Exhibit 10.5


 


	
  

  	
  Cubist Employee
  Policy

  	
   CODE OF CONDUCT AND ETHICS

  



 


Introduction


 


This
Code of Conduct and Ethics (this “Code”) covers a wide range of business
practices and procedures.  It does not
cover every issue that may arise, but it sets out basic principles to guide all
employees and Directors of Cubist Pharmaceuticals, Inc. (the “Company”).  All of our employees and Directors must
conduct themselves accordingly and seek to avoid even the appearance of
improper behavior.  This Code should also
be provided to and followed by the Company’s agents and representatives,
including consultants.


 


If a law conflicts with a policy in this
Code, you must comply with the law; however, if a local custom or policy
conflicts with this Code, you must comply with the Code.  If you have any questions about these
conflicts, you should seek advice from: (i) your Vice President, (ii) any
director-level or higher employee in Human Resources, (iii) any
director-level or higher employee in the Law Department, or (iv) the Chief
Compliance Officer.


 


If an employee wishes to report a violation
or suspected violation of this Code, he or she can contact the Company’s
Corporate Responsibility Hotline, which is 781-860-8600.  The Chief Compliance Officer is responsible
for investigating such reports.


 


If an employee wishes to report anonymously a
violation or suspected violation of this Code, including, but not limited to,
those:  (i) relating to accounting,
internal accounting controls, or auditing matters or (ii) by one or more
of the Company’s Executive Officers, he or she can contact the Company’s Confidential
Corporate Responsibility Hotline, which is 617-241-1456.  The Company’s Internal Auditors will promptly
investigate all reports to the Confidential Corporate Responsibility Hotline
and, if after investigation, the Internal Auditors determine that further
action is necessary, they will report their findings to the Audit Committee.


 


Directors must report violations or suspected
violations of the Code to the Board of Directors.


 


A good basis for
deciding when to get advice is to ask whether the conduct might be embarrassing
to the Company or the persons involved if the details were fully disclosed to
the public by the media.


 


Those
who violate the standards in this Code will be subject to disciplinary action,
up to and including termination.


 





















 


Section 1.                       Compliance
with Laws, Rules and Regulations


 


Obeying the
law, both in letter and in spirit, is the foundation on which this Company’s
ethical standards are built.  All
employees and Directors must respect and obey the laws of the jurisdictions in
which we operate.  Although not all
employees and Directors are expected to know the details of these laws, it is
important to know enough to determine when to seek advice from:  (i) your Vice President, (ii) any
director-level or higher employee in Human Resources, or (iii) any
director-level or higher employee in the Law Department.


 


The Company
holds information and training sessions and has put in place various policies
and standard operating procedures in order to promote compliance with laws, rules and
regulations, including insider-trading laws. 
Each department head is responsible for ensuring that his/her employees
attend all mandatory training sessions that are related to compliance with
laws, rules and regulations.


 


Section 2.                       Conflicts
of Interest


 


All employees and Directors are expected to
make decisions in the best interest of the Company, and not for personal gain,
and therefore are required to avoid “conflicts of interest.”


 


A
“conflict of interest” exists when a person’s private interest interferes in
any way with the interests of the Company. 
A conflict situation can arise when an employee or Director takes
actions or has interests that may make it difficult to perform his or her
Company responsibilities objectively and effectively.  Conflicts of interest may also arise when an
employee or director, or members of his or her family, receives improper
personal benefits as a result of his or her position in the Company.  Loans to, or guarantees of obligations of,
employees or Directors and their family members may create conflicts of
interest.


 


It
is almost always a conflict of interest for a Company employee to work
simultaneously for a competitor, customer, or supplier.  Employees are not allowed to work for a
competitor as a consultant or board member. 
The best policy is to avoid any direct or indirect business connection
with our customers, suppliers, or competitors, except on our behalf.


 


Directors
must comply with the Conflict of Interest provisions set forth in the Amended
and Restated Corporate Governance Guidelines.


 


Conflicts
of interest are prohibited as a matter of Company policy, except if approved by
the Board of Directors on a case-by-case basis. 
Conflicts of interest may not always be clear-cut. Employees should seek
advice from:  (i) your Vice
President, (ii) any director-level or higher employee in Human Resources,
or (iii) any director-level or higher employee in the Law Department.  Any employee who becomes aware of a conflict
or potential conflict should bring it to the attention of: (i) his or her
Vice President, (ii) any director-level or higher employee in Human
Resources, (iii) any director-level or higher employee in the Law
Department, or (iv) the Chief Compliance Officer.


 


	
  Policy
  Owner: Compliance

  	
   

  	
  Effective: December 13, 2005

  



 


2





















 


Section 3.                       Insider
Trading


 


Employees
and Directors who have access to confidential information are not permitted to
use or share that information for stock trading purposes or for any other
purpose except the conduct of our business. 
All non-public information about the Company should be considered
confidential information.  To use
non-public information for personal financial benefit or to “tip” others who
might make an investment decision on the basis of this information is not only
unethical but also illegal.  If you have
any questions, please refer to the Company’s Policy on Insider Trading and
Confidentiality, and then ask the Law Department.


 


Section 4.                       Corporate
Opportunities


 


Employees
and Directors are prohibited from exploiting for their personal advantage
opportunities that are discovered through the use of corporate property,
information, or position without the consent of the Board of Directors.  No employee or Director may use corporate
property, information, or position for improper personal gain, and no employee or
Director may compete with the Company directly or indirectly.  Employees and Directors owe a duty to the
Company to advance its legitimate interests when the opportunity to do so
arises.


 


Section 5.                       Competition
and Fair Dealing


 


We
seek to outperform our competition fairly and honestly.  We seek competitive advantages through
superior performance, never through unethical or illegal business practices.
Stealing proprietary information, possessing trade secret information that was
obtained without the owner’s consent, or inducing such disclosures by past or
present employees of other companies is prohibited.  Each employee and Director should endeavor to
respect the rights of and deal fairly with the Company’s customers, suppliers,
competitors, and their employees.  No
employee or Director should take unfair advantage of anyone through
manipulation, concealment, abuse of privileged information, misrepresentation
of material facts, or any other intentional unfair-dealing practice.


 


Drug development is highly competitive, and
it is the policy of the Company to compete aggressively, but fairly.  A major part of this commitment to compete
fairly is a commitment to abide fully by the antitrust laws.  In general, these complex laws prohibit any
form of agreement or understanding — whether formal, informal, express, or
implied — that unreasonably reduces competition and business rivalry.  Our commitment in this regard also prohibits
any unfair or untrue disparagement of a Company competitor.


 


Absent
compelling circumstances, the Company should select all vendors and contractors
on the basis of written competitive bids.


 


The purpose of
business entertainment and gifts in a commercial setting is to create good will
and sound working relationships, not to gain unfair advantage with customers.
Gifts or entertainment should not ever be offered, given, provided or accepted
by any Company employee or Director, or family member of an employee or Director
unless it: (1) is not a cash gift, (2) is consistent with customary
business practices, (3) is not


 


3





















 


excessive in
value, (4) cannot be construed as a bribe or payoff, (5) does not
violate any laws or regulations, and (6) is offered in compliance with
applicable SOPs.  You can also refer to
the “PhRMA Code” for additional guidance (copies of which are available from
the Law Department).  Please seek advice
from:  (i) your Vice President, (ii) any
director-level or higher employee in Human Resources,  (iii) any director-level or higher
employee in the Law Department, or (iv) the Chief Compliance Officer regarding
any gifts or proposed gifts which you are not certain are appropriate.


 


It
is the policy of the Company to comply with health care “fraud and abuse”
laws.  This includes Federal and State
anti-kickback laws that prohibit offering or giving kickbacks or other improper
inducements to those who may be in a position to purchase or prescribe (or to
arrange for or recommend the purchase or prescription of) our products.  Any arrangements with healthcare customers
(including but not limited to the provision of gifts, grants, and business
courtesies) should be reviewed to ensure compliance with applicable laws,
Company policies, and SOPs, which are available from the Law Department.


 


Section 6.                       Discrimination
and Harassment


 


The
diversity of the Company’s employees is a tremendous asset. We are firmly
committed to providing equal opportunity in all aspects of employment and will
not tolerate any discrimination or harassment of any kind. Please refer to
Cubist’s “Policy Against Sexual Harassment in the Workplace” for additional
information and guidance.


 


Section 7.                       Health and
Safety


 


The Company
strives to provide each employee with a safe and healthful work
environment.  Each employee has
responsibility for maintaining a safe and healthy workplace for all employees
by following safety and health rules and practices and reporting
accidents, injuries and unsafe equipment, practices or conditions.


 


The
Company will not tolerate violence and threatening behavior. Employees should
report to work in condition to perform their duties, free from the influence of
illegal drugs or alcohol.  The Company
will not tolerate the use of illegal drugs in the workplace or on the Company’s
property.  Please see the Company’s policies
for further guidance.


 


Section 8.                       Record-Keeping


 


The Company follows the accepted accounting rules and
controls set forth by the U.S. Securities and Exchange Commission and the
Financial Accounting Standards Board. 
The Company requires honest and accurate recording and reporting of
information in all circumstances, and without exception.  The Company requires that its certified
public accountants have access to any and all information necessary for them to
conduct audits properly.


 


Business expense accounts must be documented and
recorded accurately.  If you are not sure
whether a certain expense is legitimate, ask your supervisor or the
Controller.  Rules and guidelines
are available from the Controller.


 


4





















 


All of the Company’s books, records, accounts and
financial statements must be maintained in reasonable detail, must
appropriately reflect the Company’s transactions and must conform both to
applicable legal requirements and to the Company’s system of internal controls.
Unrecorded or “off the books” funds or assets should not be maintained unless
permitted by applicable law or regulation and approved in writing by the Chief
Financial Officer.


 


Business records and communications often become
public, and we should avoid exaggeration, derogatory remarks, guesswork, or
inappropriate characterizations of people and companies that could be
misunderstood.  This applies equally to
e-mail, internal memos, and formal reports. 
Records should always be retained or destroyed according to the Company’s
record retention policies.  In accordance
with those policies, in the event of litigation or governmental investigation,
threatened or known, please consult with a director-level or higher employee in
the Law Department.


 


Section 9.                       Confidentiality


 


Employees and Directors must maintain the
confidentiality of confidential information entrusted to them by the Company or
its customers, except when disclosure is authorized by a director-level or
higher employee in the Law Department, or required by laws or regulations.  Confidential information includes all
non-public information that might be of use to competitors, or harmful to the
Company or its customers, if disclosed. 
It also includes information that suppliers and customers have entrusted
to us.  The obligation to preserve
confidential information continues even after employment ends.


 


Section 10.                Protection and
Proper Use of Company Assets


 


All employees and Directors should endeavor to
protect the Company’s assets and ensure their efficient use.  Theft, carelessness, and waste have a direct
impact on the Company’s profitability. Any suspected incident of fraud or theft
should be immediately reported for investigation. Company equipment should not
be used for non-Company business, though incidental personal use may be
permitted.


 


The obligation of employees and Directors to protect
the Company’s assets includes its proprietary information.  Proprietary information includes intellectual
property such as trade secrets, patents, trademarks, and copyrights, as well as
business, marketing and service plans, engineering and manufacturing ideas,
designs, databases, records, salary information and any unpublished financial
data and reports.  Unauthorized use or
distribution of this information would violate Company policy.  It could also be illegal and result in civil
or even criminal penalties.  Please see
the Company’s policies on IT usage and confidentiality (copies of which are
located on Picasso) for further guidance.


 


5





















 


Section 11.                Payments to Government
Personnel


 


The U.S. Foreign Corrupt Practices Act prohibits
giving anything of value, directly or indirectly, to officials of foreign
governments or foreign political candidates in order to obtain or retain
business.  It is strictly prohibited to make
payments to government officials of any country.


 


In addition, the U.S. government has a number of
laws and regulations regarding business gratuities, which may be accepted by
U.S. government personnel, including, but not limited to, employees of Medicare,
Medicaid, and the Veterans Administration. 
The promise, offer or delivery to an official or employee of the U.S.
government of a gift, favor or other gratuity in violation of these rules would
not only violate Company policy but could also be a criminal offense.  State and local governments, as well as
foreign governments, may have similar rules.


 


The
Company does not contribute, directly or indirectly, to any political campaign
or party.  Company expense accounts may
not be used to pay for any personal political contributions or seek any other
form of company reimbursement and use company facilities or company assets may
not be used for the benefit of any party or candidate, including an employee or
Director individually running for office. 
Employees and Directors are not prohibited from contributing to properly
established political action committees.


 


Section 12.                Misrepresentations
and False Statements


 


Employees and Directors must never make a
deliberate misrepresentation concerning the Company or its business
operations.  No employee or Director shall
create, or assist another in creating, a false or misleading entry on the
Company’s books.


 


Section 13.                Responding to
Government Requests


 


Employees and
Directors are expected to respond truthfully to Governmental inquiries.  It is the Company’s policy to cooperate with
all reasonable requests from Governmental agencies concerning the Company’s
business operations.


 


Section 14.                Compliance
Procedures


 


We
must all work to ensure prompt and consistent action against violations of this
Code.  However, in some situations it may
be difficult to know right from wrong. 
Since we cannot anticipate every situation that will arise, it is
important that we have a way to approach a new question or problem.  These are the steps to keep in mind:


 


•                        Make
sure you have all the facts.  In
order to reach the right solutions, we must be as fully informed as possible.


 


•                        Ask
yourself. What specifically am I being asked to do? Does it seem unethical or
improper?  This will enable you to
focus on the specific question you are faced with and the alternatives you
have.  Use your judgment and common
sense; if something seems unethical or improper, it probably is.


 


6





















 


•                        Clarify
your responsibility and role.  In
most situations, there is shared responsibility.  Are your colleagues informed?  It may help to get others involved and
discuss the problem.


 


•                        Discuss
the problem with your supervisor. 
This is the basic guidance for all situations.  In many cases, your supervisor will be more
knowledgeable about the question and will appreciate being brought into the
decision-making process.  Remember that
it is your supervisor’s responsibility to help you solve problems.


 


•                        Seek
help from Company resources.  In the
rare case where it may not be appropriate to discuss an issue with your
supervisor, or where you do not feel comfortable approaching your supervisor
with your question, discuss it with any director-level or higher employee of
Human Resources, any director-level or higher employee in the Law Department or
the Chief Compliance Officer.


 


•                        You
may report violations in confidence and without fear of retaliation.  You may report violations or suspected
violations of this Code by calling the Company’s Corporate Responsibility
Hotline at 781-860-8600.  All inquiries
to the Corporate Responsibility Hotline will be handled confidentially to the
extent reasonably possible.  You may anonymously report
violations or suspected violations of this Code, including, but not limited to,
those: (i) relating to accounting, internal accounting controls, or
auditing matters or (ii) by one or more of the Company’s Executive
Officers, by calling the Company’s Confidential Corporate Responsibility Hotline
at 617-241-1456.  The Company does not
permit retaliation of any kind against employees for good faith reports of
ethical violations.


 


•                        Always
ask first, act later.  If you are
unsure of what to do in any situation, seek guidance before you act.


 


Section 15.                How to Report any
Illegal or Unethical Behavior


 


Employees are encouraged to seek advice
from:  (i) their respective Vice
President, (ii) any director-level or higher employee in Human
Resources,  (iii) any director-level
or higher employee in the Law Department, or (iv) the Chief Compliance
Officer about observed illegal or unethical behavior and, when in doubt, about
the best course of action in a particular situation.


 


You
should review Section 14 if you believe you have observed illegal or
unethical behavior.  Employees should
promptly report such behavior to: (i) your Vice President, (ii) any
director-level or higher employee in Human Resources, (iii) any
director-level or higher employee in the Law Department, or (iv) the Chief
Compliance Officer. You may also report such behavior to the Company’s
Corporate Responsibility Hotline at 781-860-8600.  If you wish to report such behavior
anonymously, you can call the Company’s Confidential Corporate Responsibility
Hotline at 617-241-1456.  Employees are expected to cooperate in
internal investigations of misconduct.


 


7





















 


Directors must report any observed illegal or
unethical behavior to the Chief Compliance Officer or to the Board of
Directors.


 


Section 16.                No Retaliation


 


The Company will not retaliate in any manner,
including, but not limited to, discharging, demoting, suspending, threatening,
harassing, or otherwise discriminating against an employee who reports in good
faith violations or suspected violations of this Code, including, but not
limited to, accounting fraud or securities law violations.


 


Section 17.                Waivers of the
Code of Business Conduct and Ethics


 


Any waiver of this Code for employees may be
made only by the Board of Directors.  Any
waiver of this Code for Executive Officers or Directors may be made only by the
Board of Directors and will be promptly disclosed as required by law or Nasdaq
regulation.


 


8