their internal standard operating procedures (“SOPs”)
as to product recalls and the treatment of product complaints and inquiries as
to safety, quality or efficacy reasonably in advance of the date of Commercial
Launch of any Licensed Product in the Territory.  If either Party becomes aware of information
about any Licensed Product indicating that it may not conform to the specifications
for Licensed Product then in effect pursuant to the Supply Agreement, or that
there are potential adulteration, misbranding and/or other issues regarding
safety or effectiveness, it shall promptly so notify the other Party.  The JCT shall meet to discuss such
circumstances and to consider appropriate courses of action, which courses of
action with respect to each recall shall be consistent with the internal SOP of
the Party having the right to control such recall pursuant to this Section 5.7.  Except to the extent otherwise provided in Section 5.7(b) below,
Chiron shall control, at its sole expense, all recalls of Licensed Product
within the Territory.  Cubist shall
control, at its sole expense, all recalls of Licensed Product outside the
Territory.  Chiron shall maintain
complete and accurate records of any recall for such periods as may be required
by legal requirements, but in any event for no less than three (3) years.


 


(b)           In the event that any recall of
Licensed Product in the Territory is required or necessary by virtue of such
Licensed Product being Defective Manufactured Product, then both Parties shall
work together to devise a reasonable and appropriate plan to implement such
recall, it being understood that the objective of such plan shall be to effect
such recall as quickly and as cost-effectively as reasonably possible under the
circumstances.  After the Parties shall
have reached agreement on the terms of such plan (or, in the event that the
Parties cannot reach agreement as to the terms of such plan, Chiron shall have
the right, acting reasonably and in good faith, to adopt another plan), Chiron
shall implement such recall in a manner consistent with the terms of such
plan.  Cubist shall cooperate with Chiron
in any way that Chiron reasonably requests in order to support the implementation
of such recall.  Subject to the
limitation of liability set forth in Section 10.6(a), Cubist shall
reimburse Chiron for all Recall Expenses (as defined below) provided that
[*].  For the avoidance of doubt, the
limitation set forth above in this Section 5.7(b) (and in Section 6.6(b) of
the Supply Agreement) on Cubist’s responsibility for Recall Expenses shall not
apply to limit Chiron’s remedies and Cubist’s obligations or liabilities with
respect to matters other than Recall Expenses, including, without limitation, (i) Cubist’s
obligation to indemnify Chiron pursuant to Sections 10.1 and 10.3 of this
Agreement with respect to costs and expenses other than Recall Expenses, and (ii) Chiron’s
remedies under Sections 8.1, 9.1(d) and 11.6 of the Supply Agreement.  “Recall Expenses”
shall mean the costs and expenses incurred by Chiron in connection with a
recall of Licensed Product that is implemented in accordance with this Section 5.7(b) (and/or
Section 6.6(b) of the Supply Agreement), including, without
limitation, the costs and expenses associated with notification and destruction
and/or return of such recalled Licensed Product.


 






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5.8.  Label.  To the extent
permitted by applicable law, regulation or the Regulatory Authority having
jurisdiction, Chiron shall identify Cubist as the licensor of the Cubist Marks
applied to Licensed Products on the vial label, package insert, outside of the
packaging and advertising materials for such Licensed Product in each country
of the Territory in a manner approved in advance in writing by Cubist, such
consent not to be unreasonably withheld, conditioned or delayed. Chiron shall
also comply with the patent marking provisions of Section 8.8 hereof.


 


5.9.  Governmental
Inspections.  Each
party shall advise the other party of any governmental visits to, or written or
oral inquires about, any facilities or procedures for the manufacture, storage,
or handling of the Licensed Product, or the marketing, selling, promotion or
distribution of the Licensed Product, promptly (but in no event later than [*]
after notice of such visit or inquiry. 
Each party shall, within [*] of receipt or submission, furnish to the
other party any report or correspondence issued by or provided to the
governmental authority in connection with such visit or inquiry.


 


ARTICLE 6.


 


COMMERCIALIZATION;
DILIGENCE


 


6.1.  Marketing
Plan; Diligence Obligation.


 


(a)  Marketing Plan.  Not later than three
(3) months after the acceptance by a Regulatory Authority of an
application for Regulatory Approval for the Launch Indication(s) in any
Major Market Country (the “Marketing Plan
Trigger Event”), Chiron shall prepare and deliver to Cubist one
marketing plan for the Territory, which marketing plan shall set forth Chiron’s
plan, strategy and proposed activities to market the Licensed Products in the
Territory with respect to the Launch Indication(s) (the “Marketing Plan”). The Marketing Plan may
include, as appropriate and without limitation, the following elements:


 


(i)            the anticipated
date of Commercial Launch for the Launch Indication(s) in each Major
Market Country;


 


(ii)           a description of
Chiron’s general strategy with respect to pre-launch and post-launch marketing,
advertising and promotion activities (including, without limitation, sponsoring
medical education events) for the Launch Indication(s) in each Major
Market Country;


 


(iii)         a description of the
marketing, advertising and promotional activities (including, without
limitation, sponsoring medical education events and product positioning of
Chiron) for the Launch Indication(s) in each Major Market Country;


 


(iv)          an estimated time
schedule for the performance of marketing activities;


 






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(v)            a general
description of the personnel resources of Chiron that will perform the marketing
activities; and


 


(vi)          a general
description of Chiron’s pricing strategy in the Territory.


 


Effective upon the
occurrence of the Marketing Plan Trigger Event, Chiron shall update annually
and provide such updated Marketing Plan to Cubist prior to the JCT’s last
scheduled meeting during the then current year. Such updated Marketing Plan
shall, at such later time as Chiron shall determine in its sole discretion,
cover, among other things, additional Licensed Products, additional indications
and additional countries for which Regulatory Approval has been obtained,
considered individually or in the aggregate. 
Cubist shall have the right to review and comment, via the JCT, on the
Marketing Plan and any and all revisions and updates thereto, and Chiron shall,
in good faith, consider all comments made by Cubist.  For the avoidance of doubt, the foregoing
provisions of this Section 6.1(a) shall not impose any obligation on
Chiron to have any plan, strategy or any proposed activities, or to conduct any
particular activities, with respect to any specific country within the
Territory (it being understood that Chiron may have no such plan, strategy or
any proposed activities with respect to any specific country in the Territory)
but shall only impose an obligation on Chiron to set forth in the Marketing
Plan any such plan, strategy or proposed activities with respect to any
specific country within the Territory to the extent that Chiron has any such
plan, strategy or proposed activities. The provisions of the foregoing sentence
shall not relieve Chiron from its obligations to use Commercially Reasonable
Efforts under Section 6.1(b) below.


 


Effective from and
after the Marketing Plan Trigger Event, and subject to the provisions of this Section 6.1(a),
Chiron  shall use Commercially Reasonable
Efforts to carry out and perform during each calendar year the plan, strategy
and proposed activities set forth in the Marketing Plan, as may be in effect
for such calendar year.  Chiron reserves
the right at any time to change or modify the Marketing Plan in response to (i) changes
in clinical strategy or regulatory strategy of either Chiron or Cubist, (ii) regulatory
feedback, (iii) scientific feasibility, (iv)  increases in
anticipated costs of any Territory Specific Studies, (v) any significant
adverse event or condition relating to the safety or efficacy of a Licensed
Product, (vi) manufacturing feasibility, including, without limitation,
changes in the anticipated costs of manufacturing and/or procuring Licensed
Product, (v) significant adverse changes in market conditions or a market
potential of a drug candidate, or (vi) any other reason that Chiron
determines in its reasonable discretion justifies such change or modification;
however, prior to making any decision to change or modify the Marketing Plan
(other than annual updates), Chiron shall have first provided its reasons in
support of such decision to Cubist via the JCT and the JCT shall have met to
discuss the merits of such decision.  The
exercise by Chiron of any right that it may have under this Section 6.1(a) to
change or modify all or any portion of the Marketing Plan shall not relieve
Chiron from its obligations to use Commercially Reasonable Efforts under Section 6.1(b) below.


 


(b)  Marketing Activities.  Chiron will use
Commercially Reasonable Efforts to:


 


(i)            effect the
Commercial Launch of Licensed Product for the Launch Indication(s) within
[*] after obtaining Regulatory Approval and acceptable Price Approval therefor;
and


 






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(ii)           market, sell and
distribute Licensed Products for the Launch Indication(s), upon receipt of
Regulatory Approval and acceptable Price Approval.


 


In addition and
without limiting the foregoing, during the period commencing [*] before the
date of first Commercial Launch of Licensed Product in each of the Major Market
Countries, and continuing through the [*] after such first Commercial Launch,
Chiron shall:


 


(1)           budget and spend on
marketing, advertising and promotion activities with respect to Licensed
Product (exclusive of fully loaded direct and indirect costs attributable to
salespersons): (A) in each Major Market Country an amount equal to the greater
of: (I) [*], or (II) [*] of the forecasted Net Sales of such Licensed
Product in such Major Market Country; or (B) in all of the Major Market
Countries collectively, an aggregate amount equal to the greater of: (III) [*]
the amount in the foregoing clause (I) during the period commencing [*]
before the date of first Commercial Launch of Licensed Product in the first
such country and continuing through the [*] after such first Commercial Launch
in the last such country, or (IV) [*] the amount in the foregoing clause (II) during
the period commencing [*] before the date of first Commercial Launch of
Licensed Product in the first such country and continuing through the [*] after
such first Commercial Launch in the last such country; and


 


(2)           employ or engage
not less than [*] salespersons to sell Licensed Products in each Major Market
Country or not less than [*] salespersons in the aggregate in all of the Major
Market Countries.


 


For purposes of
the foregoing provisions of this Section 6.1(b), the availability of
supply of Licensed Products shall be considered in determining whether Chiron
has used Commercially Reasonable Efforts to meet its diligence
obligations.  Further, any delay by
Chiron in effecting Commercial Launch in any Major Market Country until
Regulatory Approval in such country has been obtained for a second indication
(to the extent that a single indication does not allow Chiron to obtain
acceptable Price Approval in such country) shall be deemed not to be a material
breach by Chiron of any of its obligations under this Agreement.


 


(c)  Costs and Expenses.  Chiron shall bear
all of the costs and expenses in connection with any and all Commercialization
activities engaged in by Chiron and its Affiliates pursuant to, and in
accordance with, the provisions of this Section 6.1.


 


(d)  Ownership of Marketing
Information.  Chiron
shall be the sole owner of all rights, including intellectual property rights,
in and to all sales, marketing, financial and business Information of Chiron,
including without limitation, all customer and distributor lists of Chiron
and all Information of Chiron regarding sales projections, distribution
channels, market potential and competitive products analyses for the Licensed
Products (the “Chiron Marketing Information”),
and, except to the extent otherwise expressly provided elsewhere in this
Agreement or the Supply Agreement, no right of access, use or other license is
granted to Cubist or to any Other Licensee under this Agreement.  Notwithstanding any provision in this
Agreement to the contrary, no Chiron Marketing Information shall form any part
of Chiron Data, Chiron Know-How, Chiron Related Know-How or any Joint Know-How.


 






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6.2.  Prohibited
Marketing and Sales Activities.  Chiron
shall not engage in any direct marketing activities for the Licensed Products
outside of the Territory without Cubist approval.  Cubist shall not engage in any direct
marketing activities inside the Territory without Chiron approval.  The foregoing shall not prohibit either party
from participating in any conferences, symposia or other industry gatherings
merely because the venue for such gathering happens to be outside of the
Territory in the case of Chiron or inside the Territory in the case of
Cubist.  Chiron shall require that its
distributors make all commercially reasonable efforts to prevent any units of
Licensed Product sold by such distributors in any country within the Territory
from being resold in, or transported to, any country outside of the Territory.


 


6.3.  Discounting.  Neither Chiron nor
its Affiliates shall discount the price of Licensed Products or agree to reduce
the unit volume of purchases or sales of any Licensed Product in consideration
of any price increase on, the receipt of any payment in connection with, or the
entering of an arrangement for the purchase or sale (including, without
limitation, any arrangement guaranteeing volume increases or minimum volume)
of, a product other than a Licensed Product, or shall enter into any agreement
for such purpose.


 


6.4.  Marketing
and Promotional Literature.  Marketing
and promotional literature related to the Licensed Products and prepared for
use in the Territory by Chiron shall be prepared in a manner consistent with
relevant local statutes and regulations. 
In all marketing and promotional literature, Cubist shall be presented
and described as the party who developed the Licensed Product.  To the extent permitted by law, all marketing
and promotional literature shall display the Cubist Marks, trade names, logos
and trade dress of the Licensed Product in a manner that promotes the Product
and each of the parties in an appropriate manner.  To the extent practical, the Cubist name and
logo shall appear the same in size and proximity as the Chiron name and logo on
all marketing and promotional literature used in each country of the Territory
unless prohibited by the law, statutes or regulations of such country.  With the consent of Chiron, which consent
shall not be unreasonably withheld or delayed, Cubist shall have the right to
reproduce, distribute and otherwise use outside the Territory all Licensed
Product related marketing and promotional literature prepared by Chiron.  With the consent of Cubist, which consent
shall not be unreasonably withheld or delayed, Chiron shall have the right to
reproduce, distribute and otherwise use in the Territory all Licensed Product
related marketing and promotional literature prepared by Cubist.


 


ARTICLE 7.


 


COMPENSATION


 


7.1.  Upfront
Consideration.


 


(a)           In consideration for the licenses
granted to Chiron under this Agreement, Chiron shall, as soon as practicable
after the Effective Date (but in no event later than the seventh (7th) business day following the
Effective Date), make payment to Cubist of a license fee in the amount of eight
million dollars ($8,000,000).  Such
license fee shall be in the form of a


 






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cash payment made
by wire transfer of immediately available funds to a bank account or bank
accounts designated by Cubist.  Such
license fee shall be nonrefundable and noncreditable.


 


(b)           Simultaneously with the execution and
delivery of this Agreement, the Chiron Parent Company and Cubist are entering
into the Stock Purchase Agreement pursuant to which, among other things, at the
closing referred to below in this Section 7.1(b), Cubist shall agree to sell
to the Chiron Parent Company, and the Chiron Parent Company shall agree to
purchase from Cubist, [*] shares of Cubist common stock (subject to adjustment
for any reclassification, stock split, stock dividend, reverse stock split
merger, consolidation or similar transaction or event). The aggregate purchase
price payable by the Chiron Parent Company for all of such shares of Cubist
common stock shall be equal to ten million dollars ($10,000,000), payable in
the form of a cash payment made by wire transfer of immediately available funds
to a bank account or bank accounts designated by Cubist.


 


(c)           The closing of the
sale and purchase of such shares of Cubist Common Stock shall take place as
soon as practicable after the Effective Date but in no event later than the
seventh (7th) business
day following the Effective Date.


 


7.2.  Milestone
Payments.  Subject
to Section 13.6(a)(v), in consideration for the licenses and exclusive
rights of this Agreement, Chiron shall make a milestone payment to Cubist upon
the achievement of each development milestone with respect to a Licensed
Product as set forth in the table in Section 7.2(a) below, and Chiron
shall also make a milestone payment to Cubist upon the achievement of each
sales milestone with respect to a Licensed Product as set forth in the table in
Section 7.2(b) below. Chiron shall make payment of the applicable
milestone payment within [*] after Chiron’s receipt of notice from Cubist of
the first achievement of each such development milestone and of each such sales
milestone, as documented by appropriate written and/or other materials. Each
such milestone payment by Chiron shall be in the form of a cash payment made by
wire transfer of immediately available funds to a bank account or bank accounts
designated by Cubist.  Each milestone
payment by Chiron to Cubist hereunder shall be paid only once, and shall be
noncreditable and nonrefundable.


 


(a)  Development Milestone
Payments.


 


	
  Milestone Event

  	
   

  	
  Payment

  Amount

  	
   

  
	
   

  	
   

  	
  (in millions)

  	
   

  
	
  1.

  	
  Regulatory
  Approval of a Licensed Product [*]

  	
   

  	
  [*]

  	
   

  
	
  2.

  	
  Price Approval
  of a Licensed Product [*]

  	
   

  	
  [*]

  	
   

  
	
  3.

  	
  Regulatory
  Approval of a Licensed Product for [*] by Regulatory Authorities [*]

  	
   

  	
  [*]

  	
   

  
	
  Total Potential Development Milestone Payments

  	
   

  	
  [*]

  	
   

  



 






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(b)  Sales Milestone Payments.


 


	
  Milestone Event

  	
   

  	
  Payment

  Amount

  	
   

  
	
   

  	
   

  	
  (in millions)

  	
   

  
	
  1.

  	
  Cumulative Net
  Sales in the Territory is equal to or greater than [*]

  	
   

  	
  [*]

  	
   

  
	
  2.

  	
  Cumulative Net
  Sales in the Territory is equal to or greater than [*]

  	
   

  	
  [*]

  	
   

  
	
  3.

  	
  Cumulative Net
  Sales in the Territory is equal to or greater than [*]

  	
   

  	
  [*]

  	
   

  
	
  4.

  	
  Cumulative Net
  Sales in the Territory is equal to or greater than [*]

  	
   

  	
  [*]

  	
   

  
	
  5.

  	
  Cumulative Net
  Sales in the Territory is equal to or greater than [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
  Total Potential Sales Milestone
  Payments

  	
   

  	
  [*]

  	
   

  
						



 


7.3.  Royalties.


 


(a)  Royalty.  Subject to the other
terms and conditions of this Agreement (and, in particular , the provisions of Section 7.3(b) and
Section 7.3(c) below), Chiron shall pay Cubist a royalty with respect
to each Licensed Product sold by Chiron or its Affiliates equal to a percentage
determined in accordance with the table below or in accordance with Sections 7.3(b) or
7.3(c) below, as applicable, taking into consideration the protection
afforded by Cubist Patents at the relevant time, (such applicable percentage,
the “Royalty Rate”), of Net Sales
in any country within the Territory of units of such Licensed Product during
each calendar quarter from and after the date of Commercial Launch in such
country, less the aggregate Transfer Price previously paid to Cubist for having
supplied pursuant to the Supply Agreement such units of such Licensed Product
that are sold by Chiron or its Affiliates during such calendar quarter:


 


	
  Royalty Year

  	
   

  	
  Royalty Rate for the First [*] of

  Aggregate Annual Net Sales of

  All Licensed Products in All

  Countries of the Territory under

  Patent and Know-How

  Exclusivity

  	
   

  	
  Royalty Rate for Aggregate

  Annual Net Sales of All

  Licensed Products in All

  Countries of the Territory in

  Excess Of [*] under Patent and

  Know-How Exclusivity

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  



 


For
purposes of this Section 7.3, the first Royalty Year with respect to all
Licensed Products shall commence on the date of Commercial Launch by Chiron or
any of its Affiliates in any country within the Territory and end on December 31
of the year in which the Commercial Launch occurred.  Each succeeding Royalty Year shall commence
on January 1 of the ensuing


 






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year and end on December 31 of such year.  Accordingly, the determination of the Royalty
Year for the purpose of determining the Royalty Rate which applies shall not be
either on a Licensed Product-by-Licensed Product basis or on a
country-by-country basis.


 


The
determination of the Royalty Rate pursuant to the table in this Section 7.3(a) (i.e.
whether the Royalty Rate in left hand column or the right hand column in the
table above applies) shall also not be made on a Licensed Product-by-Licensed
Product basis or on a country-by-country basis, but, instead, shall be made
based on the aggregate amount of annual Net Sales for all Licensed Products in
all countries in the Territory.


 


The
determination of the amount of royalties due Cubist pursuant to this Section 7.3(a) shall
be made on a Licensed Product-by-Licensed Product basis and on a
country-by-country basis by multiplying the Royalty Rate that is applicable for
any particular Royalty Year, as determined in accordance with the foregoing
provisions of this Section 7.3(a), by the Net Sales arising from sales in
each country within the Territory of units of each Licensed Product by Chiron
or its Affiliates during each calendar quarter of the applicable Royalty Year.


 


(b)  Know-How Step-Down.  Notwithstanding Section 7.3(a) but
subject to Section 7.3(c), for any given country in the Territory, if
there is no Valid Claim that would be infringed by the sale by Chiron or its
Affiliates of Licensed Product in such country but for the licenses
granted by Cubist to Chiron hereunder (treating, for purposes of this Section 7.3(b) only,
all Joint Patents as if Cubist owned all right, title and interest in and to
the Joint Patents and Chiron had no interest in the Joint Patents other than
the rights licensed to Chiron by Cubist), then the Royalty Rate applicable to
Net Sales of such Licensed Product by Chiron or its Affiliates in such subject
country shall be the rate as determined in accordance with the table in Section 7.3(a) above,
but reduced by [*] (for example, the Royalty Rate for the second royalty year
where aggregate annual Net Sales are less than [*] shall be [*] instead of
[*]). The determination of the amount of royalties due Cubist pursuant to this Section 7.3(b) shall
be made on a Licensed Product-by-Licensed Product basis and on a
country-by-country basis by multiplying the Royalty Rate that is applicable for
any particular Royalty Year, as determined in accordance with the foregoing
provisions of this Section 7.3(b), by the Net Sales arising from sales in
each country within the Territory of units of each Licensed Product by Chiron
or its Affiliates during each calendar quarter of the applicable Royalty
Year.  Notwithstanding anything in this
Agreement to the contrary, no royalty shall be payable by Chiron pursuant to
this Section 7.3(b) after June 30, 2020.


 


(c)  Competition Step-Down.  Notwithstanding
anything in the foregoing provisions of this Section 7.3 to the contrary,
for any given country within the Territory, if (i) the aggregate unit
sales by all Third Parties in such country of Unlicensed Products constitute
more than 30% of the market share on a per unit basis with respect to all unit
sales of such Unlicensed Products and the affected Licensed Product in such
country (i.e., including the unit sales by Chiron
and its Affiliates and distributors of the Licensed Product whose market share
has been affected by sales of such Unlicensed Product), and (ii) there is
no Valid Claim which is being infringed by such Third Parties in connection
with such Third Parties’ use or sale of such Unlicensed Products in such
country or in connection with such Third Parties’ manufacture of such
Unlicensed Products anywhere in the world, then, subject to the provisions set
forth below


 






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in this Section 7.3(c) and
Sections 7.3(d), 7.3(e) and 7.3(f), the obligation of Chiron and its
Affiliates to pay royalties to Cubist under this Section 7.3 with respect
to sales of such Licensed Product in such country shall terminate and be of no
further force or effect.


 


(d)  Competition Step-Down Procedures.  If Chiron believes that the
provisions of Section 7.3(c) apply, Chiron shall notify Cubist in
writing of such belief and shall provide, together with such notice, copies of
the market research studies, market surveys or other marketing data that show
that the aggregate unit sales in such subject country of Unlicensed Products
exceeds the 30% market share threshold set forth in clause (i) of Section 7.3(c).  Cubist shall have a period of [*] from the
date that such notice and market data is delivered to Cubist to evaluate the
issue and reach its own determination as to whether the criteria of Section 7.3(c) have
been satisfied.


 


(i)            If within such [*]
period Cubist sends written notice to Chiron stating that Cubist agrees with
Chiron’s position on the issue, then the provisions of Section 7.3(c) shall
apply to sales of such Licensed Product by Chiron or its Affiliates in such
country and Chiron shall be entitled to cease paying royalties under this Section 7.3
in connection with such sales.


 


(ii)           If Cubist does not
send such written notice to Chiron within the [*] period in clause (i) above,
but within [*] after the end of such [*], Cubist commences an action against
the allegedly infringing Third Parties to enforce the Valid Claims and prevent
sales of Unlicensed Products in such country, then Chiron shall continue making
payment of royalties in connection with sales of the affected Licensed Product
by Chiron or its Affiliates in such country in the manner set forth in Section 7.3(e).


 


(iii)         If Cubist does not
send such written notice to Chiron within the [*] period in clause (i) above
and if Cubist does not commence such action within the [*] period in clause (ii) above,
then the provisions of Section 7.3(c) shall be deemed to apply to
sales of such Licensed Product by Chiron or its Affiliates in such country and
Chiron shall be entitled to cease paying royalties under this Section 7.3
in connection with such sales.


 


If Chiron becomes
entitled to cease paying royalties under Section 7.3(c) (i.e.
pursuant to clause (i) or (iii) of this Section 7.3(d)), then,
within [*] after Chiron so becomes entitled to cease paying royalties, Cubist
shall make payment to Chiron of all unearned royalties previously paid by
Chiron to Cubist as of the earliest month when sales of Unlicensed Product
exceeded the 30% market share threshold, together with interest thereon at the
rate specified for late payments pursuant to Section 7.10 hereof.


 


(e)  Holdback of Royalties Upon Certain Cubist Enforcement
Actions.  If after having
received Chiron’s notice to Cubist pursuant to Section 7.3(d), Cubist has
timely commenced an action to enforce the Valid Claims as required by Section 7.3(d)(ii),
then, with respect to any sales of such Licensed Product in the country in
question, from and after the date that Cubist commences such action, Chiron
shall pay to Cubist [*] of the royalties that Chiron otherwise would be
required to pay to Cubist in connection with such sales pursuant to Section 7.3(a) or
Section 7.3(b), as applicable, and without giving effect for this purpose
to Section 7.3(c).  The obligation
of Chiron to make the partial payment of royalties in accordance with the


 






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foregoing
provisions of this Section 7.3(e) shall continue with respect to such
sales of such Licensed Product in such country for so long as Cubist shall
continue the action to enforce the Valid Claims in order to prevent sales in
such country of the applicable Unlicensed Products, subject however to the
other terms of this Agreement governing the duration of the obligation of
Chiron to pay royalties to Cubist. If the final adjudication (following the
expiration of all rights of appeal) or final settlement of such action will
result in aggregate unit sales by all Third Parties in such country of such
applicable Unlicensed Products to be less than 30% of the market share on a per
unit basis with respect to all unit sales of such applicable Unlicensed
Products and the affected Licensed Product in such country (i.e., including the unit sales by Chiron and its Affiliates
and distributors of the Licensed Product whose market share has been affected
by sales of such applicable Unlicensed Product) (such thirty percent (30%)
market share on a per unit basis, the “Unlicensed Sales
Threshold”), then, within [*] after written notice to Chiron that
such final adjudication or final settlement has occurred, Chiron shall make
payment to Cubist the remaining [*] of the royalties payable that Chiron
withheld pursuant to this Section 7.3(e) together with interest
thereon at the rate specified for late payments pursuant to Section 7.10
hereof.  If, on the other hand, the final
adjudication or final settlement of such action will not result in the
aggregate unit sales by all Third Parties in such country of such applicable
Unlicensed Products to be below the Unlicensed Sales Threshold in such country,
then, within [*] of such final adjudication or final settlement, Cubist shall
make payment to Chiron of all unearned royalties paid by Chiron to Cubist
pursuant to this Section 7.3(e) together with interest thereon at the
rate specified for late payments pursuant to Section 7.10 hereof.


 


(f)  Chiron Enforcement Action.  Notwithstanding anything expressed
or implied in Sections 7.3(c), 7.3(d) or 7.3(e) to the contrary, if
Chiron commences an action to enforce a Valid Claim against any sales of
Unlicensed Products in any given country in the Territory, then Chiron shall
continue to make payment to Cubist of royalties payable in connection with
sales of Licensed Products in such country in accordance with the provisions of
Section 7.3(a) or Section 7.3(b), as applicable, unless and
until there is a final adjudication (following the expiration of all rights of
appeal) or final settlement of such action that will result in aggregate unit
sales by all Third Parties in such country of such Unlicensed Products to be
greater than the Unlicensed Sales Threshold in such country. If the final
adjudication or final settlement of such action will result in aggregate unit
sales by all Third Parties in such country of such Unlicensed Products to be
greater than the Unlicensed Sales Threshold in such country, then, within [*]
after written notice to Cubist that such final adjudication or final settlement
has occurred, Cubist shall make payment to Chiron of all unearned royalties
paid by Chiron to Cubist pursuant to this Section 7.3(f) as of the
earliest month when sales of Unlicensed Product exceeded the 30% market share
threshold, together with interest thereon at the rate specified for late
payments pursuant to Section 7.10 hereof. 
Chiron shall not enter into any such final settlement without the prior
written consent of Cubist (which consent shall not be unreasonably withheld or
delayed).


 


(g)  Clinical Supplies.  Notwithstanding any
provision in this Agreement to the contrary, Chiron shall have no obligation to
pay any royalty to Cubist for any Licensed Products distributed by Chiron for
use in any clinical study conducted by Chiron under this Agreement, including
without limitation, Territory Specific Studies, clinical studies for Proposed
Indications and Medical Affairs Studies.


 






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7.4.  Adjustments.  In recognition and
acknowledgement of the commercial advantage provided to Chiron under this
Agreement even in the absence of a Valid Claim, including, but not limited to,
advantages obtained by use of Cubist’s Know-How or regulatory exclusivity, the
Parties have agreed to the royalty rates set forth in Section 7.3(b).  In the event that a court of competent
jurisdiction or arbitration panel determines that the downward adjustment on
the applicable Royalty Rate effected by the provisions of Section 7.3(b) is
insufficient to avoid violating the doctrine of patent misuse or otherwise to
avoid rendering the obligation of Chiron to pay royalties to Cubist pursuant to
Section 7.3 unenforceable, in either case in connection with sales of any
Licensed Product in any country in the Territory that would be subject to the
foregoing provisions of Section 7.3(b), then the Parties hereby agree (i) that
any such court of competent jurisdiction or arbitration panel shall have the
discretion and right to reduce the applicable Royalty Rate to a level where
such court of competent jurisdiction or arbitration panel deems appropriate or
necessary so that the doctrine of patent misuse or any other applicable law is
not violated and (ii) that such court of competent jurisdiction or
arbitration panel shall enforce the obligation of Chiron and its Affiliates to
pay royalties to Cubist pursuant to Section 7.3 using such reduced
applicable Royalty Rate to calculate Chiron’s royalty obligation under Section 7.3.


 


7.5.  Third
Party Royalties and Other Payments.  The
royalties payable by Chiron to Cubist under Section 7.3 shall be inclusive
of (and Cubist shall be solely responsible for) any and all royalty obligations
or other payment obligations to Third Parties arising from license or other
agreements entered into by Cubist prior to the Effective Date relating to the
manufacture, use, sale, offer for sale or importation of the Licensed Products,
including without limitation, the Lilly License, or after the Effective Date
with respect to such obligations incurred by Cubist pursuant to Section 8.5(c) relating
to Patents of any Third Party that were published or generally available prior
to the Effective Date.


 


7.6.  Royalty
Payments and Reports.  All
amounts payable to Cubist under this Agreement shall be paid by Chiron in
Dollars within [*] of the end of each calendar quarter except as otherwise
specifically provided herein.  Each
payment of royalties owing to Cubist shall be accompanied by a statement, on a
country-by-country basis, of (i) the amount of gross sales of Licensed
Product, (ii) an itemized calculation of Net Sales showing deductions
during such calendar quarter provided for in the definition of Net Sales, (iii) the
amount of aggregate gross sales of Licensed Product and Net Sales in all
countries within the Territory during such calendar quarter and on a cumulative
basis as of the end of such calendar quarter, (iv) the amount of royalty
due on such sales, and (v) the currency exchange rates used in determining
the amount of Dollars payable to Cubist. 
If any royalty reductions are claimed by Chiron under this Agreement
from the full royalty rates set forth in Section 7.3, then the report
shall set forth in detail the claimed reduction and the related facts.


 


7.7.  No
Reductions or Offsets.  Chiron
and its Affiliates shall make payment to Cubist of all amounts that Chiron is
required to pay to Cubist pursuant to this Article 7 without any
reduction, offset or setoff, except to the extent otherwise expressly provided
in Sections 7.3(c), 7.3(d), 7.3(e) or 7.3(f).  In addition, in the event that the amount of
royalties due from Chiron to Cubist pursuant to this Agreement is less than the
aggregate Transfer Price previously paid to Cubist for such units, then Chiron
acknowledges and agrees that it shall not be entitled to any refund or credit
of such previously paid Transfer Price, and
that Cubist shall not be liable or responsible for, or owe Chiron any monies as
a result of, such deficiency.


 






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7.8.  Tax
Matters.


 


(a)           The Parties acknowledge and agree that under the
current United States - Ireland Tax Treaty (the “Tax Treaty”),
Chiron has no obligation to withhold any amounts on account of taxes from any
payment by Chiron to Cubist under this Article 7.


 


(b)           [*] to Cubist under this Article 7 [*] shall
at its sole discretion either (i) [*], or (ii) [*] to the extent of
any [*].


 


(c)           [*] to Cubist [*] shall at its sole discretion
either (i) [*], or (ii) [*] to the extent of any [*].


 


7.9.  Foreign
Exchange.  For
the purpose of computing the Net Sales for Licensed Products sold in a currency
other than Dollars, such currency shall be converted into Dollars using the
average monthly rate of exchange for the month in which such currencies are
received, as at 12:00 P.M. New York time for the Federal Reserve Bank of
New York (Bloomberg Page USCF Index).


 


7.10.  Late
Payments.  Any
amounts not paid by Chiron when due under this Agreement shall be subject to
interest from and including the date payment is due through and including the
date upon which Chiron has made a wire transfer of immediately available funds
into an account designated by Cubist at a rate equal to [*] quoted in the Money
Rates section of the Wall Street Journal (New York Edition) calculated daily on
the basis of a 365-day year, or similar reputable data source, or, if lower,
the highest rate permitted under applicable law.


 


7.11.  Exports
of Licensed Product from the Territory; [*] 
In the
event that Cubist provides to Chiron written evidence that Licensed Products
sold in any country in the Territory by Chiron are being exported from such
country and imported into a country outside the Territory, and that such export
of Licensed Product has had a material adverse effect on the sales by Cubist or
an Other Licensee of Licensed Product in such country outside the Territory,
then Chiron shall use Commercially Reasonable Efforts to employ such remedies
as are available to Chiron under applicable laws in the Territory to prevent
the continued export of Licensed Product from the country in the Territory to
such country outside of the Territory. 
In the event that Chiron is in breach of its obligations under this Section 7.11,
The [*] until such time as Chiron shall have provided to Cubist and implemented
a plan to remedy the situation.


 


ARTICLE 8.



INTELLECTUAL PROPERTY


 


8.1.  Ownership
of Inventions.  Subject
to the licenses granted by either Party to the other Party pursuant to this
Agreement, the entire right, title and interest in and to all discoveries,
improvements, processes, formulas, data, inventions, enhancements, know-how and
trade secrets, patentable or otherwise, that arise from activities performed
under or pursuant to this Agreement or the Supply Agreement and that were or
are developed or invented:


 






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(a)           solely by employees
of Cubist (“Cubist Inventions”)  shall be owned solely by Cubist;


 


(b)           solely by employees
of Chiron (“Chiron Inventions”) shall be
owned solely by Chiron; and


 


(c)           jointly by
employees of Cubist and Chiron (“Joint Inventions”)
shall be owned jointly by Cubist and Chiron.


 


Inventorship shall
be determined in accordance with U.S. patent laws.


 


8.2.  Prosecution
of Patents.


 


(a)  Cubist Patents.  Cubist shall be
responsible for the filing, prosecution and maintenance of the Cubist Patents
at its sole expense; provided, however, that Cubist shall (i) provide
Chiron with all material documentation and correspondence from, sent to or
filed with patent offices in the Territory regarding the Cubist Patents, (ii) provide
Chiron with a reasonable opportunity to review and comment upon all filings
with such patent offices in advance of submissions to such patent offices, and (iii) shall
consider, in good faith, incorporating any reasonable comments provided by
Chiron. If Cubist determines in its sole discretion to abandon or not file or
maintain any claim or patent application within the Cubist Patents anywhere in
the Territory, then Cubist shall provide Chiron with thirty (30) days prior
written notice of such determination, or reasonable notice if the period for determination
is less than thirty (30) days, and shall provide Chiron with the opportunity to
file, prosecute and maintain such claim or patent application in the Territory
in the name of Chiron (or an Affiliate of Chiron) as assignee and Cubist shall
assign to Chiron its entire right in such claim or patent application in the
Territory, and thereafter Chiron shall be responsible for all costs and
expenses in connection with the filing, prosecution or maintenance of any such
claim or patent application assigned by Cubist to Chiron pursuant to this Section 8.2(a).
Chiron shall also pay for all costs and expenses in connection with any
assignment by Cubist to Chiron of any claim or patent application pursuant to
this Section 8.2(a).  Cubist shall
inform Chiron of any patents, information or proceeding of which Cubist becomes
aware that relate to Cubist Patents that may adversely impact the validity,
title or enforceability of Cubist Patents in the Territory.


 


(b)  Chiron Patents.  Chiron shall be
responsible for the filing, prosecution and maintenance of the Chiron Patents
at its sole expense; provided, however, that Chiron shall (i) provide
Cubist with all material documentation and correspondence from, sent to or
filed with patent offices regarding the Chiron Patents, (ii) provide
Cubist with a reasonable opportunity to review and comment upon all filings
with such patent offices in advance of submissions to such patent offices, and (iii) shall
consider, in good faith, incorporating any reasonable comments provided by
Cubist. If Chiron determines in its sole discretion to abandon or not file or
maintain any claim or patent application within the Chiron Patents, then Chiron
shall provide Cubist with thirty (30) days prior written notice of such
determination, or reasonable notice if the period for determination is less
than thirty (30) days, and shall provide Cubist with the opportunity to file,
prosecute and maintain such claim or patent application in the name of Cubist
(or an Affiliate of Cubist) as assignee and Chiron shall assign to Cubist its
entire right in such claim or patent application, and thereafter Cubist shall
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with the filing, prosecution or maintenance of any such claim or patent
application assigned by Chiron to Cubist pursuant to this Section 8.2(b).
Cubist shall also pay for all costs and expenses in connection with any
assignment by Chiron to Cubist of any claim or patent application pursuant to
this Section 8.2(b). Chiron shall inform Cubist of any patents,
information or proceeding of which Chiron becomes aware that relate to Chiron
Patents that may adversely impact the validity, title or enforceability of
Chiron Patents.


 


(c)  Joint Patents.  Unless the Parties
otherwise mutually agree in writing, Cubist shall have the first right to file,
prosecute and maintain in the Territory and outside the Territory, upon
appropriate consultation with Chiron, all patent applications and patents that
claim any Joint Inventions (any such patent application and any patents issuing
therefrom a “Joint Patent”), provided however, in the event that Cubist elects not to
file any patent application in the Territory or outside the Territory with
respect to any Joint Invention, Chiron shall have such right and upon exercise
of such right, Chiron shall have the right to prosecute and maintain in the
Territory and outside the Territory, upon appropriate consultation with Cubist,
the Joint Patents to which such Joint Invention relates.  In each case, the filing Party (A) shall
give the non-filing Party a reasonable opportunity to review the text of the
application or submission before filing, (B) shall consult with the
non-filing Party with respect thereto, (C) shall, prior to filing any
application or submission, incorporate any reasonable comments that the
non-filing Party shall make on a timely basis to such application or submission
and (D) shall supply the non-filing Party with a copy of the application
or submission as filed, together with notice of its filing date and serial
number and all substantive prosecution. 
Each Party shall keep the other advised of the status of the actual and
prospective patent filings described above in this Section 8.2(c) and,
upon the request of the other, provide advance copies of any papers related to
the filing, prosecution and maintenance of such patent filings.  Cubist shall promptly give notice to Chiron
of the grant, lapse, revocation, surrender, invalidation or abandonment in the
Territory or outside the Territory of any Joint Patent being prosecuted by
Cubist.  Chiron shall promptly give
notice to Cubist of the grant, lapse, revocation, surrender, invalidation or
abandonment in the Territory or outside the Territory of any Joint Patent being
prosecuted by Chiron.  With respect to
all filings hereunder, the filing Party shall be responsible for payment of all
costs and expenses related to such filings (subject to partial reimbursement to
the extent provided in the next sentence). 
Where the filing Party is Chiron, it shall be entitled to reimbursement
from Cubist for [*] of the expenses and costs incurred by the filing Party in
connection with the prosecution and maintenance of Joint Patents.  Except to the extent either Party is
restricted by the licenses granted to the other Party, and covenants contained
herein, and to the extent permitted by law, each Party shall be entitled to
practice and sublicense Joint Patents and Joint Know-How without restriction or
an obligation to account to the other Party. 
Either Party may disclaim its interest in any particular Patent covering
a Joint Invention, in which case (X) the disclaiming Party shall assign
its ownership interest in such Patent to the other Party for no additional
consideration, (Y) the Party which is then the sole owner shall be solely
responsible for all future costs of such Patent, and (Z) the disclaiming
Party shall hold no further rights thereunder.


 


8.3.  Patent
Term Extensions.  Cubist
will, in its sole discretion, after discussing its strategy with Chiron and
reasonably considering Chiron’s comments, in each country in the Territory,
determine for which, if any, of the Patents within the Cubist Patents and Joint
Patents, the Parties will apply to extend the patent term with respect to
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in patent term
extension laws or regulations in the Territory similar to the Patent Term
Restoration Act or other similar laws and regulations affording an extension or
restoration of patent terms in the United States, which similar laws and
regulations shall include without limitation any Supplementary Protection
Certificates. Chiron shall not make any submissions, filings or other
communications with any governmental agency with respect to patent term
restoration (or other similar grant of a monopoly right with respect to any
Licensed Product) for any Patents within the Cubist Patents or Joint Patents
without Cubist’s express consent.  Chiron
will cooperate fully with Cubist in making such filings at Cubist’s sole expense
which may include without limitation, making available regulatory data and
information for such purpose. 
Notwithstanding anything in the foregoing provisions of this Section 8.3
to the contrary, in the event that Cubist, in its sole discretion, makes a
determination not to seek an extension within the Territory of the patent term
of any Cubist Patent or Joint Patent in the Territory with respect to Licensed
Products, then Cubist shall provide Chiron with thirty (30) days prior written
notice of such determination, or reasonable notice if the period for
determination is less than thirty (30) days, and shall provide Chiron with the
opportunity, at Chiron’s sole discretion and sole cost and expense, to make
submissions and filings, and take such other actions as may be reasonably
required, on behalf of Cubist to extend within the Territory the patent term of
any Cubist Patent or Joint Patent in the Territory with respect to License
Products.


 


8.4.  Infringement
of Patents by Third Parties.


 


(a)  Notification.  Each Party shall
promptly notify the other Party in writing of any alleged or threatened
infringement of the Cubist Patents, Chiron Patents and Joint Patents of which
it becomes aware (such infringement, “Infringement”,
and “Infringe” shall be interpreted
accordingly).


 


(b)  Infringement of Patents in the
Territory.  For
all Infringement of Cubist Patents, Chiron Patents or Joint Patents in the
Territory, Chiron shall have the right, but not the obligation, to bring, at
its own expense and in its sole control, an appropriate action against the
person or entity engaged in such Infringement directly or contributorily.  If Chiron does not bring such action within
ninety (90) days of notification thereof to or by Cubist pursuant to Section 8.4(a) or
within ninety (90) days of the date upon which notification thereof to Cubist
was given by Chiron pursuant to Section 8.4(a) hereof, Cubist shall
have the right, but not the obligation, to bring at Cubist’s expense and in its
sole control, such appropriate action. 
The Party not bringing an action under this paragraph (b) shall be
entitled to separate representation in such matter by counsel of its own choice
and at its own expense, but such Party shall cooperate reasonably with the
Party bringing such action, including without limitation agreeing to be named
as a party to such action if necessary.


 


(c)  Other Infringement of Cubist
Patents.  For
all Infringement of Cubist Patents other than Infringement described in Section 8.4(b) above,
Cubist shall have the exclusive right, but not the obligation, to bring, at
Cubist’s expense and in its sole control, an appropriate action against any
person or entity engaged in such Infringement directly or contributorily.


 


(d)  Infringement of Chiron Patents
and Joint Patents outside the Territory. 
For all Infringement of Chiron Patents and
Joint Patents outside of the Territory,


 






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Cubist shall have
the right, but not the obligation, to bring, at Cubist’s expense and in its
sole control, an appropriate action against any person or entity engaged in
such Infringement directly or contributorily. 
If Cubist does not bring such action within ninety (90) days of
notification thereof to or by Chiron pursuant to Section 8.4(a) or
within ninety (90) days of the date upon which notification thereof to Chiron
was given by Cubist pursuant to Section 8.4(a) hereof, Chiron shall
have the right, but not the obligation, to bring at Chiron’s expense and in its
sole control, such appropriate action. 
The Party not bringing an action under this paragraph (d) shall be
entitled to separate representation in such matter by counsel of its own choice
and at its own expense, but such Party shall cooperate reasonably with the
Party bringing such action, including without limitation agreeing to be named
as a party if necessary for such action.


 


(e)  Settlement; Allocation of
Proceeds.  Cubist
shall not settle a claim brought under this Section 8.4 involving Cubist
Patents, Chiron Patents or Joint Patents in a manner that would limit or
restrict the ability of Chiron to sell, or Chiron’s sales of, Licensed Products
in the Territory, without the prior written consent of Chiron (which consent
shall not be unreasonably withheld or delayed). 
Chiron shall not settle a claim brought under this Section 8.4
involving Cubist Patents, Chiron Patents or Joint Patents in a manner that
would limit or restrict the ability of Cubist to sell, or Cubist’s sales of,
Licensed Products outside the Territory, without the prior written consent of
Cubist (which consent shall not be unreasonably withheld or delayed).  In the event of any recovery of monetary
damages from the Third Party in an action brought under Section 8.4(b), Section 8.4(c) or
Section 8.4(d), whether such damages result from the infringement of
Cubist Patents, Chiron Patents or Joint Patents, such recovery shall be
allocated first to the reimbursement of any reasonable expenses incurred by the
Parties in the litigation under this Section 8.4 (including, for this
purpose, a reasonable allocation of internal counsel), and any remaining
amounts (“Remainder”) shall be
allocated as follows:


 


(i)            the portion of the
Remainder that represents recovery for Infringement in the Territory shall be
treated as Net Sales of Licensed Products in accordance with Section 7.3
with Chiron retaining such amounts and paying to Cubist the applicable royalty
thereon unless the Remainder consists of a recovery in any action brought by
Cubist pursuant to Section 8.4(b) hereof in which case the portion of
the Remainder that represents recovery for Infringement in the Territory shall
be [*] Cubist and [*] Chiron; and


 


(ii)           the portion of the
Remainder that represents recovery for Infringement outside the Territory shall
be [*] for Cubist unless the Remainder consists of a recovery in an action
brought by Chiron pursuant to Section 8.4(d) hereof in which case the
portion of the Remainder that represents recovery for Infringement outside the
Territory shall be [*] Cubist and [*] Chiron.


 


8.5.  Infringement
of Third Party Rights.


 


(a)  Notice.  If any Licensed
Product developed, manufactured, used or sold by either Party, its Affiliates,
licensees, sublicensees or distributors becomes the subject of a Third Party
claim of patent infringement relating to the development, manufacture, use,
sale, offer for sale or importation of such Licensed Product, or if either
Party reasonably believes, based on facts that such Party has become aware of,
that a reasonable potential for any such claim exists, the Party first having
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the other Party in
writing, and the Parties shall promptly meet to evaluate the claim and discuss
the appropriate course of action.  Any
claim or potential claim referred to in this Section 8.5(a) is
hereinafter referred to as a “Third Party Infringement
Claim”.


 


(b)  Avoidance of Infringement.  In the event that
there is a Third Party Infringement Claim that arises from the use or practice
of any Cubist Technology, Chiron Technology or any Joint Technology in
connection with the research, development, manufacture, use, sale, offer for
sale or importation of Licensed Products in the Territory and/or outside the
Territory, the Parties shall confer in good faith as promptly as practicable
after both parties become aware of such Third Party Infringement Claim as to
whether it is feasible to alter their approach to the infringing activities
with respect to the Licensed Product so as to avoid such infringement without
adversely affecting their rights under this Agreement.  In the event the Parties determine in good
faith that it is feasible to alter their approach to such infringing activities
without adversely affecting their rights under this Agreement, the Parties
shall implement such alternative approach to such infringing activities.


 


(c)  Licensing to Resolve
Infringement by Cubist Technology.  If
the Parties determine in good faith that it is not feasible to alter their
approach to any infringing activities referred to in Section 8.5(b) so
as to avoid such infringement without adversely affecting their rights under
this Agreement, then, if such infringement arises from the use or practice of
any Cubist Technology or the research, development, manufacture, use, sale,
offer for sale or importation of Licensed Products in the Territory, Cubist
shall use commercially reasonable efforts to obtain a license on commercially
reasonable terms from the Third Party whose intellectual property rights are
being infringed so as to avoid, eliminate, resolve or settle such
infringement.  In the event that Cubist
shall obtain a license from a Third Party pursuant to this Section 8.5(c) in
order to avoid, eliminate, resolve or settle any Third Party Infringement Claim
of such Third Party and such license consists of or provides rights relating to
the development, manufacture, use, sale, offer for sale or import of Licensed
Products in the Territory, then Cubist shall sublicense such rights to Chiron
for use in the Territory to the same extent that Cubist Technology is licensed
by Cubist to Chiron for use in the Territory pursuant to Article 2 hereof,
provided that Chiron agrees in writing to make payment, and makes
payment when due, to Cubist of the portion of the costs or other amounts paid
and required to be paid by Cubist to obtain and maintain such license that are
reasonably appropriate for Chiron to bear in light of the relative financial
benefits that could reasonably be expected to be derived from such license by
Chiron in the Territory, on the one hand, and by Cubist and, if applicable,
Third Party licensees of Cubist, outside the Territory, on the other hand.
Notwithstanding any provision of this Agreement to the contrary, for purposes
of this Section 8.5(c), the Parties hereby agree that Chiron shall not be
obligated to bear any portion of the costs or other amounts paid and required
to be paid by Cubist to obtain and maintain such license if the intellectual
property rights of such Third Party that are infringed or allegedly infringed
by the use or practice of any Cubist Technology, or the research, development,
manufacture, use, sale, offer for sale or importation of Licensed Products in
the Territory, consists of Patents of such Third Party that had published or
were generally available to the public as of the Effective Date (a “Knowable Patent”).


 


(d)  Determination of Relative
Financial Benefits.  In
connection with any determination of the relative financial benefits that could
reasonably be expected to be derived by Chiron, Cubist and, if applicable,
Third Party licensees of Cubist in connection with any


 






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license obtained
by Cubist or Chiron pursuant to Section 8.5(c), such relative financial
benefits shall be determined by considering actual and projected net sales and
actual or projected royalties from sales of the infringing Licensed Product by
Chiron, Cubist and, if applicable, Third Party licensees of Cubist in the
territory or territories that is or are covered by any such license.


 


(e)  Limitation of Obligation to
Sublicense.  Notwithstanding
anything in this Agreement expressed or implied to the contrary, Cubist shall
have no obligation to sublicense to Chiron any rights licensed by Cubist
pursuant to Section 8.5(c) if Chiron has not agreed in writing to
pay, and does not make payment when due, of the portion of the cost and expense
incurred or to be incurred by Cubist in connection with seeking and maintaining
such license that Chiron is required to pay pursuant to Section 8.5(c).


 


(f)  Defense.  The Party against
which a Third Party Infringement Claim is brought shall defend against such
claim at its sole expense and the other Party shall have the right, but not the
obligation, to participate in any such suit, at its sole option and at its own
expense.  Such other Party shall
reasonably cooperate with the Party conducting the defense of the claim,
including if required to conduct such defense, furnishing a power of attorney.


 


(g)  Settlement.  Neither Party shall
enter into any settlement of a claim brought under this Section 8.5 that
materially adversely affects the other Party’s rights or interests without such
other Party’s written consent, which consent shall not be unreasonably withheld
or delayed.


 


8.6.  Patent
Oppositions.


 


(a)  Third Party Patent Rights.  If either Party
desires to bring an opposition, action for declaratory judgment, nullity
action, interference, reexamination or other attack upon the validity, title or
enforceability of a Patent owned or Controlled by a Third Party that covers or
may cover the manufacture, use, sale, offer for sale or importation of any
Licensed Product, such Party shall so notify the other Party and the Parties
shall promptly confer in good faith to determine whether to bring such action
or the manner in which to settle such action. 
Cubist shall have the first right, but not the obligation, to bring at
its own expense and in its sole control such action outside the Territory. If
Cubist does not bring such action within ninety (90) days of notification
thereof pursuant to this Section 8.6(a) (or earlier, if required by
the nature of the proceeding), Chiron shall have the right, but not the
obligation, to bring at Chiron’s expense and in its sole control, such
action.  Chiron shall have the first
right, but not the obligation, to bring at its own expense and in its sole
control such action in the Territory.  If
Chiron does not bring such action within ninety (90) days of notification
thereof pursuant to this Section 8.6(a) (or earlier, if required by
the nature of the proceeding), Cubist shall have the right, but not the
obligation, to bring at Cubist’s expense and in its sole control, such
action.  The Party not bringing an action
under this Section 8.6(a) shall be entitled to separate
representation in such proceeding by counsel of its own choice and at its own
expense, and shall cooperate reasonably with the Party bringing such action.
Any awards or amounts received in bringing any such action shall be first
allocated to reimburse the Parties’ reasonable expenses incurred in such
action, and any remaining amounts shall be retained by the Party bringing such
action.


 






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(b)  Parties’ Patent Rights.  If a Cubist Patent,
a Chiron patent or a Joint Patent becomes the subject of any proceeding
commenced by a Third Party in connection with an opposition, reexamination
request, action for declaratory judgment, nullity action, interference or other
attack upon the validity, title or enforceability thereof, then the Party
responsible for the prosecution of such Cubist Patent, such Chiron Patent or
such Joint Patent pursuant to Section 8.2 hereof shall control such action
at the sole cost or expense of the controlling Party unless the Parties
otherwise agree in writing.  The
controlling Party will permit the non-controlling Party to participate in the
proceeding to the extent permissible under law, and to be represented by its
own counsel in such proceeding, at the non-controlling Party’s expense.  If either Party decides that it does not wish
to defend against such action, then the other Party shall have a backup right
to assume defense of such Third Party action at its own expense.  Any awards or amounts received in defending
any such Third Party action shall be allocated between the Parties as provided
in Section 8.4(e) as if the Party conducting such opposition were the
Party that brought an action against an alleged infringer.


 


(c)  Noncontravention.  Nothing in this Section 8.6
shall be construed to relieve either Party of its obligations under Section 8.5
hereof.


 


8.7.  Sublicensed
Technology.


 


(a)  Generally.  The licenses granted
under Article 2, to the extent they include sublicenses of Third-Party
technology licensed by Cubist as of the Effective Date, a complete list of
which is set forth in Exhibit E, and
including without limitation the Lilly License (“Effective Date Third Party Licenses”), shall be subject to
the terms and conditions of such Effective Date Third Party Licenses.  Cubist shall faithfully and timely perform
and discharge its obligations under the Effective Date Third Party Licenses
(including without limitation the payment of all royalties and other financial
compensation due to such Third Parties thereunder in connection with the sale
of Licensed Products) and shall not permit any action to be taken or event to
occur, in each case, within Cubist’s reasonable control, which would give such
Third Party the right to terminate such Effective Date Third Party
License.  Further, Cubist shall not amend
any Effective Date Third Party License without Chiron’s consent, such consent
not to be unreasonably withheld. 
Notwithstanding the provisions of the foregoing two sentences, Cubist
shall not be liable to Chiron for breach of the obligations set forth in the
foregoing two sentences unless such breach shall materially adversely affect
Chiron’s ability to develop or Commercialize Licensed Products in accordance
with the provisions of this Agreement. 
If Cubist is notified or otherwise becomes aware of its material breach
of any such Effective Date Third Party License, it shall promptly notify Chiron
in writing, reasonably detailing such breach. 
Cubist shall also notify Chiron of any material breach by such Third
Parties of any of their obligations under the Effective Date Third Party
Licenses.  The Parties shall promptly
confer in good faith regarding an appropriate manner for curing any such breach
within the time allotted by such Effective Date Third Party License, or if the
Third Party is in breach, monitoring the ability and adequacy of the Third
Party’s efforts to cure such breach.  If
Cubist does not perform the agreed-upon remedy of such breach within the
designated time, then Chiron may itself perform the agreed-upon remedy for such
breach for the benefit of Cubist and any amounts that Chiron pays to cure such
breach shall be either promptly reimbursed by Cubist or Chiron may withhold an
equal amount from any payments due to Cubist under this Agreement.  If a good faith dispute between a Third Party
and Cubist arises about the interpretation of any provision within such
Effective Date Third Party


 






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License, Chiron
shall use its Commercially Reasonable Efforts to ensure that its actions, if
any, under this Section 8.7(a) do not detrimentally affect the
ability of Cubist to contest the interpretation advanced by such Third Party.


 


(b)  Lilly License.  It is agreed and
acknowledged that in the event of termination of the Lilly License, any
sublicense granted by Cubist to Chiron under this Agreement of any rights
granted by Lilly to Cubist under the Lilly License shall automatically be
assigned by Cubist to Lilly in accordance with the provisions of Section 10.06
of the Lilly License.


 


(c)  Decision to License Third
Party Technology.  In
the event that either Party believes that certain Third Party intellectual
property may be useful to the development, manufacture, use, sale, offer for
sale or import of Licensed Products in the Territory and/or outside the
Territory, then such Party shall request through the JCT that the Parties
consider (i) whether the Parties should seek a license to such Third Party
intellectual property to allow either or both Parties to use or practice such Third
Party intellectual property in connection with the development, manufacture,
use, sale, offer for sale or import of Licensed Products, (ii) how to
allocate the costs of obtaining and maintaining such license between the
Parties, (iii) how the Parties should proceed to seek such license, and (iv) whether,
instead of seeking such license, the Parties can develop, manufacture, use,
sell, offer for sale or import Licensed Product in a way that would eliminate
or reduce the usefulness or desirability of licensing such Third Party
intellectual property.


 


(d)  Licensing of Third Party
Technology.  If
the Parties reach a consensus that the Parties should seek a license to any
Third Party intellectual property referred to in Section 8.7(c), then the
Parties shall seek such license in a manner and on terms consistent with the
determinations made by the Parties with respect to the matters set forth in
clauses (i), (ii) and (iii) of Section 8.7(c). If the Parties
are unable to reach a consensus that the Parties should seek such license and
if the Parties are unable to reach a consensus that the Parties can develop,
manufacture, use, sell, offer for sale or import Licensed Products in a way
that would eliminate or reduce the usefulness and desirability of obtaining such
license, then either Party shall be free to itself seek such license at its
sole cost and expense. If Cubist is the Party that seeks such license and such
license consists of or provides rights useful to the development, manufacture,
use, sale, offer for sale or import of Licensed Products in the Territory,
then, at Chiron’s request made at any time during the Term, Cubist shall
sublicense such rights to Chiron for use in the Territory provided that Chiron
agrees in writing to make payment, and makes payment when due,  to Cubist of the portion of the costs paid
and required to be paid by Cubist to obtain and maintain such license that are
reasonably appropriate for Chiron to bear in light of the relative financial benefits
that could reasonably be expected to be derived from such license by Chiron in
the Territory, on the one hand, and by Cubist and, if applicable, Third Party
licensees of Cubist, outside the Territory, on the other hand. If Chiron is the
Party that seeks such license and such license consists of or provides rights
useful to the development, manufacture, use, sale, offer for sale or import of
Licensed Products outside the Territory, then, at Cubist’s request made at any
time during the Term, Chiron shall sublicense such rights to Cubist outside the
Territory provided that Cubist agrees in writing to make payment, and makes
payment when due, to Chiron of the portion of the costs paid and required to be
paid by Chiron to obtain and maintain such license that are reasonably
appropriate for Cubist to bear in light of the relative financial benefits that
could reasonably be expected to be derived from such license by Cubist and, if


 






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applicable, Third
Party licensees of Cubist outside the Territory, on the one hand, and by Chiron
in the Territory, on the other hand.


 


(e)  Limitation of Obligation to
Sublicense.  Notwithstanding
anything in this Agreement expressed or implied to the contrary, the Party that
obtains a license pursuant to Section 8.7(d) above shall have no
obligation to make the licensed rights obtained pursuant to such license
available to the other Party if such other Party is not bearing a reasonably
appropriate portion of the cost and expense of seeking and maintaining such
license in light of the relative financial benefits that could reasonably be
expected to be derived from such license by Chiron in the Territory, on the one
hand, and by Cubist and, if applicable, Third Party licensees of Cubist outside
the Territory, on the other hand.


 


(f)  Determination of Relative
Financial Benefits.  In
connection with any determination of the relative financial benefits that could
reasonably be expected to be derived by Chiron, Cubist and, if applicable,
Third Party licensees of Cubist in connection with any license obtained by
Cubist or Chiron pursuant to this Section 8.7, such relative financial
benefits shall be determined by considering actual and projected net sales and
actual or projected royalties from sales of the applicable Licensed Product by
Chiron, Cubist and, if applicable, Third Party licensees of Cubist in the
territory or territories that is or are covered by any such license.


 


8.8.  Patent
Marking.  Licensed
Products marketed and sold by the Parties hereunder shall be marked with
appropriate patent numbers or indicia at Cubist’s request, to the extent
permitted by law, in those countries in which such markings have notice value
as against infringers of patents.


 


8.9.  Applicability
to Chiron Patents.  Notwithstanding
any provision of this Agreement to the contrary, the provisions of this Article 8
shall apply to any Chiron Patent only to the extent that the Parties have not
otherwise agreed on responsibilities for prosecution, maintenance, enforcement,
defense and other management of such Chiron Patent.


 


8.10.  Trademarks.


 


(a)  Trademark License.  Subject to the
provisions set forth in this Section 8.10, Cubist hereby grants Chiron an
exclusive, royalty-free license under its entire right, title and interest in
and to the Cubist Marks to use and display the Cubist Marks in connection with
the Commercialization of Licensed Products within the Territory.  Chiron shall not use Cubist’s trade names
and/or marks in a way which would be confusing or otherwise adversely affect
their value.  Chiron agrees that it will
not reproduce or use the Cubist Marks in any manner whatsoever other than as
authorized by this Agreement, and that its uses of the Cubist Marks will comply
with the current trademark guidelines that Cubist may provide from time to
time.  Chiron shall provide Cubist with
copies of any materials containing any Cubist Marks prior to using or disseminating
such materials, and shall reasonably consider all comments made by Cubist
regarding the use of the Cubist Marks. 
Cubist will have the right to monitor Chiron’s use of the Cubist Marks
and to request that Chiron correct any failure to comply with this Section 8.10
adversely affecting the strength or value of such trademark.


 






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(b)  Selection and Registration of
Product Trademarks.  Subject
to the provisions set forth below in this Section 8.10, Chiron shall use
in connection with the Commercialization of any Licensed Product in the
Territory those trademarks used by Cubist in connection with the
Commercialization of such Licensed Product outside the Territory.  In the event that (i) any trademark or
trademarks used by Cubist in connection with the Commercialization of any
Licensed Product outside the Territory may not be registered for use in the
Territory with such Licensed Product or (ii) Chiron believes that it would
be a significant advantage for the Commercialization of any Licensed Product in
the Territory to select and use a trademark or trademarks in connection
therewith that is or are different from the trademark or trademarks being utilized
by Cubist in connection with the Commercialization of such Licensed Product
outside the Territory, then Chiron shall notify Cubist about the matter and
shall submit to Cubist several other trademarks that Chiron desires to use, and
believes can be used, with the Licensed Product in question in the
Territory.  Cubist and Chiron shall
jointly consider, discuss and decide the matter.  Chiron shall not use any trademark in connection
with the Commercialization of any Licensed Product within the Territory that is
different from the trademark or trademarks being utilized by Cubist in
connection with the Commercialization of such Licensed Product outside the
Territory without Cubist’s written consent. 
Any trademark used by Chiron in connection with the Commercialization of
any Licensed Product in the Territory that is different than the trademark or
trademarks utilized by Cubist in connection with the Commercialization of such
Licensed Product outside the Territory and that has been selected and approved
in accordance with the provisions of this Section 8.10(b) is
hereinafter referred to as an “Approved New
Trademark”. Subject to Chiron’s right to use each Approved New
Trademark in accordance with the provisions of this Agreement, Cubist shall own
all right, title and interest to each Approved New Trademark, and each Approved
New Trademark shall become one of, and be included among, the Cubist Marks,
and, to the extent permitted by applicable law, Cubist shall be responsible for
registering and maintaining such Approved New Trademark within and outside the
Territory, at Cubist’s own expense. 
Chiron hereby assigns to Cubist any and all right, title, interest, and
goodwill that Chiron may have in any such Approved New Trademark (other than
the right, if applicable, set forth below in this Section 8.10 to register
and maintain such Approved New Trademark and Chiron’s license and right to use
such Approved New Trademark pursuant to the provisions of Section 8.10(a) hereof)
and hereby agrees to execute such further documents as Cubist shall reasonably
request to further evidence and perfect such assignment.  In the event that the laws of any applicable
country within the Territory shall not permit Cubist to register any Cubist Mark,
then Chiron shall be responsible for registering and maintaining such Cubist
Mark in such applicable country, notwithstanding the fact that Cubist shall own
such Cubist Mark, and any use or goodwill arising from use of the mark shall
inure to the benefit of Cubist.


 


(c)  Infringement of Trademarks by
Third Parties.  Each
Party shall notify the other Party in writing promptly upon learning of any
actual, alleged or threatened infringement in the Territory or outside the
Territory of any Cubist Mark or of any unfair trade practices, trade dress
imitation, passing off of counterfeit goods, or like offenses, in any case
involving or affecting Licensed Products in the Territory or outside the
Territory (hereinafter “TM Infringement”).  In the case of any TM Infringement in the
Territory, after any such written notice has been sent and received with
respect to such TM Infringement, the Parties shall confer in good faith as to
the reasonable response to such TM Infringement.  In the absence of other


 






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agreement between
the Parties, (i) Cubist shall have the exclusive right, in its own
discretion and at its own expense, to bring an action to address TM Infringement
outside the Territory, (ii) Chiron shall have the first right, in its own
discretion and at its own expense, to bring an action to address TM
Infringement in the Territory, and (iii) if Chiron does not exercise its
rights under the foregoing clause (ii) within ninety (90) days after the
Parties shall have conferred in good faith as to the reasonable response to
such TM Infringement in the Territory in accordance with the above provisions
of this Section 8.10(c), Cubist shall have the right, in its own
discretion and its own expense, to bring an action to address such TM
Infringement in the Territory.  Any
recovery by the Party pursuing the Third Party for the alleged TM Infringement
shall be applied first to reimburse the costs and expenses incurred by the
Party pursuing the infringer, and the portion of any remainder that is
attributable to TM Infringement outside the Territory shall be allocated [*] to
Cubist, and the portion of such remainder that is attributable to TM
Infringement in the Territory shall be allocated as follows: (i) if the
pursuing Party is Chiron, [*]; and (ii) if the pursuing Party is Cubist,
[*].


 


(d)  Product Trademarks Infringe
Third Party Rights.  Each
Party shall notify the other Party in writing promptly upon being notified that
any Cubist Mark or trade dress associated with the sale of License Products in
the Territory or outside the Territory is alleged to infringe any Third Party
trademark or other related intellectual property rights. In the case of any
such alleged infringement in the Territory, after any such written notice has
been sent and received with respect to such alleged infringement, the Parties
shall confer in good faith as to the reasonable response to such alleged
infringement.


 


8.11.  Subordination
to Lilly Rights.  Notwithstanding
anything in this Article 8 expressed or implied to the contrary, the
Parties hereby agree that the respective rights and obligations of the Parties
under this Article 8 with respect to the Cubist Patents licensed by Cubist
from Lilly pursuant to the Lilly Agreement and set forth on Exhibit F hereto (in each case, a “Lilly Patent”) shall, to the extent
applicable, be subject to the respective rights and obligations of Lilly and
Cubist with respect to such Lilly Patent as set forth in the Lilly
Agreement.  In the event that the rights
and obligations of Lilly and Cubist under the Lilly Agreement with respect to
any Lilly Patent shall be in conflict with the respective rights and
obligations of Cubist and Chiron under this Article 8 with respect to such
Lilly Patent, the respective rights and obligations of Lilly and Cubist under
the Lilly Agreement with respect to such Lilly Patent shall control, take
precedence and supersede the respective rights and obligations of Cubist and
Chiron under this Article 8 with respect to such Lilly Patent to the
extent of any such conflict.


 


ARTICLE 9.



REPRESENTATIONS AND WARRANTIES


 


9.1.  Mutual
Representations and Warranties.  Each
Party hereby represents and warrants to the other Party as follows:


 


(a)  Corporate Existence and Power.  It is a corporation
duly organized, validly existing and in good standing under the laws of the
state in which it is incorporated, and has full corporate power and authority
and the legal right to own and operate its property and assets and


 






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to carry on its
business as it is now being conducted and as contemplated in this Agreement,
including, without limitation, the right to grant the licenses granted
hereunder.


 


(b)  Authority and Binding
Agreement.  As
of the Effective Date, (i) it has the corporate power and authority and
the legal right to enter into this Agreement and perform its obligations
hereunder; (ii) it has taken all necessary corporate action on its part
required to authorize the execution and delivery of the Agreement and the
performance of its obligations hereunder; and (iii) the Agreement has been
duly executed and delivered on behalf of such Party, and constitutes a legal,
valid and binding obligation of such Party that is enforceable against it in
accordance with its terms.


 


(c)  No Conflict.  It has not entered
into any agreement with any Third Party that is in conflict with the rights
granted to the other Party under this Agreement, and has not taken any action
that would in any way prevent it from granting the rights granted to the other
Party under this Agreement, or that would otherwise materially conflict with or
adversely affect the rights granted to the other Party under this
Agreement.  Its performance and execution
of this Agreement will not result in a breach of any other contract to which it
is a Party.


 


(d)  Validity.  It is aware of no
action, suit, inquiry or investigation instituted by any Third Party which
questions or threatens the validity of this Agreement.


 


(e)  Consents.  All necessary
consents, approvals and authorizations of all governmental authorities and
other persons or entities required to be obtained by such Party in connection
with the execution and delivery of this Agreement have been obtained.


 


9.2.  Cubist
Representations and Warranties.  Cubist
hereby represents and warrants to Chiron as follows:


 


(a)  Ownership of Intellectual
Property.  Except
for the rights licensed to Cubist pursuant to the Effective Date Third Party
Licenses, except for any Third Party intellectual property rights that would be
infringed or misappropriated by the use or practice of the Cubist Patents,
Cubist Know-How and the Cubist Marks (as to which infringement or
misappropriation Cubist has no knowledge as of the Effective Date), [*] Cubist
is the owner of the Cubist Patents, the Cubist Know-How and Cubist Marks that
exist as of the Effective Date, free and clear (as of the Effective Date) of
all liens, encumbrances, security interests, licenses, and options to acquire
or license in favor of Third Parties. Except for any Third Party intellectual
property rights that would be infringed or misappropriated by the use or
practice of the Cubist Patents, Cubist Know-How and the Cubist Marks (as to
which infringement or misappropriation Cubist has no knowledge as of the
Effective Date),  as of the Effective
Date, (1) Cubist has the requisite right to grant to Chiron the licenses
granted herein to Chiron, and (2) no right or license of any Third Party
is required to permit Cubist to perform its obligations under this Agreement in
accordance with the terms of this Agreement and to permit Chiron to exercise
its rights hereunder in accordance with the terms of this Agreement.


 


(b)  Claims Related to Use of
Intellectual Property.  As
of the Effective Date, Cubist is not aware of any pending or threatened claims
against Cubist asserting that any of the activities of Cubist relating to the
Licensed Products or the conduct by the Parties of any of the


 






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activities
contemplated by this Agreement relating to the Licensed Products infringes the
rights of any Third Party.  As of the
Effective Date, Cubist is not aware of any published or generally available
Patents of any Third Party that would be infringed by the use or practice of
the Cubist Patents, Cubist Know-How or the Cubist Marks.


 


(c)  Notice to Third Persons.  As of the Effective
Date, Cubist has not given any notice to any Third Party asserting
infringement, misappropriation or violation by such Third Party upon any of the
Cubist Technology.


 


(d)  Effective Date Third Party
Licenses.  Exhibit E is an accurate and complete
list of all Effective Date Third Party Licenses, including without limitation,
the Lilly License.  As of the Effective
Date, all Effective Date Third Party Licenses remain in effect and Cubist is
not in breach or default in the performance of its obligations under the
Effective Date Third Party Licenses. 
Cubist has not received any notice from any of the other parties to any
of the Effective Date Third Party Licenses, including without limitation,
Lilly, of any breach, default or non-compliance of Cubist under the terms of
any of the Effective Date Third Party Licenses, including without limitation,
the Lilly License.  There have been no
amendments or other modification to the Effective Date Third Party Licenses,
including without limitation, the Lilly License, except as have been disclosed
to Chiron in writing.  Cubist has the
requisite right under the Lilly License to grant to Chiron a sublicense of
Cubist’s rights under the Lilly License. 
Lilly’s right of first negotiation under the Lilly License to acquire
the rights licensed by Cubist to Chiron as of the Effective Date pursuant to
this Agreement has expired or been exhausted or waived.


 


(e)  No Misappropriation.  To the best knowledge
of Cubist as of the Effective Date (after having made due inquiry of its
employees on or prior to the Effective Date), it has not misappropriated the
trade secret of any Third Party in its activities to develop and Commercialize
Licensed Products.


 


(f)  Regulatory Filings.  Exhibit G
is an accurate and complete list of all INDs, NDAs and other Drug Approval
Applications for Licensed Products filed by Cubist anywhere in the world as of
the Effective Date.  Except for the
rights granted to Chiron pursuant to this Agreement and the Supply Agreement,
Cubist is as of the Effective Date the owner of all INDs, NDAs and other Drug
Approval Applications set forth on Exhibit G attached hereto, free
and clear (as of the Effective Date) of all liens, encumbrances, security
interests, licenses, and options to acquire or license in favor of Third
Parties.  As of the Effective
Date, Cubist has complied in all material respects with all laws
applicable to all INDs, NDAs and other Drug Approval Applications set forth on Exhibit G
attached hereto.


 


(g)  Regulatory Data and Affairs.  Cubist has disclosed
to Chiron all material information and data that is known to Cubist and that is
in the possession of, or otherwise available to, Cubist relating to (i) the
results of pre-clinical and clinical studies of Licensed Products conducted by
or on behalf of Cubist or Lilly, and (ii) Cubist’s pending Drug Approval
Application in the United States for the Licensed Product and its status.  All such material information and data
disclosed by Cubist to Chiron are complete and accurate in all material
respects.


 






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(h)  Non-Infringement of Cubist
Technology by Third Parties.  As
of the Effective Date, Cubist is unaware of any activities by Third Parties
that would constitute infringement or misappropriation of any Cubist
Technology.


 


(i)  Litigation.  [*,] Cubist is not
aware of any litigation against Cubist that has been pending or threatened with
respect to the Cubist Technology, Licensed Products or Cubist’s rights in
either of the foregoing.


 


(j)  Restrictive Agreements.  As of the Effective
Date, Cubist has not entered into any agreement with a Third Party pursuant to
which Cubist shall have agreed not to enforce any right of Cubist to preclude
such Third Party from using or practicing any or all of the Cubist Technology
or Commercialize Licensed Products in the Territory.


 


(k)  Patent Prosecution.  To the best of
Cubist’s knowledge as of the Effective Date, (i) Cubist has complied in
all material respects with all laws applicable to the prosecution and
maintenance of the Cubist Patents, and (ii) those employees of Cubist
having a duty to disclose to the patent office of any country in the Territory
information material to the patentability of the subject matter of any or all
of the Cubist Patents in such country have disclosed all such information.


 


9.3.  Chiron
Representation and Warranty - No Intellectual Property.  Chiron hereby
represents and warrants to Cubist that as of the Effective Date, Chiron is not
aware (without having conducted any review of its existing intellectual
property portfolio) that it has any patents, trade secrets or know-how that
would be useful in connection with the development, manufacture, marketing,
promotion, use, sale, import or export of Licensed Products.


 


9.4.  Disclaimer.  Chiron understands
that Licensed Products are the subjects of ongoing clinical research and
development and that Cubist cannot assure the safety or usefulness of Licensed
Products, however, the foregoing shall not be construed to affect the
allocation of risks agreed upon by the Parties under to Article 10.


 


9.5.  No
Other Representations.  THE
EXPRESS REPRESENTATIONS AND WARRANTIES STATED IN THIS ARTICLE 9 ARE IN LIEU OF
ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT OR NON-MISAPPROPRIATION OF THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS.


 






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ARTICLE
10.


 


INDEMNIFICATION


 


10.1.  Indemnification by Cubist.
Subject to all of the provisions of this Article 10, Cubist hereby agrees
to defend, hold harmless and indemnify (collectively “Indemnify”) Chiron and its Affiliates, and their respective
agents, directors, officers and employees (the “Chiron Indemnitees”) from and against any and all suits,
claims, actions, demands, liabilities, expenses and/or losses, including
without limitation reasonable legal expenses and attorneys’ fees (collectively “Losses”) suffered or incurred by any of
such Chiron Indemnitees resulting from (i) a material breach of any of
Cubist’s representations and warranties pursuant to Article 9 of this
Agreement or Article 9 of the Supply Agreement; (ii) a material
breach of any of Cubist’s covenants and agreements made pursuant to this
Agreement or the Supply Agreement; (iii) any Third Party claim made
against any such Chiron Indemnitee for damages suffered by such Third Party
arising from any failure of Cubist or any of its Affiliates, contractors or
distributors, or any of their respective agents or employees, to comply in any
material respect with applicable laws or regulations; (iv) any Third Party
claim made against any such Chiron Indemnitees for death, bodily injury or property
damage suffered by such Third Party arising from the negligence, recklessness
or willful misconduct of Cubist or any of its Affiliates, contractors or
distributors, or any of their respective agents or employees, in the course of
carrying out any of the actions or activities of Cubist under or in connection
with this Agreement or the Supply Agreement; or (v) any Third Party claim
made against any such Chiron Indemnitees for death, bodily injury or property
damage suffered by such Third Party arising from any activities of Cubist or
any of its Affiliates, licensees (other than Chiron), contractors or
distributors, or any of their respective agents or employees, anywhere in the
world prior to, on, or after the Effective Date in connection with their respective
development, manufacturing or Commercialization activities with respect to
Licensed Products; provided, however,
that Cubist shall not be required to indemnify the Chiron Indemnitees for any
Losses pursuant to this Section 10.1 to the extent that (1) such
Losses arise from matters or claims for which Chiron is required to indemnify
any of the Cubist Indemnities pursuant to Section 10.2 hereof, (2) such
Losses arise from Chiron’s breach or non-compliance with any of the provisions
of this Agreement or the Supply Agreement, (3) such Losses arise or result
from the negligence, recklessness or willful misconduct of Chiron or any of its
Affiliates, contractors or distributors, or any of their respective agents or
employees, (4) such Losses arise or result from any Third Party products
liability claim, (5) such Losses consist of Recall Expenses that are in
excess of the maximum amount of such Recall Expenses for which Cubist is liable
under Section 5.7(b) of this Agreement and Section 6.6(b) of
the Supply Agreement or (6) Cubist’s liability for such Losses is limited
pursuant to Section 10.6.  Cubist’s
liability to any of the Chiron Indemnitees with respect to Third Party products
liability claim is set forth in Section 10.3 below.


 


10.2.  Indemnification by Chiron.
Subject to all of the provisions of this Article 10, Chiron hereby agrees
to Indemnify Cubist  and its Affiliates,
and their respective agents, directors, officers  and employees (the “Cubist Indemnitees”) from and against any and all Losses
suffered or incurred by any of such Cubist Indemnitees resulting from (i) a
material breach of any of Chiron’s representations and warranties pursuant to Article 9
of this Agreement or Article 9 of the Supply Agreement; (ii) a
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agreements made pursuant to this Agreement or the Supply Agreement; (iii) any
Third Party claim made against any such Cubist Indemnitee for damages suffered
by such Third Party arising from any failure of Chiron or any of its
Affiliates, contractors or distributors, or any of their respective agents or
employees, to comply in any material respect with applicable laws and
regulations; (iv) any Third Party claim made against any such Cubist
Indemnitee for death, bodily injury or property damage suffered by such Third
Party arising from the negligence, recklessness or willful misconduct of Chiron
or any of its Affiliates, contractors or distributors, or any of their
respective agents or employees, in the course of carrying out any of the
actions or activities of Chiron under or in connection with this Agreement or
the Supply Agreement; or (v) any Third Party claim made against any such
Cubist Indemnitees for death, bodily injury or property damage suffered by such
Third Party arising from any activities of Chiron or any of its Affiliates,
licensees (other than Cubist), contractors or distributors, or any of their
respective agents or employees, anywhere in the world on or after the Effective
Date in connection with their respective development, manufacturing or
Commercialization activities with respect to Licensed Products; provided, however, that Chiron shall not
be required to indemnify the Cubist Indemnitees for any Losses pursuant to this
Section 10.2 to the extent that (1) such Losses arise from matters or
claims for which Cubist is required to indemnify any of the Chiron Indemnities
pursuant to Section 10.1 hereof, (2) such Losses arise from Cubist’s
breach or non-compliance with any of the provisions of this Agreement or the
Supply Agreement, (3) such Losses arise or result from the negligence,
recklessness or willful misconduct of Cubist or any of its Affiliates,
contractors or distributors, or any of their respective agents or employees, (4) such
Losses arise or result from any Third Party products liability claim or (5) Chiron’s
liability for such Losses is limited pursuant to Section 10.6. Chiron’s
liability to any of the Cubist Indemnitees with respect to Third Party products
liability claim is set forth in Section 10.3 below.


 


10.3.  Liability for Third Party
Products Liability Claims.


 


(a)           Subject to all of
the provisions of this Article 10, Cubist hereby agrees to Indemnify the
Chiron Indemnitees from and against any and all Losses suffered or incurred by
any of such Chiron Indemnitees resulting from any Third Party product liability
claim made against any such Chiron Indemnitee for death, bodily injury or
property damage suffered by such Third Party from or in connection with any
Licensed Product sold by Chiron or its Affiliates or distributors for use in
the Territory but only if and to the extent that such death, bodily injury or
property damage was or is caused by reason of such Licensed Product being a
Defective Manufactured Product; provided, however,
that Cubist shall not be required to indemnify the Chiron Indemnitees for any
Losses pursuant to this Section 10.3(a) to the extent that (1) such
Losses arise from matters or claims for which Chiron is required to indemnify
any of the Cubist Indemnities pursuant to Section 10.3(b) hereof or (2) such
Losses arise from Chiron’s breach or non-compliance with any of the provisions
of this Agreement or the Supply Agreement.


 


(b)           Subject to all of
the provisions of this Article 10, Chiron hereby agrees to Indemnify the
Cubist Indemnitees from and against any and all Losses suffered or incurred by
any of such Cubist Indemnitees resulting from any Third Party product liability
claim made against any such Cubist Indemnitee for death, bodily injury or
property damage suffered by such Third Party from or in connection with any
Licensed Product sold or used by Chiron or its Affiliates or distributors but
only if and to the extent that such death, bodily injury or property damage
arises or results from (A) the improper use, transportation, packaging,
storage or


 






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handling of such
Licensed Product by Chiron or any of its Affiliates, contractors or
distributors, or any of their respective agents or employees, including,
without limitation, any such use, transportation, packaging, storage or
handling of such Licensed Products that does not conform with any of the
applicable specifications of such Licensed Product or with the requirements of
any Regulatory Authorities or any applicable laws within the Territory, (B) the
failure of such Licensed Product to have an appropriate shelf-life at the time
such Licensed Product was sold or used by Chiron or any of its Affiliates,
contractors or distributors, or any of their respective agents or employees, provided
that such Licensed Product is not a Defective Manufactured Product, (C) any
defect or deficiency in the label or package insert of, or the marketing or
promotional materials with respect to, such Licensed Product, including,
without limitation, the failure of the label or package insert of, or the
marketing or promotional materials with respect to, such Licensed Product to
meet the requirements of any Regulatory Authority or any applicable laws within
the Territory, except to the extent that such defect or deficiency resulted
from incorrect information received by Chiron from Cubist or from the failure
by Cubist to disclose to Chiron information that is in the possession of
Cubist, (D) the promotion (including the establishment of any program to
provide treatment on a named patient basis or other similar basis) by Chiron or
any of its Affiliates, contractors or distributors, or any of their respective
agents or employees, of such Licensed Product for use in connection with an
indication for which such Licensed Product has not received Regulatory Approval
if data in Chiron’s possession establishes that it would not be safe or
effective to use such License Product for the treatment of such indication, (E) a
defect in such Licensed Product due to improper manufacture by Chiron or by a
Third Party manufacturer, (F) any failure by Chiron to develop, use,
market, promote or sell such License Product in compliance with all of the
applicable requirements of the Regulatory Authorities in the Territory and all
of the applicable laws within the Territory, (G) any of the activities or
responsibilities that Chiron performs or is required to perform pursuant to the
Supply Agreement, or (H) any breach by Chiron of any of its obligations
under this Agreement or the Supply Agreement; provided,
however, that Chiron shall not be required to indemnify the Cubist
Indemnitees for any Losses pursuant to this Section 10.3(b) to the
extent that (1) such Losses arise from matters or claims for which Cubist
is required to indemnify any of the Chiron Indemnities pursuant to Section 10.3(a) hereof
or (2) such Losses arise from Cubist’s breach or non-compliance with any
of the provisions of this Agreement or the Supply Agreement.


 


(c)           Subject to the
provisions of Section 10.3(d) and 10.4(b) below, in the event
that there is a Third Party products liability claim for death, bodily injury
or property damage suffered by such Third Party from or in connection with any
Licensed Product sold or used by Chiron or its Affiliates or distributors and
neither Party is required to indemnify the other Party pursuant to Section 10.3(a) or
10.3(b) above in connection with such Third Party products liability
claim, then the Parties agree to [*] amounts that are paid or are required to
be paid to such Third Party in connection with such Third Party products
liability claim (regardless of whether such amounts are determined by a court
of competent jurisdiction, arbitration proceeding or negotiated settlement),
with [*] of this Agreement in connection with [*] in connection with the
[*].  The Parties hereby agree that this
clause (c) is not intended to cover Third Party products liability claims
arising from sales of Licensed Product outside of the Territory by Cubist, its
Affiliates or Other Licensees, or any of their respective distributors.


 






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(d)           Notwithstanding
anything expressed or implied in Section 10.3(c) to the contrary, in
no event shall Cubist have any obligation under Section 10.3(c) with
respect to any Third Party products liability claim if and to the extent that,
prior to the time that such Third Party products liability claim arises,  (i) Cubist has taken steps to eliminate
or mitigate the risk of any such Third Party products liability claim arising
outside the Territory, the adequacy of such steps to be judged in accordance
with the applicable laws and regulatory requirements outside the Territory, (ii) Cubist
has communicated to Chiron the potential risk of any such Third Party products
liability claim could arise in the future and the steps that Cubist has taken,
is taking or will be taking to eliminate or mitigate such risk outside the
Territory and (iii) Chiron has not taken substantially the same steps in
the Territory as Cubist has taken outside the Territory.  Cubist shall also not have any obligation
under Section 10.3(c) with respect to any Third Party products
liability claim if and to the extent that, prior to the time that such Third
Party products liability claim arises, (x) Chiron has knowledge of facts
and circumstances that establish that there is a risk of any such Third Party
products liability claim arising in the Territory and fails to disclose such
knowledge to Cubist, (y) Chiron fails to implement any plan previously
discussed and agreed to by the Parties to eliminate or mitigate the risk of any
such Third Party products liability claim arising in the Territory or (z) if
the Parties have not discussed any such plan or cannot agree on any such plan,
and Chiron fails to take steps to eliminate or mitigate the risk of any such
Third Party products liability claim arising in the Territory, the adequacy of
such steps to be judged in accordance with the applicable laws and regulatory
requirements in the Territory.


 


(e)           EXCEPT TO THE EXTENT
EITHER PARTY HAS ANY LIABILITY TO THE OTHER PARTY PURSUANT TO THIS SECTION 10.3,
NEITHER PARTY SHALL HAVE ANY LIABILITY TO THE OTHER PARTY UNDER THIS AGREEMENT,
THE SUPPLY AGREEMENT OR OTHERWISE UNDER ANY THEORY OF LIABILITY FOR ANY THIRD
PARTY PRODUCTS LIABILITY CLAIM IN CONNECTION WITH LICENSED PRODUCTS.


 






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10.4.  Procedure


 


(a)           If either Party is
seeking indemnification under Section 10.1, 10.2, 10.3(a) or 10.3(b) in
connection with a Third Party claim, it shall inform the indemnifying Party of
such Third Party claim giving rise to the obligation to indemnify pursuant to
such section as soon as reasonably practicable after receiving notice of the
claim.  The indemnifying Party shall have
the right to assume the defense of any such Third Party claim for which it is
obligated to indemnify the indemnified Party under Section 10.1, 10.2,
10.3(a) or 10.3(b).  The indemnified
Party shall cooperate with the indemnifying Party (and its insurer) as the
indemnifying Party may reasonably request, and at the indemnifying Party’s sole
cost and expense.  The indemnified Party
shall have the right to participate, at its own expense and with counsel of its
choice, in the defense of any claim or suit that has been assumed by the
indemnifying Party.  Neither Party shall
have any obligation to indemnify the other Party in connection with any
settlement made without the indemnifying Party’s written consent, provided that the indemnifying Party does not unreasonably
withhold or delay any such written consent. 
If the Parties cannot agree as to the application of Sections 10.1,
10.2, 10.3(a) or 10.3(b) to any Third Party claim, the Parties may
conduct separate defenses of such claims, with each Party retaining the right
to claim indemnification from the other in accordance with Section 10.1,
10.2, 10.3(a) or 10.3(b) upon resolution of the underlying claim.


 


(b)           If either Party
becomes subject to a Third Party products liability claim for which such Party
believes that it has the right to require the other Party to share, in
accordance with the provisions of Section 10.3(c) above, in any
payments to be made to such Third Party in connection with such claim, such
Party shall inform the other of such Third Party products liability claim as
soon as reasonably practicable after receiving notice of the claim.  The Party that is subject to the Third Party
products liability claim shall have the right to control the defense of such
claim, but the other Party shall have the right to participate, at its own
expense and with counsel of its choice, in the defense of such Third Party
products liability claim.  Neither Party
shall have any obligation to share in the cost of any settlement of any such
Third Party products liability claim if such settlement is made without such
Party’s written consent, provided that
such Party does not unreasonably withhold or delay any such written consent.


 


10.5.  Insurance. Each
Party shall procure and maintain insurance or self-insurance, including product
liability insurance, adequate to cover its obligations hereunder and which are
consistent with normal business practices of prudent companies similarly
situated at all times during which any Licensed Product is being clinically
tested with human subjects or commercially distributed or sold by Chiron,
Cubist or Other Licensees.  It is
understood that such insurance shall not be construed to create a limit of
either Party’s liability with respect to its indemnification obligations under
this Article 10.  Each Party shall
provide the other with written evidence of such insurance (or financial information
that describes the amounts available under any self-insurance facility) upon
request.


 






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10.6.  Limitation of Liability


 


(a)           NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR LOST PROFITS OR FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF THE OTHER PARTY IN
CONNECTION WITH THIS AGREEMENT OR THE SUPPLY AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE SUPPLY AGREEMENT, HOWEVER CAUSED, UNDER
ANY THEORY OF LIABILITY.  THE FOREGOING
LIMITATION SHALL NOT APPLY SO AS TO LIMIT THE LIABILITY OF EITHER PARTY FOR
LOST PROFITS OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE
OR EXEMPLARY DAMAGES THAT MAY BE IMPOSED UPON SUCH PARTY UNDER ANY THEORY
OF LIABILITY (OTHER THAN BREACH OF CONTRACT), WHETHER BY STATUTE OR COMMON LAW,
AS  A RESULT OF ANY INFRINGEMENT BY SUCH
PARTY OF THE INTELLECTUAL PROPERTY RIGHTS OF THE OTHER PARTY OR AS A RESULT OF
THE FAILURE OF SUCH PARTY TO PERFORM AND OBSERVE ITS CONFIDENTIALITY
OBLIGATIONS TO THE OTHER PARTY.


 


(b)           EXCEPT AS A RESULT
OF A MATERIAL BREACH BY EITHER PARTY OF ITS REPRESENTATIONS AND WARRANTIES
PURSUANT TO ARTICLE 9 OF THIS AGREEMENT OR OF A MATERIAL BREACH BY SUCH PARTY
OF ITS COVENANTS AND AGREEMENTS IN SECTION 8.5 OR SECTION 8.10 OF
THIS AGREEMENT, AND EXCEPT FOR ANY INDEMNIFICATION OBLIGATION THAT EITHER PARTY
MAY HAVE UNDER CLAUSE (i) OR (ii) OF SECTION 10.1 OR 10.2
(AS APPLICABLE) OF THIS AGREEMENT WITH RESPECT TO ANY MATERIAL BREACH BY SUCH
PARTY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS UNDER
ARTICLE 9, SECTION 8.5 OR SECTION 8.10 OF THIS AGREEMENT, SUCH PARTY
SHALL NOT HAVE ANY LIABILITY TO THE OTHER PARTY UNDER THIS AGREEMENT OR THE
SUPPLY AGREEMENT FOR ANY THIRD PARTY CLAIM MADE AGAINST SUCH OTHER PARTY FOR
ACTUAL OR ALLEGED INFRINGEMENT OR MISAPPROPRIATION OF THE INTELLECTUAL PROPERTY
RIGHTS OF SUCH THIRD PARTY TO THE EXTENT THAT SUCH INFRINGEMENT OR
MISAPPROPRIATION ARISES FROM ACTIVITIES UNDER OR PURSUANT TO THIS AGREEMENT OR
THE SUPPLY AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY ACTUAL OR ALLEGED
INFRINGEMENT OR MISAPPROPRIATION OF THE INTELLECTUAL PROPERTY RIGHTS OF SUCH THIRD
PARTY CAUSED AS A RESULT OF THE USE OR PRACTICE BY SUCH OTHER PARTY OF THE
INTELLECTUAL PROPERTY RIGHTS OF SUCH PARTY.


 


(c)           CUBIST’S LIABILITY
UNDER THIS AGREEMENT OR THE SUPPLY AGREEMENT OR UNDER TORT PRINCIPLES OF
NEGLIGENCE FOR FAILURE TO SUPPLY LICENSED PRODUCT TO CHIRON OR THE SUPPLY OF
DEFECTIVE MANUFACTURED PRODUCTS [*]  ANY
FAILURE TO SUPPLY, OR ANY SUPPLY OF DEFECTIVE MANUFACTURED PRODUCT, WHICH
ARISES OUT OF A PARTICULAR CIRCUMSTANCE (EVEN IF SUCH CIRCUMSTANCE AFFECTS
MULTIPLE LOTS OF LICENSED PRODUCT) CONSTITUTES A SINGLE “BREACH” FOR THIS
PURPOSE.  [*] SHALL NOT APPLY IN THE CASE
OF FRAUD OR A WILLFUL BREACH BY CUBIST OF ITS SUPPLY OBLIGATIONS OR BREACH OF
CUBIST’S OBLIGATION TO ALLOCATE


 






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LIMITED SUPPLIES
IN ACCORDANCE WITH SECTION 8.1 OF THE SUPPLY AGREEMENT, OR TO CUBIST’S
OBLIGATIONS UNDER SECTION 5.7 (RECALLS AND VOLUNTARY WITHDRAWALS) AND SECTION 10.3
(LIABILITY FOR THIRD PARTY PRODUCT LIABILITY CLAIMS) OF THIS AGREEMENT AND SECTION 9.1(d) (CUBIST’S
PRODUCT WARRANTIES — EXCLUSIVE REMEDY) OF THE SUPPLY AGREEMENT.


 


ARTICLE
11.


 


RECORDS;
PUBLICATIONS


 


11.1.  Records. Each
Party shall keep or cause to be kept full and accurate books of account and
records containing all particulars that may be necessary to determine, in a
manner consistent with generally accepted accounting principles in the United
States, the sums or credits due under this Agreement, including, but not
limited to Transfer Prices,
Manufacturing Costs and Net Sales.  At
the written request (and expense) of either Party, the other Party and its
Affiliates and licensees and sublicensees shall permit an independent certified
public accountant appointed by such Party and reasonably acceptable to the
other Party, accompanied by representatives of the financial department of the
audited Party at reasonable times, upon reasonable notice and no more
frequently than once per calendar year, to examine only (i) those records
as may be necessary to determine the correctness or completeness of any report
or payment made under this Agreement and the Supply Agreement, including but
not limited to Transfer Prices, Manufacturing Costs, and Net Sales, with
respect to any calendar year ending not more than three (3) years prior to
such Party’s request and (ii) those records as may be necessary to comply
with the requesting Party’s obligations under applicable law or with a request
made by any governmental authority, in either case with respect to any calendar
year ending not more than seven (7) years prior to such Party’s
request.  Results of any such examination
shall be (i) made available to both Parties, (ii) limited to
information relating to the Licensed Products and (iii) subject to Article 12.
The Party requesting the audit shall bear the full cost of the performance of
any such audit, unless such audit discloses a variance of more than [*] from
the amount of the original report, royalty or payment calculation.  In such case, the Party being audited shall
bear the full cost of the performance of such audit.


 


11.2.  Publications. Neither
Party shall publish or present the results of studies carried out under this
Agreement without the opportunity for prior review by the other Party in
accordance with the provisions set forth in this Section 11.2.  Subject to Section 12.2, each Party
agrees to provide the other Party the opportunity to review any proposed
abstracts, manuscripts or presentations (including verbal presentations) which
relate to any Licensed Product at least sixty (60) days prior to their intended
submission for publication and agrees, upon request, not to submit any such
abstract or manuscript for publication, or to make such presentation, until the
other Party is given a reasonable period of time to secure patent protection
for any material in such publication or presentation that is owned by the
requesting Party (either individually or jointly with the non-requesting Party)
and which the requesting Party believes to be patentable.  In the event that the nature of the content
of any proposed publication or presentation is such that a Party is entitled to
request that submission of such publication or delivery of such presentation be
delayed pursuant to the foregoing provisions of this Section 11.2, then
both Parties understand that a reasonable commercial strategy may require delay
of publication or presentation of


 






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information or filing of patent applications.  The Parties agree to review and consider
delay of publication or presentation and filing of patent applications under
certain circumstances. Neither Party shall have the right to publish or present
Confidential Information of the other Party, and each Party shall remove the
Confidential Information of the other Party from any proposed publication or
presentation upon request by such other Party. 
Nothing contained in this Section 11.2 shall prohibit the inclusion
of information necessary to file a patent application with a government
authority, except for Confidential Information of the non-filing Party, provided
the non-filing Party is given a reasonable opportunity to review the
information to be included prior to submission of such patent application.  Notwithstanding the foregoing, the Parties
recognize that independent investigators have been engaged, and will be engaged
in the future, to conduct clinical trials of Licensed Products.  Independent investigators that have been
engaged by a Party or both Parties prior to or on the Effective Date may
release information regarding such studies in a manner consistent with academic
standards within the scope of such investigator’s agreement with the relevant
Party. Independent investigators that are
engaged by a Party or both Parties after the Effective Date are understood to
operate in an academic environment and shall be allowed to release information
regarding such studies in a manner consistent with academic standards and
within the scope of such investigator’s agreement with the relevant Party.  With respect to any agreement entered by
either Party with any independent investigator after the Effective Date to
conduct clinical trials of Licensed Products, such Party shall use Commercially
Reasonable Efforts to include in such agreements provisions that would give
such Party the right to limit the publication rights of such independent
investigator with respect to any results of such clinical trials to the same
extent as such Party would have under this Section 11.2 if such
independent investigator were the other Party to this Agreement; provided,
however, that  in no event shall such
Party be required or obligated to make any payment to such independent
investigator or incur any financial cost or penalty for the benefit of such
independent investigator in order to limit the publication rights of such
independent investigator in the manner contemplated under this Section 11.2.


 


ARTICLE
12.


 


CONFIDENTIALITY


 


12.1.  Treatment of Confidential
Information. The Parties agree that during the Term,
and after this Agreement expires or terminates, a Party receiving Confidential
Information of the other Party shall (i) maintain in confidence such
Confidential Information to the same extent such Party maintains its own
proprietary industrial information of similar kind and value (but at a minimum
each Party shall use commercially reasonable efforts to maintain Confidential
Information in confidence); (ii) not disclose such Confidential
Information to any Third Party without prior written consent of the disclosing
Party, except for disclosures made in confidence to any Third Party pursuant to
a plan approved by the JCT or to its licensees or sublicensees who agree to be
bound by obligations of non-disclosure and non-use at least as stringent as
those contained in this Article 12; and (iii) not use such
Confidential Information for any purpose except those purposes expressly
permitted by this Agreement.


 


12.2.  Authorized Disclosure. Notwithstanding
any other provision of this Agreement, each Party may disclose Confidential
Information of the other Party:


 






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(a)           to the extent and
to the persons and entities required by an applicable governmental law, rule or
regulation or court order; provided, however,
that the Party required to disclose Confidential Information shall first have
given prompt notice to the other Party hereto to enable it to seek any
available exemptions from or limitations on such disclosure requirement and
shall reasonably cooperate in such efforts by the other Party (in particular,
the Parties acknowledge that Cubist and/or Chiron may be obligated to file a
copy of this Agreement with the U.S. Securities and Exchange Commission with
its next quarterly report on Form 10-Q, annual report on Form 10-K or
current report on Form 8-K or with any registration statement filed with
the U.S. Securities and Exchange Commission (the “SEC”) pursuant to the Securities Act of 1933, as amended; in
the event of any such filing, the Parties agree to cooperate and work together
to request confidential treatment pursuant to, and in accordance with, the rules and
regulations of the SEC);


 


(b)           to the extent and
to the persons and entities required by rules of the National Association
of Securities Dealers;


 


(c)           as necessary to
file or prosecute patent applications, prosecute or defend litigation or
otherwise establish rights or enforce obligations under this Agreement, but
only to the extent that any such disclosure is necessary;


 


(d)           as required by the
Lilly License;


 


(e)           to investigators,
institutions, contract research organizations, clinical research associates and
Regulatory Authorities and the like in connection with conducting clinical
trials and obtaining authorizations for same; or


 


(f)            to Regulatory
Authorities in connection with Drug Approval Applications.


 


12.3. 
Publicity. Subject to Section 11.2, any
other publication, news release or other public announcement relating to this
Agreement or to the performance hereunder, shall first be reviewed and approved
by both Parties, which approval shall not be unreasonably withheld.


 


ARTICLE
13.


 


TERM AND
TERMINATION


 


13.1.  Term. This
Agreement shall become effective on the Effective Date and shall remain in
effect until the earlier of (i) the effective date of the termination of
this Agreement pursuant to Section 13.2, 13.3 or 13.4 below, or (ii) the
expiration of the term of this Agreement on the date on which Chiron is no
longer obligated, pursuant to this Agreement, to make payment to Cubist of any
royalties in connection with sales of Licensed Products in the Territory. In
the event that the term of this Agreement expires pursuant to clause (ii) of
this Section 13.1, then the licenses granted by Cubist to Chiron, and any
licenses granted by Chiron to Cubist, pursuant to Article 2 and Section 8.10
shall survive such expiration and shall be fully paid-up, royalty-free,
perpetual and irrevocable licenses.


 






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13.2.  Termination For Convenience
by Chiron. Chiron shall have, at any time, the right
to terminate this Agreement in its entirety upon [*] prior written notice to
Cubist.  Chiron shall have, at any time,
the right to terminate this Agreement with respect only to one or more
countries within the Territory (but not more than [*] of all countries within
the Territory in any [*] upon [*] prior written notice to Cubist; provided,
however, that the foregoing right of Chiron to terminate this Agreement
on a country-by-country basis shall not apply to any Major Market Country so as
to permit Chiron to terminate this Agreement with respect to any Major Market
Country.  Chiron’s termination rights
under this Section 13.2 shall not apply on a Licensed Product-by-Licensed
Product basis.


 


13.3.  Termination By Either Party
Upon Bankruptcy or Insolvency. This Agreement may be
terminated in its entirety by either Party by giving written notice of
termination to the other Party in the event that such other Party files or
institutes any bankruptcy, liquidation or receivership proceedings, or in the
event that such other Party makes an assignment of a substantial portion of the
assets of such other Party for the benefit of its creditors; provided, however,
that, in the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if such other Party consents to the
involuntary bankruptcy or such proceeding is not dismissed within [*] after the
filing thereof.


 


13.4.  Termination for Breach.


 


(a)  Notice. If
either Party believes that the other is in material breach of this Agreement
with respect to one or more Licensed Products or if Cubist believes that Chiron
is in material breach of the Supply Agreement with respect to one or more
Licensed Products, then the Party holding such belief (the “Non-breaching Party”) may deliver notice
of such breach to the other Party (the “Notified
Party”). A breach by Chiron of its diligence obligations under Section 5.1
or under Section 6.1 hereof and a breach by Cubist of its obligation under
Section 4.1 hereof, except as specified otherwise, shall be deemed to be a
material breach of this Agreement by Chiron or Cubist, as the case may be. The
Notified Party shall have ninety (90) days to cure such breach, provided
that, if cure cannot be reasonably effected within such ninety (90) day period,
the Notified Party may elect to deliver to the Non-breaching Party within such
ninety (90) day period a plan to cure such breach within a timeframe that is
reasonably prompt in light of the circumstances then prevailing, and the
Non-breaching Party shall have the right to approve or reject in writing such
proposed plan in its absolute discretion. 
If the Non-breaching Party approves in writing such proposed plan, then
the cure period will be extended in accordance with the terms of such plan and
the  Notified Party shall use
Commercially Reasonable Efforts to carry out such plan and cure the breach  in accordance with the provisions of such
plan.


 


(b)  Failure to Cure. If
the Notified Party fails to cure such breach as provided for in Section 13.4(a),
the Non-breaching Party may terminate this Agreement either in its entirety or
with respect to one or more Licensed Products upon written notice to the
Notified Party, provided that, the Non-breaching
Party gives such written notice of termination within [*] after the Notified
Party has failed to cure such breach as provided for in Section 13.4(a).


 


(c)  Disputes. If
a Party gives notice of termination under this Section 13.4 and the other
Party disputes whether such termination is proper under this Section 13.4,
then the issue of whether this Agreement may properly be terminated upon
expiration of the notice period


 






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(unless such breach is cured as provided in Section 13.4(a)) shall
be resolved in accordance with Article 14 (Dispute Resolution).  If as a result of such dispute resolution
process it is determined that the notice of termination was proper, then such
termination shall be deemed to have been effective ninety (90) days following
the date of the notice of termination. 
If as a result of such dispute resolution process it is determined that
the notice of termination was improper, then no termination shall have occurred
and this Agreement shall remain in effect.


 


(d)  Termination as to Certain
Licensed Products. Notwithstanding the foregoing
provisions of this Section 13.4, Cubist may exercise its right to
terminate the Agreement pursuant to this Section 13.4 with respect to one
or more particular Licensed Products as to which Chiron has breached its
obligations under this Agreement or the Supply Agreement, rather than with
respect to the entire Agreement, in which case the notice provided by Cubist
pursuant to Section 13.4(a) shall specify that the Agreement is being
terminated pursuant to this Section 13.4 only with respect to certain
Licensed Products listed in such notice. 
If Cubist makes such an election under this Section 13.4(d), then
subsections (a) through (c) shall be deemed to refer to
termination of the Agreement only with respect to those Licensed Products set
forth in the notice provided pursuant to Section 13.4(a).


 


(e)  Right to Sell. Notwithstanding
anything expressed or implied in this Agreement to the contrary, in the event
that Cubist shall terminate this Agreement in accordance with the provisions of
this Section 13.4, Chiron shall, notwithstanding any such termination,
have the opportunity and right to sell, assign, sublicense or otherwise
transfer this Agreement and the Chiron Interest to any Reasonable Buyer
pursuant to, and in accordance with, the provisions of Section 15.6 of
this Agreement, provided that any such sale, assignment, sublicense or
other transfer is effected [*] after the expiration of the cure period referred
to in Section  13.4(a) or, in the event that there is a dispute
between the Parties as to whether Cubist’s termination of this Agreement has
been proper, [*] after the resolution of such dispute pursuant to the
provisions of Article 14 hereof. 
Any such Reasonable Buyer shall acquire the Chiron Interest free and
clear of any breach by Chiron that led to the termination of this Agreement and
such Reasonable Buyer shall following such acquisition have all of the rights
and obligations that Chiron would have had under this Agreement as if Chiron
had not breached this Agreement and Cubist had not terminated the Agreement.  Any such sale, assignment, sublicense or
other transfer of the Chiron Interest to a Reasonable Buyer pursuant to this Section 13.4(e) shall
not relieve or release Chiron from any liability that Chiron may have to Cubist
in connection with any breach that resulted in the exercise by Cubist of its
right to terminate this Agreement. Until the expiration of the [*] referred to
above in this Section 13.4(e), Chiron shall continue to perform in
accordance with the provisions of this Agreement and the Supply Agreement, and
shall be liable for, any and all 
obligations that accrue during such [*] under this Agreement and the
Supply Agreement.  In the event that
Chiron is unable to consummate a sale, assignment, sublicense or other transfer
of this Agreement and the Chiron Interest within such [*], then all of Chiron’s
rights under this Section 13.4(e) shall terminate and be of no
further force or effect whatsoever


 


13.5.  INTENTIONALLY OMITTED.


 


13.6.  Consequences of Termination.


 






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(a)           If either Cubist or
Chiron terminates this Agreement in its entirety, or with respect to one or
more Licensed Product(s), or with respect to one or more countries, in each
case pursuant to any provisions of this Article 13, then, subject to the
right of Chiron to sell, assign, license or otherwise transfer its rights,
obligations and interests under this Agreement pursuant to Section 13.4(e):


 


(i)            The licenses
granted by Cubist and Chiron under Article 2 shall terminate (1) with
respect to all Licensed Products and all countries within the Territory if the
Agreement has been terminated in its entirety, or (2) with respect to
those Licensed Products as to which Chiron or Cubist has exercised termination
rights, in which case the licenses granted by Cubist and Chiron under Article 2
shall terminate with respect to such Licensed Products for all countries in the
Territory if Chiron or Cubist exercised termination rights with respect to such
Licensed Products in all countries in the Territory or the licenses granted by
Cubist and Chiron under Article 2 shall terminate with respect to such
Licensed Products only in certain countries within the Territory if Chiron or
Cubist exercised termination rights with respect to such Licensed Products only
in such countries within the Territory but not the other countries within the
Territory.  For purposes of this
Agreement, the term “Reverted Products”
shall mean those Licensed Products as to which Cubist or Chiron exercise
termination rights pursuant to this Article 13 (and could mean, in any
particular context, all of the Licensed Products if this Agreement is
terminated in its entirety), and the term “Reverted Country”
shall mean any country within the Territory as to which Cubist or Chiron
exercise termination rights pursuant to this Article 13 (and could mean,
in any particular context, all of the countries within the Territory if this
Agreement were terminated in its entirety or, with respect to any particular
Licensed Product, if Chiron’s rights to such Licensed Product are terminated as
to all countries within the Territory).


 


(ii)           Chiron shall
discontinue making any representation regarding its status as a licensee of or
distributor for Cubist in all Reverted Countries for all applicable Reverted
Products, and shall cease conducting any Commercialization activities in all
Reverted Countries with respect to all applicable Reverted Products.


 


(iii)         As promptly as possible,
Chiron shall transfer to Cubist all Drug Approval Applications and Regulatory
Approvals that Chiron holds as of the time of any such termination for Reverted
Products in all applicable Reverted Countries. 
In such event, Chiron shall take all actions necessary to effect such
transfer of such Drug Approval Applications and Regulatory Approvals to Cubist.


 


(iv)          Promptly after any
such termination, Chiron shall execute any documents required in the reasonable
opinion of Cubist (1) for Cubist to be entered as a “registered user” or
owner of the Cubist Marks in connection with the Commercialization of the
Reverted Products in those applicable Reverted Countries in which Chiron was
previously entered into as the registered user, owner or registered licensee of
the Cubist Marks pursuant to, and in accordance with, the provisions of Section 8.10
hereof, or (2) for Chiron to be removed as registered user or licensee of
the Cubist Marks in connection with the Commercialization of the Reverted
Products in such applicable Reverted Countries.


 






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(v)            Chiron shall be
responsible for payment of any milestone payments that accrue to Cubist for any
milestones achieved for any Reverted Product(s) prior to the effective
date of any such termination, but not for any milestones achieved for any
Reverted Product(s) after the effective date of any such termination.


 


(b)           In the event that
this Agreement is terminated due to the rejection of this Agreement by or on
behalf of a Party under Section 365 of the United States Bankruptcy Code
(the “Code”), all licenses and rights to
licenses granted under or pursuant to this Agreement by one Party to the other
are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
the Code, licenses of rights to “intellectual property” as defined under Section 101(35A)of
the Code.  The Parties agree that the
licensed Party, as a licensee of such rights under this Agreement, shall retain
and may fully exercise all of its rights and elections under the Code.


 


13.7.  Survival.


 


(a)           Expiration or
termination of this Agreement shall not relieve the Parties of any liability
hereunder which accrued, or which arose during or relates to, any period prior
to the effective date of such expiration or termination, nor preclude either
Party from pursuing all rights and remedies it may have hereunder or at law or
in equity with respect to any breach of this Agreement prior to the effective
date of such expiration or termination, nor prejudice either Party’s right to
obtain performance of any obligation hereunder which accrued, or which arose
during or relates to, any period prior to the effective date of such expiration
or termination.  The remedies provided in
this Article 13 are not exclusive of any other remedies a Party may have
in law or equity (it being understood that nothing in this sentence shall limit
the scope or application of any limitations on Chiron’s remedies that may be
expressly set forth elsewhere in this Agreement, including Section 10.6 of
this Agreement).  Upon any expiration of
the term of this Agreement pursuant to clause (ii) of Section 13.1
hereof, the following provisions of this Agreement shall survive any such
expiration: Articles 1, 10, 12, 14 and 15 and Sections 2.2, 2.3, 2.8, 4.6,
5.5, 8.2(c), 8.4, 8.7(a), 8.7(b), 8.8, 8.9, 8.10, 8.11, 11.1 and this 13.7, and
Sections 9.1, 9.2 and 9.3 (but Sections 9.1, 9.2 and 9.3 shall survive only for
purposes of making an indemnification claim in accordance with the provisions
of Article 10 with respect to a Third Party claim that arises from any
breach of Section 9.1, 9.2 or 9.3 and that relates to any period prior to
any such expiration of the term of this Agreement).  In addition, the provisions of Section 8.5
hereof shall survive the expiration of the term of this Agreement pursuant to
clause (ii) of Section 13.1 hereof so as to cover and apply to any
Third Party Infringement Claim that arises after such expiration and that is
based on infringement of a Knowable Patent.


 


(b)           Notwithstanding
expiration of this Agreement,


 


(i)            Chiron shall not
promote, sell or offer for sale Licensed Products in any Cubist Patent Country;


 


(ii)           Chiron shall require
its distributors who sell Chiron’s Licensed Products to make a similar
covenant;


 


(iii)         Chiron shall require
its sublicensees to make a similar covenant; and


 






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(iv)          Chiron shall not
grant to any subcontractor or sublicensee any rights that are broader in scope
than the rights that Chiron has at the time of such expiration.


 


“Cubist
Patent Country” means any country in which there is an unexpired
Cubist Patent or Joint Patent which includes a valid and enforceable claim that
covers the Licensed Product sold by Chiron and in which Cubist or its licensees
are selling their own Licensed Products.


 


(c)           Upon any termination of
this Agreement pursuant to Sections 13.2, 13.3 or 13.4, the following
provisions of this Agreement shall survive any such termination:
Articles 1, 10, 12, 14 and 15, and Sections 11.1, 13.4, 13.6 and this Section 13.7,
and Sections 9.1, 9.2 and 9.3 (but Sections 9.1, 9.2 and 9.3 shall survive only
for purposes of making an indemnification claim in accordance with the
provisions of Article 10 with respect to a Third Party claim that arises
from any breach of Section 9.1, 9.2 or 9.3 and that relates to any period
prior to any such termination of this Agreement).


 


ARTICLE
14.


 


DISPUTE
RESOLUTION


 


14.1.  Disputes.
The Parties recognize that disputes as to certain matters may from time to time
arise during the term of this Agreement which relate to either Party’s rights
and/or obligations hereunder.  It is the
objective of the Parties to establish procedures to facilitate the resolution
of disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. 
To accomplish this objective, the Parties agree to follow the procedures
set forth in this Section 14.1 if and when a dispute arises under this
Agreement.  Business issues that are not
contractual disputes arising under this Agreement shall be discussed by the JCT
at the request of either party.  Any
contractual dispute arising under this Agreement shall be discussed first by
the JCT.  In the event that the JCT is
unable to resolve any such contractual dispute within thirty (30) days after
such contractual dispute is submitted to the JCT, then any such contractual
dispute shall, by either Party providing written notice to the other Party, be
referred to the respective chief executive officers of the Parties for
attempted resolution by good faith negotiations within thirty (30) days after
such notice is received.  In the event
that the designated officers are not able to resolve such dispute within such
thirty (30) day period, and do not agree to extend the time period for
resolving the dispute, or if the terms and conditions of the resolution or
settlement of the dispute are breached, the dispute shall be submitted for
mediation by a mutually acceptable Third Party within thirty (30) days after
expiration of the previous thirty (30) day period, unless the Parties agree to
extend the period for submitting the contractual dispute for mediation.  In the event that such contractual dispute is
not resolved within thirty (30) days after such contractual dispute is submitted
for mediation, unless the parties otherwise agree to extend the time period for
resolving the dispute, then such contractual dispute shall be resolved by
arbitration pursuant to the provisions of Section 14.2. Pending resolution
of any dispute covered by this Section 14.1, both Parties will continue
their performance under this Agreement and the Supply Agreement of any
obligations (including, without limitation, payment obligations) that are not
the subject of such dispute.


 


14.2.  Arbitration.
If the dispute is not resolved pursuant to Section 14.1 above, then the
Parties shall follow the procedures set forth below.


 






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(a)           Any claim, dispute,
or controversy arising out of or relating to this Agreement that is not
resolved in accordance with the provisions of Section 14.1 and that the
Parties agree to submit to binding arbitration pursuant to this Section 14.2
will be submitted by the parties to arbitration under rules then in effect
(“ICC Rules”) of the International
Chamber of Commerce (“ICC”) in New
York, New York U.S.A. as modified herein or by agreement of the parties.  Any such arbitration shall be conducted in New
York, New York by three (3) arbitrators. 
Each Party shall select one (1) arbitrator and such arbitrators
shall jointly appoint the third arbitrator who shall act as the chairman.  If either Party fails to appoint an
arbitrator within thirty (30) days of a request by the other Party, or if the
arbitrators selected by the parties cannot agree on a chairman within thirty
(30) days after they have been selected, then either Party may request the ICC
to appoint such co-arbitrator (for the non-responsive Party) or the chairman.  Such appointment shall be binding on the
Parties.  Each Party irrevocably and
unconditionally (i) consents to the jurisdiction of any such proceeding
and waives any objection that it may have to personal jurisdiction or the
laying of venue of any such proceeding; and (ii) knowingly and voluntarily
waives its rights to have disputes tried and adjudicated by a judge and jury
except as otherwise expressly provided herein. 
The Parties hereby agree to exercise their respective rights under the
ICC Rules to cause any arbitration proceeding under this Section 14.2(a) to
be finalized and a decision rendered by the arbitrators as soon as reasonably
practicable but in no event more than six (6) months after the
commencement of such arbitration proceeding. 
Without limiting the provisions of the preceding sentence, the Parties
will cooperate with each other in causing the arbitration to be held in as
efficient and expeditious a manner as practicable.  Unless the Parties agree otherwise, they
shall be limited in their discovery to directly relevant documents.  Responses or objections to a document request
shall be served twenty (20) days after receipt of the request.  The arbitrators shall resolve any discovery
disputes.  Nothing herein shall prevent
the Parties from settling any dispute by mutual agreement at any time.


 


(b)           Except as otherwise
required by law, the Parties and the arbitrator(s) shall maintain as
confidential all information or documents obtained during the arbitration
process, including the resolution of the dispute.  The arbitration shall be conducted in English
language.


 


(c)           The arbitrator(s) shall
not have the authority to award any injunctive relief or to award exemplary or
punitive damages, and the Parties expressly waive any right to such
damages.  The arbitrator(s) shall
have the authority to award actual money damages (including interest on unpaid
amounts from the date due).  The costs
and expenses of the arbitration, but not the costs and expenses of the Parties,
shall be shared equally by the Parties, provided that the non-prevailing Party
in any arbitration shall pay the other Party’s costs and expenses (including
travel expenses) and reimburse such Party for its portion of the arbitration
costs. In the event that neither Party wins totally, reimbursement shall be
made proportionally in accordance with the ICC Rules.  Any award rendered by the arbitrator(s) shall
be final and binding upon the Parties. 
Judgment upon the award may be entered in any court of competent
jurisdiction.  If a Party fails to
proceed with arbitration, unsuccessfully challenges the arbitration award, or
fails to comply with the arbitration award, the other Party is entitled to
costs, including reasonable attorneys’ fees, for having to compel arbitration
or defend or enforce the award.


 


14.3.  Governing Law; Judicial
Resolution. Resolution of all disputes arising out of
or related to this Agreement or the performance, enforcement, breach or
termination of this Agreement and any remedies relating thereto, shall be
governed by and construed under the


 






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substantive laws of the United States of America and the State of New
York, as applied to Agreements executed and performed entirely in the State of
New York by residents of the State of New York, without regard to conflicts of
law rules.  Any dispute arising under
this Agreement shall be submitted to a state or federal court of competent
jurisdiction, except as otherwise expressly provided in this Agreement.


 


14.4.  Equitable Remedies;
Injunctive Relief. Nothing in this Article 14
shall prohibit either Party from seeking or obtaining any equitable remedy,
including, but not limited to, injunctive relief, from a court or government
agency of competent jurisdiction.


 


14.5.  [*] If
a dispute is submitted to arbitration in accordance with Section 14.2 in
connection with any alleged breach of this Agreement by [*], provided however, [*] pursuant to this
Agreement [*] that relates to such dispute. [*] after such dispute is submitted
to arbitration [*] final determination of the arbitration or upon mutual
agreement of Cubist and Chiron.


 


14.6.  Interest. All
amounts owed by either Party to the other Party in connection with any breach
of this Agreement or the Supply Agreement shall bear interest at the rate
stipulated in Section 7.10 hereof for late payments.


 


ARTICLE
15.


 


MISCELLANEOUS


 


15.1.  Entire Agreement; Amendment.
This Agreement, including the Exhibits hereto, sets
forth the complete, final and exclusive agreement and all the covenants,
promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersedes and terminates all
prior agreements and understandings between the Parties.  There are no covenants, promises, agreements,
warranties, representations, conditions or understandings, either oral or
written, between the Parties other than as are set forth herein and therein.  No subsequent alteration, amendment, change
or addition to this Agreement shall be binding upon the Parties unless reduced
to writing and signed by an authorized officer of each Party.


 


15.2.  Force Majeure. Both
Parties shall be excused from the performance of their obligations under this
Agreement to the extent that such performance is prevented by force majeure and
the nonperforming Party promptly provides notice of the prevention to the other
Party.  Such excuse shall be continued so
long as the condition constituting force majeure continues and the
nonperforming Party uses reasonable efforts to remove the condition.  For purposes of this Agreement, force majeure
shall include conditions beyond the control of the parties, such as an act of
God, voluntary or involuntary compliance with any regulation, law or order of
any government, war, an act of terrorism, civil commotion, labor strike or
lock-out, epidemic, failure or default of public utilities or common carriers,
destruction of production facilities or materials by fire, earthquake, storm or
like catastrophe; provided, however,
the payment of invoices due and owing hereunder shall not be delayed by the
payer because of a force majeure affecting the payer.


 






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15.3.  Notices. Any
notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement and shall be deemed to have
been sufficiently given for all purposes if mailed by first class certified or
registered mail, postage prepaid, express delivery service or personally
delivered, or if sent by facsimile, electronic transmission confirmed.  Unless otherwise specified in writing, the mailing
addresses of the Parties shall be as described below.


 


	
  

  	
  For Chiron:

  	
  Chiron
  Healthcare Ireland Ltd.

  
	
   

  	
   

  	
  United Drug House,

  
	
   

  	
   

  	
  Belgard Road,

  
	
   

  	
   

  	
  Tallaght, Dublin, Ireland

  
	
   

  	
   

  	
  Fax: +353 (1) 458-5583

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Chiron Corporation

  
	
   

  	
   

  	
  460 Horton Street

  
	
   

  	
   

  	
  Emeryville, CA 94608

  
	
   

  	
   

  	
  Fax: (510) 923-5360

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  For Chiron Corporation:

  	
  Chiron
  Corporation

  
	
   

  	
   

  	
  460 Horton Street

  
	
   

  	
   

  	
  Emeryville, CA 94608

  
	
   

  	
   

  	
  Fax: (510) 923-3823

  
	
   

  	
   

  	
  Attention: President, BioPharmaceuticals

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Chiron
  Corporation

  
	
   

  	
   

  	
  460 Horton Street

  
	
   

  	
   

  	
  Emeryville, CA 94608

  
	
   

  	
   

  	
  Fax: (510) 923-5360

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  For Cubist:

  	
  Cubist
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  65 Hayden Avenue

  
	
   

  	
   

  	
  Lexington, Massachusetts 02421

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Fax: 781-860-1407

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Bingham
  McCutchen LLP

  
	
   

  	
   

  	
  150 Federal Street

  
	
   

  	
   

  	
  Boston, Massachusetts 02110

  
	
   

  	
   

  	
  Attention: Julio E.
  Vega, Esq.

  
	
   

  	
   

  	
  Fax: (617) 951-8736

  



 






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15.4.  Maintenance of Records. Each
Party shall keep and maintain all records required by law or regulation with
respect to Licensed Products and shall make copies of such records available to
the other Party upon request.


 


15.5.  No Strict Construction. This
Agreement has been prepared jointly and shall not be strictly construed against
either Party.


 


15.6.  Assignment.


 


(a)  Assignment by Cubist. Cubist
may sell, assign, sublicense or otherwise transfer this Agreement, the Supply
Agreement, all (or any portion) of its rights under this Agreement or the
Supply Agreement and/or all (or any portion) of its obligations under this
Agreement or the Supply Agreement to a Third Party, without any requirement or
condition that Chiron consent to any such sale, assignment, sublicense or other
transfer, provided that:


 


(i)            (A) if and to the
extent that Cubist sells, assigns, sublicenses or transfers any of its
obligations under this Agreement to such Third Party, then Cubist also sells,
assigns, sublicenses or transfers to such Third Party any obligations of Cubist
under the Supply Agreement that correspond, without limitation, on a Licensed
Product by Licensed Product basis, or on a country by country basis, to the
obligations of Cubist under this Agreement that are being sold, assigned,
sublicensed or transferred to such Third Party by Cubist, and (B) if and
to the extent that Cubist sells, assigns, sublicenses or transfers any of its
obligations under the Supply Agreement to such Third Party, then Cubist also
sells, assigns, sublicenses or transfers to such Third Party any obligations of
Cubist under this Agreement that correspond, without limitation, on a Licensed
Product by Licensed Product basis, or on a country by country basis, to the
obligations of Cubist under the Supply Agreement that are being sold, assigned,
sublicensed or transferred to such Third Party by Cubist; and


 


(ii)           such Third Party has
expressly agreed in writing to assume the performance of any and all
obligations under this Agreement and the Supply Agreement that Cubist sells,
assigns, sublicenses or transfers to such Third Party or is required to sell,
assign, sublicense or transfer to such Third Party  pursuant to the provisions of this Section 15.6(a).


 


(b)  Assignment by Chiron. Notwithstanding
any other provision in this Agreement to the contrary, Chiron may not sell,
assign, sublicense or otherwise transfer this Agreement, the Supply Agreement
or any of its rights or obligations under this Agreement or the Supply
Agreement without the prior written consent of Cubist (which consent may be
withheld or delayed by Cubist in its absolute discretion), except for any sale,
assignment, sublicense or other transfer that is effected in strict compliance
with the provisions set forth below in this Section 15.6(b) and Section 15.6(c) which
shall not require or be conditioned upon any consent by Cubist to any such
sale, assignment, sublicense or other transfer. 
At any time from and after [*], Chiron may sell, assign, sublicense or
otherwise transfer this Agreement and the Supply Agreement and all (but not
less than all) of its rights and obligations under this Agreement and the
Supply Agreement (collectively, the “Chiron
Interest”) to any Reasonable Buyer without having to obtain the
consent of Cubist to any such sale, assignment, sublicense or other transfer; provided,
however, that (i) prior to any such sale, assignment, sublicense or
other transfer of the Chiron Interest, such Reasonable Buyer has expressly
agreed in writing to assume the


 






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performance of any and all obligations of Chiron under this Agreement
and the Supply Agreement, and (ii) Chiron shall have given Cubist at least
[*] advance notice of any such sale, assignment, sublicense or other transfer;
and, provided, further, that, if and to the extent applicable,
all of the conditions set forth in Section 15.6(c) below are
satisfied. Notwithstanding the foregoing provisions of this Section 15.6(b),
in the event that Cubist enters into a definitive agreement with any Third
Party granting to such Third Party any Commercialization rights with respect to
any Licensed Product in the United States, then at any time on or prior to [*]
any such definitive agreement between Cubist and such Third Party, Chiron may
sell, assign, sublicense or otherwise transfer the Chiron Interest to any Third
Party without having to obtain the consent of Cubist; provided, however,
that as a part of the consummation of such sale, assignment, sublicense or
other transfer of the Chiron Interest, such Third Party has expressly agreed in
writing to assume the performance of any and all obligations of Chiron under
this Agreement and the Supply Agreement; and, provided, further,
that, if and to the extent applicable, all of the conditions set forth in Section 15.6(c) below
are satisfied.


 


(c)  Restrictions on Payments. Notwithstanding
any other provision in this Section 15.6 to the contrary, Chiron’s right
to sell, assign, sublicense or otherwise transfer its rights to the Chiron
Interest to a Reasonable Buyer or any other Third Party subject to, and in
accordance with, Section 15.6(b) without obtaining the consent of
Cubist shall also be subject to the requirements and conditions that (i) such
sale, assignment, sublicense or other transfer results in the transfer by
Chiron of all of its then prospective economic rights in and to the Chiron
Interest to such Reasonable Buyer or other Third Party, and (ii) in the
event that any such sale, assignment, sublicense or other transfer calls for
royalty payments, earn-out payments, milestone-based or performance-based
payments or other payments of any kind to be made over time by such Reasonable
Buyer or other Third Party to Chiron, the agreement between Chiron and such
Reasonable Buyer or other Third Party shall stipulate a maximum aggregate
dollar amount of royalty payments, earn-out payments, milestone-based or
performance-based payments and/or other payments that such Reasonable Buyer or
other Third Party shall pay to Chiron in connection with such sale, assignment,
sublicense or other transfer of the Chiron Interest and shall also stipulate
that from and after the sixth anniversary of the closing of any such sale,
assignment, sublicense or other transfer such Reasonable Buyer or other Third
Party shall have no further obligation to make any payments of any kind or pay
any kind of consideration to Chiron in connection with such sale, assignment,
sublicense or other transfer of the Chiron Interest.


 


(d)  Injunctive Relief. The
Parties hereby acknowledge that Cubist would suffer irreparable damage and
injury in the event of any sale, assignment, sublicense or other transfer by
Chiron of the Chiron Interest to any Reasonable Buyer or other Third Party if
any such sale, assignment, sublicense or other transfer would not be effected
in compliance with the provisions of Section 15.6(b) and Section 15.6(c).  Accordingly, it is the intent of the Parties
that in the event that Chiron attempts or is attempting to sell, assign,
sublicense or otherwise transfer the Chiron Interest without complying with all
of the provisions of Section 15.6(b) and Section 15.6(c), Cubist
may, in addition to any other remedies that Cubist may have at law, seek
injunctive relief against Chiron (and/or any proposed transferee to the extent
Cubist may be so entitled under applicable law) for the sole purpose of
enforcing all of the provisions of Section 15.6(b) and Section 15.6(c).  In the event that Cubist brings any such
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to enforce the provisions of Section 15.6(b) and Section 15.6(c),
Chiron hereby agrees to waive any defenses that Cubist has an adequate remedy
at law and that Cubist will not suffer irreparable harm, and also any
requirement that Cubist post any bond in connection with any such action for
injunctive relief.  For the avoidance of
doubt, other than the defenses and the requirement specifically waived in the
foregoing two sentences, nothing in this Section 15.6(d) shall be
construed to be a waiver by Chiron of any of its remaining defenses at law or
in equity.


 


15.7.  Performance by Affiliates. Each
of Cubist and Chiron acknowledge that obligations under this Agreement may be
performed by Affiliates of Cubist and Chiron. 
Each of Cubist and Chiron guarantee performance of this Agreement by its
Affiliates.  Wherever in this Agreement
the Parties delegate responsibility to Affiliates or local operating entities,
the Parties agree that such entities may not make decisions inconsistent with
this Agreement, amend the terms of this Agreement or act contrary to its terms
in any way.


 


15.8.  Guaranty. Chiron
Parent Company hereby unconditionally and irrevocably guarantees, as primary
obligor, to Cubist, the due and punctual payment and performance as and when
due of the obligations, responsibilities, undertakings, representations,
warranties, payment covenants, obligations and agreements of Chiron and its
Affiliates under this Agreement, the Supply Agreement and any other agreement
regarding Licensed Products.


 


15.9.  Counterparts. This
Agreement may be executed in two (2) or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.


 


15.10.  Further Actions. Each
Party agrees to execute, acknowledge and deliver such further instruments, and
to do all such other acts, as may be necessary or appropriate in order to carry
out the purposes and intent of this Agreement.


 


15.11.  Severability. If
any one or more of the provisions of this Agreement is held to be invalid or
unenforceable by any court of competent jurisdiction from which no appeal can
be or is taken, the provision shall be considered severed from this Agreement
and shall not serve to invalidate any remaining provisions hereof.  The Parties shall make a good faith effort to
replace any invalid or unenforceable provision with a valid and enforceable one
such that the objectives contemplated by the Parties when entering this
Agreement may be realized.


 


15.12.  Headings. The
headings for each article and section in this Agreement have been inserted for
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or section.


 


15.13.  No Waiver. Any
delay in enforcing a Party’s rights under this Agreement or any waiver as to a
particular default or other matter shall not constitute a waiver of such Party’s
rights to the future enforcement of its rights under this Agreement, except
with respect to an express written and signed waiver relating to a particular
matter for a particular period of time.


 






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IN WITNESS WHEREOF, the Parties
have executed this License Agreement in duplicate originals by their proper
officers as of the Effective Date.


 


 


	
  CUBIST PHARMACEUTICALS, INC.

  	
  CHIRON HEALTHCARE IRELAND LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Oliver S. Fetzer

  	
   

  	
  By:

  	
    /s/ Craig A. Wheeler

  
	
  Title: 

  	
   Senior Vice President and Chief Business
  Officer

  	
   

  	
  Title: 

  	
    President, Chiron Pharmaceuticals

  
	
  Date:

  	
   October 2, 2003

  	
   

  	
  Date: 

  	
    October 2, 2003

  
	
   

  	
   

  
	
   

  	
  Agreed only as to Section 7.1(b) and (c)

  
	
   

  	
   and
  Section 15.8 by:

  
	
   

  	
   

  
	
   

  	
  CHIRON CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Craig A. Wheeler

  
	
   

  	
  Title: 

  	
     President, Chiron
  Biopharmaceuticals

  
	
   

  	
  Date: 

  	
     October 2, 2003

  
								



 






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EXHIBIT A


 


CUBIST MARKS


 


	
  Mark

  	
   

  	
  Country

  	
   

  	
  Filing Date

  	
   

  	
  Application

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 






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EXHIBIT B


 


CUBIST PATENTS


 


	
  Country

  	
   

  	
  Docket

  	
   

  	
  App Date

  	
   

  	
  App No

  	
   

  	
  Pub Date

  	
   

  	
  Pub No

  	
   

  	
  Sub Stat.

  	
   

  	
  Pat No.

  	
   

  	
  Grant Dt

  	
   

  	
  Exp Dt

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 






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EXHIBIT C


 


PRIMARY
DAPTOMYCIN MOLECULE


 





 






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EXHIBIT D


 


REGIONS AND COUNTRIES OF THE
TERRITORY


 


[*]


 






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EXHIBIT E


 


CUBIST TECHNOLOGY LICENSED FROM
THIRD PARTIES


 


[*].


 






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EXHIBIT F


 


LILLY
PATENTS


 


	
  Country

  	
   

  	
  Docket

  	
   

  	
  App Date

  	
   

  	
  App No

  	
   

  	
  Pub Date

  	
   

  	
  Pub No

  	
   

  	
  Sub Stat.

  	
   

  	
  Pat No.

  	
   

  	
  Grant Dt

  	
   

  	
  Exp Dt

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 






*
CONFIDENTIAL TREATMENT REQUESTED: MATERIAL HAS BEEN OMITTED AND FILED WITH THE
COMMISSION


 

















 


EXHIBIT G


 


INDS, NDAS
AND DRUG APPROVAL APPLICATIONS


 


IND # 57,693


CTX # 20364/0001/A


CTX # 17658/0001/A (Expired)


NDA # 21-572


 






*
CONFIDENTIAL TREATMENT REQUESTED: MATERIAL HAS BEEN OMITTED AND FILED WITH THE
COMMISSION