Exhibit 10.3


 


EXECUTION COPY


 


CONFIDENTIAL TREATMENT

PROCESSING SERVICES AGREEMENT


 


This PROCESSING SERVICES
AGREEMENT (“Agreement”) is made this 11th day of August, 2004 (“Effective Date”),
by and between Cardinal Health PTS, LLC, having a place of business at 4401
Alexander Blvd., NE, Albuquerque, New Mexico 87107 (“Cardinal Health”) and
Cubist Pharmaceuticals, Inc. (“Cubist”), having its principal place of
business at 65 Hayden Avenue, Lexington, MA 02421.


 


A.            Cardinal
Health provides contract pharmaceutical development, manufacturing, packaging,
analytical, and sales and marketing services to the pharmaceutical industry.


 


B.            Cubist
has certain proprietary technology relating to a certain pharmaceutical Product
and wants Cardinal Health to assist in the formulation, filling, packaging and
testing on such Product as provided in this Agreement and the attachments
hereto.


 


C.            Cardinal
Health and Cubist are parties to an April 14, 2004 agreement, captioned a “Quotation”,
for the development and approval of Cardinal Health’s processing of Cubist’s
CUBICIN® (daptomycin for injection) “Product” (defined below) (the “Development Agreement”).


 


D.            Cardinal
Health and Cubist are parties to a September 30, 2003 Packaging Agreement,
pursuant to which Cardinal Health provides certain services to Cubist in
connection with the packaging of CUBICIN that has been processed by a third
party (the “Packaging Agreement”).


 


E.             Cubist
desires to engage Cardinal Health to provide certain services to Cubist in
connection with the processing of CUBICIN; and Cardinal Health desires to
provide such services pursuant to the terms and conditions set forth in this
Agreement.


 


NOW,
THEREFORE, in consideration of the mutual covenants, terms and conditions set
forth below, the parties agree as follows:


 


ARTICLE 1


DEFINITIONS


 


The
following terms have the following meanings in this Agreement:


 





















 


1.1           “Affiliate(s)”
means any corporation, firm, partnership or other entity which controls, is
controlled by or is under common control with a party.  For purposes of this definition, “control”
shall mean the ownership of at least fifty percent (50%) of the voting share
capital of such entity or any other comparable equity or ownership interest.


 


1.2           “API”
means the active pharmaceutical ingredient set forth in Exhibit A which
has been released by Cubist and provided to Cardinal Health, along with a
Certificate of Analysis, as provided in this Agreement.


 


1.3           “Applicable
Laws” means all laws, ordinances, rules and regulations within the
Territory applicable to the Processing of the Product or any aspect thereof and
the obligations of Cardinal Health or Cubist, as the context requires under
this Agreement, including, without limitation, (i) all applicable federal,
state and local laws and regulations of each Territory; (ii) the U.S.
Federal Food, Drug and Cosmetic Act, and (iii) the Good Manufacturing
Practices for Finished Pharmaceuticals promulgated by the Regulatory
Authorities, as amended from time to time (“GMPs”).


 


1.4           “Batch”
means a defined quantity of formulated bulk drug solution which has been or is
in the process of being packaged into Dosage Containers in accordance with the
Specifications.


 


1.5           “Batch
Record” means a document consisting of master manufacturing formula,
appropriate packaging bill of materials and instructions, and exception
documentation, such as non-conforming material reports, deviations, variance
reports, and additional documentation which may have been processed as part of
the production record of a Batch.


 


1.6           “Calendar
Quarter” means a period of three (3) consecutive months commencing on January 1,
April 1, July 1 or October 1 of any calendar year.


 


1.7           “Cardinal
Health Materials” shall have the meaning set forth in Article 12.


 


1.8           “Certificate
of Analysis” or “COA” means a document certifying that the Product was
manufactured in a GMP compliant facility and was tested in accordance with, and
meets the applicable Specifications. 
COAs for Product will contain at least the following information: (a) date;
(b) list number; (c) lot number; (d) name of Product; (e) name
of test; (f) Specification limit; (g) test result as a numerical
value unless designated pass/fail in the specification limit; and (h) Cardinal
Health Quality Assurance department approval. 
..


 


1.9           “Change
Order” shall have the meaning set forth in Section 4.5(a).


 


1.10         “Commencement
Date” means the first date upon which a Regulatory Authority approves Cardinal
Health as a manufacturer of the Product.


 


1.11         “Confidential
Information” is as defined in Section 11.2.


 


2





















 


1.12         “Contract
Year” means each consecutive twelve (12)
month period beginning on the Commencement Date.


 


1.13         “Cubist
Materials” shall have the meaning set forth in Article 12.


 


1.14         “Cubist’s
Marks” shall mean Cubist’s name, any trademark, trade name, service name, and
any other names for which Cubist has rights or for which application has been
made, or may be made during the term of this Agreement, to the applicable
Regulatory Authority for recognition as a registered trademark or service mark
of Cubist or the Product, including, without limitation, the mark CUBICIN.


 


1.15         “Defective
Product “ shall have the meaning set forth in Section 5.3.


 


1.16         “Dispute”
shall have the meaning set forth in Section 18.9.


 


1.17         “Dosage
Container” means any final dosage form container(s) the parties may agree upon
in writing from time to time.


 


1.18         “Effective
Date” means the date set forth on page 1 of this Agreement.


 


1.19         “Estimated
Commitment” shall have the meaning set forth in Section 4.1.


 


1.20         “Facilities”
means Cardinal Health’s facilities located in Albuquerque, New Mexico or such
other facility as agreed to in writing by the parties.


 


1.21         “FDA” means
the United States Food and Drug Administration.


 


1.22         “Firm
Commitment” shall have the meaning set forth in Section 4.1.


 


1.23         “Latent
Defect” means a defect that Cubist could not reasonably have discovered upon
inspection and testing of samples from each Batch of Product and that is
conclusively determined to be attributable to Cardinal Health prior to delivery
of such Batch of Product in accordance
with Section 6.1.


 


1.24         “Intellectual
Property” means all intellectual property (whether or not patented),
including without limitation, patents, patent applications, know-how, trade
secrets, copyrights, trademarks, designs, concepts, technical information,
manuals, standard operating procedures, instructions or specifications.


 


1.25         “Master Batch Record” means a document
consisting of the specific procedures for the manufacturing formula and
appropriate packaging bill of materials to produce and store the product in
accordance with the Specifications and Applicable Laws.


 


1.26         “Minimum
Requirement” shall have the meaning set forth in Section 4.1.


 


3





















 


1.27         “Process” or
“Processing” means the compounding, filling, producing, labeling and packaging
of the API and Raw Materials into Product in accordance with the Specifications
and the terms and conditions set forth in this Agreement.


 


1.28         “Processing
Date” means the day on which the Product is to be compounded by Cardinal
Health.


 


1.29         “Product”
means the API Processed into Dosage Containers and packaged in accordance with
the Specifications.


 


1.30         “Purchase
Order” shall have the meaning set forth in Section 4.3.


 


1.31         “Raw
Materials” means all raw materials, supplies, components and packaging
necessary to manufacture and ship the Product in accordance with the
Specifications, as provided in Exhibit A, but not including the API.


 


1.32         “Regulatory
Authority” means the US Food and Drug Administration and any other governmental
regulatory authority within a Territory involved in regulating any aspect of
the development, manufacture, market approval, sale, distribution, packaging or
use of the Product.


 


1.33         “Rolling
Forecast” shall have the meaning set forth in Section 4.2.


 


1.34         “Specifications”
means the procedures, requirements, standards, quality control testing and
other data and the scope of services as set forth in Exhibit A for
Product, which are hereby incorporated by reference into this Agreement, along
with any valid amendments or modifications thereto, subject to the terms and
conditions set forth in Article 8.


 


1.35         “Term” shall
have the meaning set forth in Section 15.1.


 


1.36         “Territory”
means the United States of America and any other country which the parties
agree in writing to add to this definition of Territory in an amendment to this
Agreement.


 


1.37         “Unit
Pricing” shall have the meaning set forth in Section 7.1.


 


ARTICLE 2


VALIDATION, PROCESSING & RELATED SERVICES


 


2.1           Supply
and Purchase of Product.  During the
Term, Cardinal Health shall Process and supply to Cubist the Product in
accordance with the Specifications, the Applicable Laws and the terms and
conditions of this Agreement. Cubist shall purchase the Product from Cardinal
Health in accordance with the terms and conditions of this Agreement.  Cardinal Health shall not use any third party
contractors or subcontractors to perform any of the Processing without Cubist’s
prior written consent.


 


4





















 


2.2           Other
Related Services.  Cardinal Health
shall provide other services upon terms and conditions agreed to by the parties
in writing from time to time.


 


ARTICLE 3


MATERIALS


 


3.1           API.
Cubist shall supply to Cardinal Health for Processing, at Cubist’s sole cost,
the API and applicable reference standards in quantities sufficient to meet
Cubist’s requirements for each Product as further set forth in Article 4.  Prior to delivery of any of the API or
reference standard to Cardinal Health for Processing, Cubist shall provide to
Cardinal Health a copy of the API Material Safety Data Sheet (“MSDS”), as
amended, and any subsequent revisions thereto. Cubist shall supply the API and
reference standards [ ]* no later
than [ ]* before the scheduled Processing Date upon which such API will be used
by Cardinal Health hereunder.  Cubist
shall provide Cardinal Health with the API certificates of analysis, as
provided to Cubist by its API supplier, prior to the shipment of API to
Cardinal Health. Upon receipt of the API, Cardinal Health shall conduct UV and
IR identification testing of the API only. Cardinal Health shall use the API
solely and exclusively for Processing under this Agreement.


 


3.2           Raw
Materials.  Cardinal Health shall be
responsible for procuring, inspecting and releasing adequate Raw Materials as
necessary to meet the Firm Commitment, unless otherwise agreed to by the
parties in writing.  In certain
instances, Cubist may require a specific supplier to be used for Raw
Material.  In such an event, the supplier
will be specified in the Specifications, and Cubist shall be responsible for
the timeliness, quantity and quality of supply of such Raw Materials.  If the cost of any such Raw Material is
greater than Cardinal Health’s costs for the same raw material of equal quality
from other suppliers, Cardinal Health shall add the difference between Cardinal
Health’s cost of the Raw Material and Cubist’s mandated supplier’s cost to the
Unit Price of the Product.  [ ]* will be responsible for all costs
associated with qualification of a new supplier of a Raw Material not
previously qualified by Cardinal Health. 
Unless a particular Raw Material can, with Cubist’s prior written
consent, be replaced with the same raw material from another supplier, Cardinal
Health shall [ ]* of Product if (i) [
]*, a particular Raw Material necessary to Process the Product, and (ii) Cardinal
Health placed orders for Raw Materials necessary to Process the Product
promptly following receipt of Cubist’s [ ]*.


 


3.3           Artwork
and Packaging. Cubist shall provide or approve, prior to the procurement of
applicable components, all artwork,   and
packaging information necessary to Process the Product.  Such artwork and packaging information is and
shall remain the exclusive property of Cubist, and Cubist shall be solely
responsible for the content thereof. 
Cardinal Health agrees not to use such artwork, advertising and
packaging information or any reproduction thereof following the termination of
this Agreement, or during the Term of this Agreement in any manner other than
solely for the purpose of performing its obligations hereunder.


 


3.4           Reimbursement
for Raw Materials. In the event of (i) a Specification change for any
reason permitted hereunder, (ii) termination or expiration of this
Agreement; or (iii) obsolescence of any Raw Material,  Cubist shall bear the cost of any unused Raw
Materials that Cardinal Health is unable to use for any other product that it
processes, provided that (a) Cardinal Health purchased such Raw Materials
in quantities consistent with Cubist’s [ ]* and the


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


5





















 


supplier’s minimum
purchase obligations, and (b) Cardinal Health has used commercially
reasonable efforts to use such Raw Materials for another product or products
that it processes.


 


ARTICLE 4


PURCHASE ORDERS & FORECASTS


 


4.1           Initial
Forecasts.  On or before the [ ]* of
the calendar quarter, beginning at least [ ]* prior to the anticipated
Commencement Date, Cubist shall furnish to Cardinal Health a written [ ]*
rolling forecast of the quantities of Product that Cubist intends to order from
Cardinal Health during the [ ]* period commencing with the start of the next
calendar quarter (“Initial Forecast”). 
The first [ ]* of such Initial Forecast shall constitute a binding
commitment for the quantities of Product specified therein (“Firm Commitment”)
and the following [ ]* of the Initial Forecast shall be non-binding, good faith
estimates (“Estimated Commitment”).


 


4.2           Rolling
Forecasts.  Following the Initial
Forecast, on or before the [ ]* of each calendar quarter, Cubist shall furnish
to Cardinal Health a written [ ]* rolling forecast of the quantities of Product
that Cubist intends to order from Cardinal Health during the [ ]* period
commencing with the start of the next calendar quarter (“Rolling Forecast”).   The first [ ]* of such Rolling Forecast
shall constitute a Firm Commitment and the following [ ]* of the Rolling
Forecast shall be Estimated Commitments.


 


4.3           Purchase
Orders and Supply.  Along with the
Initial Forecast and each Rolling Forecast, Cubist shall submit a purchase
order for the Firm Commitment portion of the Rolling Forecast, which specifies
the actual number of Batches to be Processed, the approximate number of Dosage
Containers in each Batch, and the requested delivery dates for each Batch
during such period (“Purchase Order”). 
Except for the Purchase Orders accompanying the Initial Forecast, Cubist
shall submit each Purchase Order to Cardinal Health at least [ ]* in advance of
the delivery date requested in the Purchase Order. In the event of a conflict
between the terms of any Purchase Order and this Agreement, this Agreement
shall control.  Cardinal Health shall
supply Cubist with Product in conformance with the Specifications and the
Master Batch Record and, subject only to Section 4.4 below, in accordance
with the quantities set forth in a Purchase Order, including the specified
delivery dates, provided that such Purchase Order has been completed and
submitted in accordance with this Agreement. 
Within [ ]* following Cardinal Health’s receipt of a Purchase Order,
Cardinal Health shall notify Cubist in writing of the anticipated Processing
Dates for the Product ordered under such Purchase Order, and will subsequently
notify Cubist of any changes to such Processing Dates; provided,
that, any such change shall not affect Cardinal’s obligation to
deliver Product [ ]*.


 


4.4           Cardinal
Health’s Cancellation of Purchase Orders. Notwithstanding the terms and
conditions set forth in Section 4.5 below, to the extent that Cubist
refuses or fails to make scheduled deliveries of the API necessary for Cardinal
Health to satisfy such Purchase Order and Cardinal Health does not otherwise
have sufficient quantity of API on hand to satisfy such Purchase Order,  Cardinal Health reserves the right to cancel
all, or any part of, a Purchase Order upon written notice to Cubist, and
Cardinal Health shall have no further obligations or liability with respect to
such Purchase Order.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


6





















 


4.5           Cubist’s
Modification or Cancellation.


 


(a)           Cubist may modify the delivery date,
Specifications or quantity of Product in a Purchase Order only by submitting a
written change order (“Change Order”) to Cardinal Health at least [ ]* in
advance of the earliest scheduled Processing Date for the Product covered by
such Purchase Order.  Such change order
shall be effective and binding against Cardinal Health [ ]*; provided, that Cardinal Health shall use commercially
reasonable efforts to accommodate the changes within reasonable manufacturing
capabilities and efficiencies.  Cardinal
Health shall advise Cubist in writing of the reasonable costs associated with
making any such change. If Cubist does not indicate to Cardinal in writing that
Cardinal Health should proceed to make the change, Cubist shall notify Cardinal
Health whether or not Cubist wants Cardinal Health to supply the Product
pursuant to the original Purchase Order or pursuant to the changed Purchase
Order.  If the change is required by a
change in Specifications, the terms of Section 8.1 shall also apply.


 


(b)           If Cubist cancels any Purchase Order, Cubist
shall pay a fee as set forth in the following table:


 


	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  
	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  
	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  
	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  
	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  
	
  [ ]*

  	
  [
  ]*

  	
  [
  ]*

  



 


(c)           If
Cubist fails to place Purchase Orders sufficient to satisfy the first [ ]* of
the Firm Commitment for any Rolling Forecast, Cubist shall, within [ ]* of
receipt of invoice, pay to Cardinal Health the unit price for all units that
were not ordered, but would have been Processed if Cubist has placed Purchase
Orders sufficient to satisfy the Firm Commitment.


 


4.6           Failure
to Deliver. If Cardinal Health has not supplied one or more Batches of
Product ordered by Cubist in a Purchase Order, Cubist may increase or reduce
its Firm Commitment and corresponding Purchase Orders for the next calendar
quarter by the number of Batches of Product that Cardinal Health [ ]*, and
Cardinal Health shall supply Product to Cubist in accordance with such revised
Purchase Orders.  Any such increase or
reduction by Cubist shall in no way affect any other remedies that Cubist may
have in law or equity for Cardinal Health’s failure to supply such Batches in
accordance with a Purchase Order.


 


4.7           Inspection
of Processing, Records and Facilities. Cubist may base up to [ ]*
representatives at the Facilities to observe the Processing, provided that
Cubist provides Cardinal Health at least [ ]* advance written notice of the
attendance of such Cubist representatives. 
Cubist shall have the right, on reasonable advance written notice, to
perform: (i) one annual quality assurance audit and inspection of Cardinal
Health’s records and production facilities relating to the Processing so that
Cubist may evaluate Cardinal Health’s quality control, manufacturing, labeling,
packaging and testing processes and Standard Operating Procedures,


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


7





















 


and (ii) one annual
audit of Cardinal Health’s inventory and inventory control processes, including
physical counts of inventory, comparison of physical counts to inventory counts
in Cardinal Health’s documentation and on its systems, and an audit of Cardinal
Health’s inventory receipt and shipment processes; provided,
that, Cubist shall have the right to perform additional audits and
inspections to the extent that: (a) Cubist has reasonable cause to believe
that the Facilities or Cardinal Health’s production of Product hereunder is not
in compliance with GMPs, the Specifications or this Agreement; (b) such an
audit is mandated by a Regulatory Authority or necessary to respond to
questions from any Regulatory Authority; or (c) the Product is
recalled.  Cubist shall indemnify and
hold harmless Cardinal Health for any action or activity of such
representatives while on Cardinal Health’s premises, except to the extent any
harm is caused by the negligent or wrongful action or activity by or on behalf
of Cardinal Health and its employees and agents.


 


ARTICLE 5


TESTING; SAMPLES; RELEASE


 


5.1           Testing by Cardinal Health; Acceptance by Cubist.  Following
Processing, Cardinal Health shall test each Batch for conformance with
Specifications and compliance with GMPs in accordance with Cardinal Health’s
standard quality assurance procedures. 
Initially, Cardinal Health will test only for sterility and deliver
samples of each Batch to a GMP-compliant third party testing facility for
finished Product testing on behalf of Cubist. 
Following transfer of the applicable test methods and upon at least [ ]*
prior written notice from Cubist to Cardinal Health, Cardinal Health will
perform finished Product testing pursuant to the Specifications.  Within [ ]* after Cardinal Health’s
completion of Processing, Cardinal Health shall provide Cubist with an accurate
and complete Batch Record and Certificate of Analysis for each Batch
Processed.  Prior to Cardinal Health
becoming obligated to perform finished Product testing, Cardinal Health shall
be responsible for completing the Certificate of Analysis only with respect to
sterility.  Thereafter, Cardinal Health
shall provide complete Certificates of Analyses.  Cubist shall have a period of [ ]* from the
date of its receipt of all completed Batch Records and Certificates of Analyses
for a Batch of Product to complete its review of such documents and either
release the Batch for delivery or notify Cardinal Health that the Batch does
not comply with the Specifications. 
Cardinal Health shall deliver Product to Cubist in accordance with Section 6.1
only upon Cubist’s release of each Batch. 
Prior to such Batch release by Cubist, Cardinal Health shall store
Product under quarantine in accordance with Product labeling, the Master Batch
Record and all Applicable Laws.  Cubist
shall have a period of [ ]* from the date of its receipt of a shipment of
Product to inspect such shipment for shortage of quantity, damage or failure of
the Product to conform to the warranty in Section 10.1.  Acceptance by Cubist shall occur either upon
Cubist’s providing written notice to Cardinal Health of acceptance or upon the
expiration of the [ ]* period, if Cubist has not provided notice of rejection,
as provided in Section 5.2; provided, however, in the case of Latent Defects, Cubist shall have [ ]*
from the date it becomes aware of any such Latent Defect to reject any Product
in accordance with Section 5.2.


 


5.2           Rejection;
Disagreements Regarding Rejection. If Cubist rejects Product for failure to
conform to the Specifications and Applicable Laws or damage caused prior to
delivery, it shall promptly notify Cardinal Health.  In the event of a disagreement between the
parties as to the basis for Cubist’s rejection, the parties shall cause a
mutually acceptable, GMP-compliant, independent laboratory to review records,
test data and to perform comparative tests and/or


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


8





















 


analyses on samples of
the Product to determine whether the basis for Cubist’s rejection is
accurate.  The independent party’s
results shall be final and binding. 
Unless otherwise agreed to by the parties in writing, the costs
associated with such testing and review shall be borne by the party which was
found by the independent laboratory to be incorrect.


 


5.3           Shortage
in Quantities.  If Cubist determines
that Cardinal Health has invoiced Cubist for more vials than have been
delivered in a particular shipment, Cubist shall notify Cardinal Health and the
parties shall work together in good faith to resolve such discrepancy.  If Cardinal Health has overcharged Cubist,
Cardinal Health shall provide Cubist a corrected invoice.


 


5.4           Replacement
of Product.  In the event of failure
of Product to conform to warranty in Section 10.1 or Product that was
damaged prior to delivery (“Defective Product”), whether as determined by
Cardinal Health or an independent laboratory under Section 5.2, Cardinal
Health shall replace all such Product with conforming Product.  THE OBLIGATION OF CARDINAL HEALTH TO (i) REPLACE
PRODUCT PURSUANT TO THIS SECTION 5.4 AND (ii) REIMBURSE CUBIST FOR
ITS ACTUAL COST OF ANY LOST, DAMAGED, OR DESTROYED API OR API THAT IS NO LONGER
USABLE AS A RESULT OF BEING USED FOR DEFECTIVE PRODUCT IN AN AMOUNT NOT TO
EXCEED THE LIMITATION SET FORTH IN SECTION 16.1 SHALL BE CUBIST’S SOLE AND
EXCLUSIVE REMEDY UNDER THIS AGREEMENT FOR DEFECTIVE PRODUCT [ ]* AND IS IN LIEU
OF ANY OTHER WARRANTY, EXPRESS OR IMPLIED.


 


5.5           Supply
of Material for Replacement Product . 
In the event Cardinal Health is required to replace Product pursuant to Section 5.3
above, Cubist shall supply, at its sole cost, Cardinal Health with sufficient
quantities of the API in order for Cardinal Health to complete such
replacement.


 


ARTICLE 6


DELIVERY


 


6.1           Delivery.
Cardinal Health shall segregate and store all Product in accordance with the
Product labeling, Master Batch Record and all Applicable Laws until delivery to
a common carrier selected by Cubist as set forth herein. Cardinal Health shall
tender the Product for delivery on the delivery date specified in the
applicable Purchase Order or such other date mutually agreed to by the parties,
[ ]*.  Cubist shall be responsible for
all costs and risk of loss associated with shipment of the Product.  Cubist shall retain title to the API at all
times; however, Cardinal Health shall assume all responsibility and risk for
the safekeeping, storage and handling of all API and Product while in Cardinal
Health’s possession or control, subject to the limitation set forth in Section 16.1.


 


6.2           Failure
to Take Delivery.  If Cubist fails to
take delivery on any scheduled delivery date, Cubist shall be invoiced on the
first day of each month for the stored Product and reasonable administration
and storage costs.  For each such Batch
of undelivered Product, Cubist agrees that: (i) Cubist has made a fixed
commitment to purchase such Product, (ii) risk of ownership for such
Product passes to Cubist, (iii) such Product shall be on a bill and hold
basis for legitimate business purposes, (iv) if no delivery date is
determined at the time of billing, Cardinal Health


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


9





















 


shall have the right to
ship the Product to Cubist within four (4) months after billing, and (v) Cubist
will be responsible for any decrease in market value of such Product that
relates to factors and circumstances outside of Cardinal Health’s control.  Within five (5) days following a written
request from Cardinal Health, Cubist shall provide Cardinal Health with a
letter confirming items (i) through (v) of this Section for each
such Batch of undelivered Product.


 


ARTICLE 7


PRICING AND PAYMENT


 


7.1           Unit
Pricing.  Cubist shall pay to
Cardinal Health the unit pricing set forth on Exhibit B-1 (“Unit
Pricing”) for all Product.  In the event
Cubist requests services other than Processing Product, Cardinal Health shall
provide a written quote of the fee for such additional services and Cubist
shall advise Cardinal Health whether it wishes to have such additional services
performed by Cardinal Health.


 


7.2           Price
Increase. The Unit Pricing may be adjusted on an annual basis, effective on
each anniversary date of this Agreement, upon [ ]* written notice from Cardinal
Health to Cubist in an amount equal to the most recent annual percentage
increase of the [ ]*, provided, however, that in no event shall such increase
be less than [ ]* or more than [ ]*.


 


7.3           Taxes;
Duty. All taxes and duties assessed on the Raw Materials, API or the
Product prior to or upon sale to Cubist, other than taxes based on Cardinal
Health’s income, are the responsibility of Cubist, and Cubist shall reimburse
Cardinal Health for any such taxes or duties paid by Cardinal Health.


 


7.4           Payment
Terms. Cardinal Health shall invoice Cubist for all Product following
delivery to Cubist pursuant to Section 6.1, and payment for such invoices
shall be due within [ ]* after Cubist’s receipt of such invoice. In the event
payment is not received by Cardinal Health on or before the [ ]* after the date
of the invoice, then such unpaid amount not disputed in good faith shall accrue
interest at the rate of [ ]* per month until paid in full.


 


7.5           Annual
True-Up.  Within [ ]* following the
end of each contract year during the Term, the first of which shall commence on
the Effective Date and end twelve months thereafter, the parties shall
reconcile the number of units of Product ordered, shipped and paid for
hereunder with the minimum annual pricing set forth on Exhibit B-1
hereto.  In the event that Cubist has
overpaid for each unit based on the actual number of units purchased, Cardinal
Health shall refund to Cubist the difference. In the event Cubist has
underpaid, Cardinal Health will invoice Cubist for any amounts due to Cardinal
Health.  For purposes of example only, if
Cubist actually purchases 2,500,000 vials of Product, but forecasted only
1,000,000, and Cardinal Health invoiced Cubist for all units at the price set
for 1,000,000 units, then Cubist shall be entitled to a refund so that it paid
for all 2,500,000 units at the lower price set for 2,000,000 or more vials.
Likewise, if Cubist actually purchases 1,000,000 vials of Product, but
forecasted 2,500,000, and Cardinal Health invoiced Cubist for 1,000,000 units
at the price set for 2,500,000 units, then Cardinal Health shall invoice Cubist
in an amount such that Cubist shall have paid for all 1,000,000 units at the
higher price set for 1,000,000 vials.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


10





















 


ARTICLE 8


CHANGES TO SPECIFICATIONS OR PROCESS


 


8.1           Specification
Changes.  All Specifications and any
changes thereto agreed to by the parties from time to time shall be in writing,
dated and signed by the parties.  No
change in the Specifications shall be implemented by Cardinal Health, whether
requested by Cubist or requested or required by any Regulatory Authority, until
the parties have agreed in writing to such change, the implementation date of
such change, and [ ]* associated with such change.  Cardinal Health shall respond promptly to any
request made by Cubist for a change in the Specifications, and both parties
shall use commercially reasonable, good faith efforts to agree to the terms of
such change in a timely manner. 
Immediately after a request is made for any change in Specifications,
Cardinal Health shall notify Cubist of the [ ]* associated with such change and
shall provide [ ]* as Cubist may reasonably require.  Cubist shall pay all mutually agreed upon
costs associated with such agreed upon changes. If the parties cannot
reasonably agree in good faith upon [ ]* associated with a requested change in
the Specifications within [ ]* of the request for the change, Cubist shall have
the right to [ ]*, and the parties shall negotiate in good faith an equitable
settlement of the amounts that would otherwise be due from Cubist to Cardinal
Health for Cubist’s then current Firm Commitment, based on the reasons for the
requested change.


 


8.2           Process
Changes.  A Process change shall be
treated as a Specification change and shall be handled as provided in Section 8.1.  Cardinal Health shall promptly provide Cubist
with any and all change control documents, deviation reports, and any other
investigation reports relating to the Process. 
Cardinal Health shall not implement changes to the Process without the
prior written consent from Cubist.


 


ARTICLE 9


RECORDS; REGULATORY MATTERS


 


9.1           Batch
Records and Data.  Within [ ]*
following the completion of Processing of each batch, Cardinal Health shall
provide Cubist with properly completed copies of Batch Records prepared in
accordance with the Specifications; provided, however, that if testing reveals
an out-of-Specification (“OOS”) result, Cardinal Health shall immediately
notify Cubist in writing and shall provide such Batch Records within [ ]*
following resolution of the OOS result. 
Cardinal Health will conduct OOS investigations (including OOS
investigations at third parties) with prior written approval from Cubist.  If such an investigation indicates that
Cardinal Health is responsible for the OOS result, Cardinal Health will not
charge Cubist for the investigation costs, and Cardinal Health shall replace
any Defective Product in accordance with Sections 5.4 and 5.5.  If an OOS investigation does not indicate
that Cardinal Health is responsible for the cause of an OOS result, the cost of
the investigation will be invoiced to Cubist at [ ]*.


 


9.2           Recordkeeping.  Cardinal Health shall maintain true and
accurate books, records, test and laboratory data, reports and all other
information relating to Processing under this Agreement, including all
information required to be maintained by all Applicable Laws.  Such information shall be maintained in
forms, notebooks and records for a period of at least [ ]*, provided, however
that (i) Cardinal Health may maintain such records for a shorter period of
no less than [ ]* from the relevant finished Product expiration date if
Cardinal Health’s standard operating


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


11





















 


procedures provide for
such a shorter period, and (ii) Cardinal Health shall in no event retain
such records for less than the period required under Applicable Laws.  If Cardinal Health plans to discontinue such
storage prior to expiration of the [ ]* period, Cardinal Health shall provide
Cubist with sufficient prior written notice so that Cubist can arrange for
alternative storage, and Cardinal Health shall cooperate with Cubist to have
any such documentation transferred to an alternative storage facility.


 


9.3           Regulatory
Compliance.  Cubist shall be solely
responsible for all permits and licenses required by any Regulatory Authority
with respect to the Product and the Processing under this Agreement other than
with respect to the Facilities, including any Product licenses, applications
and amendments in connection therewith. 
Cardinal Health will be responsible to maintain all permits and licenses
required by any Regulatory Authority with respect to the Facilities.  During the Term, Cardinal Health will: (a) assist
Cubist with all regulatory matters relating to Processing under this Agreement
and (b) provide all information necessary to support the CMC sections of
Cubist’s regulatory filings for Product, at Cubist’s request and at Cubist’s
expense.  Each party intends and commits
to cooperate to satisfy all Applicable Laws relating to Processing under this
Agreement.


 


9.4           Governmental
Inspections and Requests.  Cardinal
Health shall immediately advise Cubist if an authorized agent of any Regulatory
Authority visits the Facilities concerning the Processing of the Product.  Further, upon receipt of a Regulatory
Authority request to inspect the Facilities or audit Cardinal Health’s books
and records with respect to Processing under this Agreement, Cardinal Health
shall immediately notify Cubist, and shall provide Cubist with a copy of any
written document received from such Regulatory Authority relating to the
Product no later than [ ]* hours after Cardinal Health’s receipt thereof.  Cubist shall have a right to have up to [ ]*
representatives attend any inspection described in the first two sentences of
this Section 9.4 or, in the alternative, Cardinal Health shall provide
daily reports generally summarizing the inspectional process and any findings
communicated by the Regulatory Authority to a designated Cubist representative.  Cardinal Health shall furnish to Cubist a
copy of the report by such Regulatory Authority, if any, within [ ]* of
Cardinal Health’s receipt of such report. 
In addition, Cardinal Health shall immediately notify Cubist of other
Regulatory Authority inspections of the Facilities that are not directly
related to the Processing of the Product if Cardinal Health has a reasonable
basis to believe that the subject of, or issues identified during, such
inspection are likely to impact the Processing of the Product.  Cardinal Health shall furnish to Cubist a
copy of the report by such Regulatory Authority regarding any such inspection
to the extent that the report relates to the Processing of the Product.  Cubist shall notify Cardinal Health of any
visits by Regulatory Authorities to facilities manufacturing the API,
performing testing on the Product, or performing other services in connection
with the Product if Cubist reasonably believes that such visit may result in an
inspection of the Facilities.


 


9.5           Recall.  In the event Cardinal Health believes a
recall, field alert, Product withdrawal or field correction may be necessary
with respect to any Product provided under this Agreement, Cardinal Health
shall immediately notify Cubist in writing. Cardinal Health will not act to
initiate a recall, field alert, Product withdrawal or field correction without
the express prior written approval of Cubist, unless otherwise required by
Applicable Laws. In the event Cubist believes a recall, field alert, Product
withdrawal or field correction may be necessary with


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


12





















 


respect to any Product provided under this Agreement, Cubist shall
immediately notify Cardinal Health in writing and Cardinal Health shall provide
all necessary cooperation and assistance to Cubist.  The cost of any recall, field alert, Product
withdrawal or field correction shall be borne by Cubist except to the extent
such recall, field alert, Product withdrawal or field correction is caused by
Cardinal Health’s breach of its obligations under this Agreement or Applicable
Laws or its negligence or willful misconduct, then such cost shall be borne by
Cardinal Health.  For purposes hereof,
such cost shall be limited to reasonable, actual and documented administrative
costs incurred by Cardinal Health or Cubist, as the case may be, for such
recall, withdrawal or correction, and replacement of the Defective Product to
be recalled, in accordance with Article 5.


 


9.6           Quality
Agreements.  Within six (6) months
following the execution of this Agreement, the parties shall execute a Quality
Agreement in substantially the form attached to this Agreement as Exhibit C.
The Quality Agreement shall in no way determine liability or financial
responsibility of the parties for the responsibilities set forth therein.  In the event of a conflict between the terms
of this Agreement and the Quality Agreement, this Agreement shall control.


 


9.7           Access
to Drug Master File.  Cardinal shall
grant Cubist reference rights to all Drug Master Files (as described in 21 CFR
314.420) necessary to support Cubist’s applications for approval of Product by
Regulatory Authorities; provided, that, Cardinal Health shall not file a Type
II DMF for Product.  Cardinal shall
update its Drug Master Files annually and shall inform Cubist prior to any
modifications thereto in order to permit Cubist to amend or supplement any
affected regulatory submissions.


 


9.8           Inventory
Reports.  Cardinal shall provide
Cubist with up to date quarterly inventory reports within [ ]* of the end of
each calendar quarter. Such reports shall specify amounts of both API and
Product.


 


ARTICLE 10


REPRESENTATIONS AND WARRANTIES


 


10.1         Limited
Warranty.  Cardinal Health represents
and warrants to Cubist that Product supplied hereunder shall, at the time of
delivery, conform to the Product Specifications and Applicable Laws, and will
have been Processed in conformance with the Product Specifications and
Applicable Laws.  THE LIMITED WARRANTIES
SET FORTH IN THIS ARTICLE 10 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY, WARRANTY OF
NON-INFRINGEMENT AND ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.  EXCEPT FOR THE OTHER WARRANTIES EXPRESSED IN
THIS ARTICLE 10, CARDINAL HEALTH MAKES NO OTHER WARRANTY, EITHER EXPRESS
OR IMPLIED, WITH RESPECT TO THE PROCESSING OR THE PRODUCT.


 


10.2         API.  Cubist warrants and covenants that the API
will, at the time of delivery by Cubist to Cardinal Health, meet the applicable
API specifications and will have been produced in compliance with Applicable
Laws.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


13





















 


10.3         Release
Responsibility.   Cubist represents
and warrants that it will not release any Batch of Product if the required
Certificates of Analysis indicate that the Product does not comply with the
Specifications.


 


10.4         Artwork.  Cubist represents and warrants that to the
best of its knowledge the artwork provided to Cardinal Health does not infringe
on any third party’s intellectual property rights, including, but not limited
to, copyright, trademark or trade name. 
Cubist further represents that all artwork and the content thereof
provided to Cardinal Health shall comply with all Applicable Laws.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


14





















 


10.5         Intellectual
Property.  Cubist represents and
warrants to Cardinal Health that to the best of its knowledge Cubist has all
necessary authority and right, title and interest in and to any copyrights,
trademarks, trade secrets, patents, inventions and developments related to the
Product and the manufacture thereof existing as of the Effective Date, and
Cubist hereby grants to Cardinal Health a non-exclusive, royalty-free license
thereunder, without any right to sublicense, solely to the extent necessary for
Cardinal Health to perform its obligations under this Agreement. Cardinal
Health represents and warrants to Cubist that the work to be performed by
Cardinal Health under this Agreement, other than as specifically instructed or
approved in the Master Batch Record by Cubist, will not violate or infringe
upon any trademark, tradename, copyright, patent or other rights held by any
person or entity.


 


10.6         Existence
and Power.  Each party hereby
represents and warrants to the other party that such party (i) is duly
organized, validly existing and in good standing under the laws of the state in
which it is organized, (ii) has the power and authority and the legal
right to own and operate its property and assets, and to carry on its business
as it is now being conducted, and (iii) is in compliance with all
requirements of applicable law, except to the extent that any noncompliance
would not materially adversely affect such party’s ability to perform its
obligations under the Agreement.


 


10.7         Authorization
and Enforcement of Obligations.  Each
party hereby represents and warrants to the other party that such party (i) has
the power and authority and the legal right to enter into this Agreement and to
perform its obligations hereunder and (ii) has taken all necessary action
on its part to authorize the execution and delivery of the Agreement and the
performance of its obligations hereunder. 
The Agreement has been duly executed and delivered on behalf of such
party, and constitutes a legal, valid, binding obligation, enforceable against
such party in accordance with its terms.


 


10.8         No
Consents.  Each party hereby
represents and warrants to the other party that all necessary consents,
approvals and authorizations of all Regulatory Authorities, agencies and other
persons required to be obtained by such party in connection with the Agreement
have been or will be obtained as of the date of any Processing.


 


10.9         No
Conflict.  Each party hereby
represents and warrants to the other party that the execution and delivery of
this Agreement and the performance of such party’s obligations hereunder (i) do
not conflict with or violate any requirement of applicable laws or regulations
or any material contractual obligation of such party and (ii) do not
materially conflict with, or constitute a material default or require any
consent under, any material contractual obligation of such party.


 


10.10       Statement on Auditing Standards 70.  In
the event that Cardinal Health decides in its sole discretion to compile and
maintain a Type II Statement on Auditing Standards 70 qualification (“SAS 70
Qualification”) with respect to the Facility, Cardinal Health shall make
available to Cubist Cardinal Health’s most recent SAS 70 Qualification reports
upon Cubist’s request.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


15





















 


ARTICLE 11


CONFIDENTIAL INFORMATION


 


11.1         Nondisclosure.  During the Term of this Agreement and for a
period of [ ]* after expiration or termination of this Agreement, neither party
shall:


 


(a)           disclose,
publish or otherwise make available (orally or in writing) any Confidential
Information of the other party to any third party (except any employee,
advisor, agent or consultant of the receiving party who has a need to know or
to have access to such Confidential Information) and except as required by
Applicable Laws or in the course of litigation or other legal or administrative
proceedings; or


 


(b)           use
any Confidential Information of the other party except in connection with
performance of this Agreement or upon express prior written consent of the
other party.


 


11.2         Confidential
Information.  For purposes of this
Agreement, “Confidential Information” means any and all information disclosed
by a party at any time in connection with this Agreement, except for any
information which the receiving party can establish by competent written
evidence (a) was known to the receiving party at the time of disclosure by
the disclosing party, (b) was generally
available to the public at the time of disclosure by the disclosing party, (c) after
disclosure by the disclosing party, became generally available to the public
other than in breach of this Article 11, (d) after disclosure by the
disclosing party, became known to the receiving party from a third party
lawfully disclosing such information, or (e) was independently developed
or discovered by the receiving party without use of the disclosing party’s
Confidential Information.


 


ARTICLE 12


INTELLECTUAL PROPERTY


 


12.1         Ownership of Existing Technologies.  All
rights to and interests in Cubist’s Intellectual Property existing as of the
Effective Date, including without limitation Cubist’s rights in the Product,
the API, or the formulation thereof (“Cubist’s Existing IP”) and Cubist’s Confidential
Information shall remain vested
solely in Cubist and no right or interest therein is transferred or granted to
Cardinal Health under this Agreement except as provided in Section 10.5.  All rights to and interests in Cardinal
Health’s Intellectual Property existing as of the Effective Date (“Cardinal
Health’s Existing IP”) and Cardinal Health’s Confidential
Information shall remain vested
solely in Cardinal Health and no right or interest therein is transferred or
granted to Cubist under this Agreement except as provided in Section 12.3.


 


12.2         Cubist
Inventions. Cubist shall own all data, work product, results, reports,
inventions, developments, technologies and information, whether or not
patentable, including without limitation any Intellectual Property, that are
generated by Cardinal Health in connection with its performance under this
Agreement and arise from, are based upon, or relate to Cubist’s Existing
Intellectual Property or Cubist’s Confidential Information (“Cubist Inventions”) with the exception that Cubist
Inventions shall not include any Process Invention.  As used herein, “Process
Invention” means any discovery, development, technology or
information directed to


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


16





















 


any manufacturing, packaging or
analytical process or methodology, developed by Cardinal Health in connection
with its performance under this Agreement, whether or not patentable, that does
not relate exclusively to the Product and/or the API. For the avoidance of
doubt, such discoveries, developments, technology and information that do
relate exclusively to the Product and/or the API shall be Cubist Inventions.  Cubist will be responsible for obtaining
patent protection on inventions relating to the Cubist Inventions at its own
cost.  Cardinal Health agrees to execute
all documents necessary to perfect title in any Cubist Inventions in Cubist.


 


12.3         Cardinal Health Inventions. 
Cardinal Health shall own Process Inventions and all inventions,
developments, technologies and information, whether or not patentable that
arise from, are based upon, or relate to the Process Inventions or Cardinal
Health’s Confidential Information or Cardinal Health’s Intellectual Property,
but excluding any Cubist Inventions (“Cardinal
Health Inventions”).  Cardinal
Health will be responsible for obtaining patent protection on Cardinal Health
Inventions at its own cost.  Cubist
agrees to execute all documents necessary to perfect title in any Cardinal
Health Inventions in Cardinal Health. 
Cardinal Health hereby grants to Cubist a [ ]* license to use the
Process Inventions, Cardinal Health Inventions, any other Cardinal Health Intellectual
Property and Cardinal Health Confidential Information solely as necessary for
Cubist to manufacture, market, distribute and sell Product meeting the
Specifications.


 


12.4         Cubist’s Marks. 
Cubist’s Marks (whether owned by or licensed to Cubist) shall remain the
exclusive property of, and any use thereof by Cardinal Health shall inure to
the exclusive benefit of, Cubist.  This
Agreement shall not constitute a license to Cardinal Health to use Cubist’s
Marks for any other purpose than in connection with Cardinal Health’s
performance of its duties under this Agreement and in the form in which they
are provided by Cubist, or as approved in writing in advance by Cubist.  Upon termination of this Agreement for
whatever reason, Cardinal Health’s use of Cubist’s Marks shall
cease.  Cardinal Health shall not alter
Cubist’s Marks without the prior written consent of Cubist.  Cardinal Health shall not at any time do or
permit any act to be done which may in any way impair the rights of Cubist in
Cubist’s Marks.  Cardinal Health shall
not obtain or assert any claim to any trademark protection relating to Cubist’s
Marks (whether owned by or licensed to Cubist), and any rights so obtained
shall be immediately transferred to Cubist. 
Cardinal Health shall advise Cubist of any conflict of which Cardinal Health
becomes aware between Cubist’s Marks and the name, trademarks or trade names of
any third party.


 


ARTICLE 13


INDEMNIFICATION


 


13.1         Indemnification
by Cardinal Health.  Cardinal Health
shall indemnify and hold harmless Cubist, its Affiliates, directors, officers,
employees and agents from and against any and all suits, claims, losses,
demands, liabilities, damages, costs and expenses (including costs, reasonable
attorney’s fees and reasonable investigative costs) in connection with any
action by any third party arising out of or resulting from Cardinal Health’s: (a) negligence
or willful misconduct; (b) breach of its representations, warranties or
obligations set forth in this Agreement; (c) infringement or violation of
a third party’s patent, trade secret, copyright, trademark or other proprietary
rights, other than to the extent caused by Cubist’s express instructions to
Cardinal


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


17





















 


Health or by use of
Cubist’s Confidential Information or Cubist’s Existing IP in accordance with
this Agreement, except to the extent that such action arises out of or results
from the material breach of this Agreement by Cubist or the negligence or
willful misconduct of Cubist.


 


13.2         Indemnification
by Cubist.  Cubist shall indemnify
and hold harmless Cardinal Health, its Affiliates, directors, officers
employees and agents from and against any and all suits, claims, losses,
demands, liabilities, damages, costs and expenses (including costs, reasonable
attorney’s fees and reasonable investigative costs) in connection with any
action by any third party arising out of or resulting from Cubist’s (a) negligence
or willful misconduct; (b) breach of its representations, warranties or
obligations set forth in this Agreement; (c) sale, promotion, distribution
or use of the Product, including, without limitation, Product liability or
strict liability; or (d) infringement or violation of any third party patent,
trade secret, copyright, trademark or other proprietary rights resulting from
the sale, promotion, distribution or use of Product or the or by use of Cubist’s
Confidential Information or Cubist’s Existing IP in accordance with this
Agreement, except to the extent that any such action arises out of or results
from the material breach by Cardinal Health of this Agreement, or the
negligence or willful misconduct of Cardinal Health.


 


13.3         Indemnification
Procedures.  All indemnification
obligations in this Agreement are conditioned upon the party seeking
indemnification promptly notifying the indemnifying party of any claim or
liability of which the party seeking indemnification becomes aware (including a
copy of any related complaint, summons, notice or other instrument),
cooperating with the indemnifying party in the defense of any such claim or
liability (at the indemnifying party’s expense), and not compromising or
settling any claim or liability without prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld or
delayed.


 


ARTICLE 14


INSURANCE


 


14.1         Cardinal
Health.  Cardinal Health shall, by
and through its parent, Cardinal Health, Inc. and at its own cost and
expense, obtain and maintain in full force and effect the following insurance
during the term of this Agreement: (i) Commercial General Liability
insurance with per-occurrence and general aggregate limits of not less than [
]*; (ii)  Products and Completed Operations Liability Insurance with
per-occurrence and general aggregate limits of not less than [ ]*; (iii) Workers’
Compensation and Employer’s Liability Insurance with statutory limits for
Workers’ Compensation and Employer’s Liability insurance limits of not less
than [ ]*; (iv) Professional Services Errors & Omissions
Liability Insurance with per claim and aggregate limits of not less than [ ]*
covering sums that Cardinal Health becomes legally obligated to pay as damages
resulting from claims made by Cubist for errors or omissions committed in the
conduct of the services outlined in the Agreements.  In lieu of insurance, Cardinal Health may
self-insure any or a portion of the above required insurance.  In the event that any of the required
policies of insurance are written on a claims made basis, then such policies
shall be maintained during the entire term of this Agreement and for a period
of not less than [ ]* following the termination or expiration of this
Agreement.  Cubist shall be named as an
additional insured under the Commercial General Liability and Products and
Completed Operations Liability insurance policies as respects the manufacturing
services outlined in this Agreement. 
Cardinal


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


18





















 


Health shall furnish
certificates of insurance for all of the above noted policies and required
additional insured status to Cubist as soon as practicable after the Effective
Date of the Agreement and upon renewal of any such policies.  Each insurance policy that is required under
this Section shall be obtained from an insurance carrier with an A.M.
Best rating of at least A- VII.


 


14.2         Cubist
Insurance.  Cubist shall, at its own
cost and expense, obtain and maintain in full force and effect the following
insurance during the term of this Agreement: (i) Products and Completed
Operations Liability Insurance with per-occurrence and general aggregate limits
of not less than [ ]*; (ii) Workers’ Compensation and Employer’s Liability
Insurance with statutory limits for Workers’ Compensation and Employer’s
Liability insurance limits of not less than [ ]*; (iii) All Risk Property
Insurance, including transit coverage, in an amount equal to full replacement
value covering Cubist’s property while it is at Cardinal Health’s Facilities or
in transit to or from Cardinal Health’s Facilities.  In the event that any of the
required policies of insurance are written on a claims made basis, then such
policies shall be maintained during the entire term of this Agreement and for a
period of not less than [ ]* following the termination or expiration of this
Agreement.  Cubist shall obtain a waiver
from any insurance carrier with whom Cubist carries Property Insurance
releasing its subrogation rights against Cardinal Health.  Cubist shall not seek reimbursement for any
property claim, or portion thereof, that is not fully recovered from Cubist’s
Property Insurance policy.  Cardinal
Health and its Affiliates shall be named as additional insureds under the
Products and Completed Operations Liability insurance policies as respects the
Products and completed operations outlined in this Agreement.  Cubist shall furnish certificates of
insurance for all of the above noted policies and required additional insured
status to Cardinal Health as soon as practicable after the Effective Date of
the Agreement and upon renewal of any such policies.  Each insurance policy that is required under
this Section shall be obtained from an insurance carrier with an A.M.
Best rating of at least A- VII.


 


ARTICLE 15


TERM AND TERMINATION


 


15.1         Term.  This Agreement shall commence on the
Effective Date and shall continue for a period of five (5) years, unless
earlier terminated under Section 15.2 below (the “Term”).  This Agreement shall thereafter automatically
renew for additional one (1) year periods, unless either party provides
the other party with one hundred and eighty (180) days written notice prior to
any such renewal that such party does not want the Agreement to renew.


 


15.2         Termination
by Cubist.  Cubist may terminate this
Agreement as provided in [ ]*.


 


15.3         Termination
by Either Party.


 


(a)           Material
Breach.  Either party may terminate
this Agreement immediately, if the other party commits a material breach of
this Agreement and fails to cure such breach by the end of the sixty (60) day
period following the non-breaching party’s provision of written notice to the
other party of such breach;  provided,
however, that failure to pay amounts due under this Agreement that are not
disputed in good faith within thirty (30) days after such payments are due and
receipt of notice from the party to whom such payment is due shall constitute
cause for


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


19





















 


immediate termination of this Agreement, or at the discretion of the
party to whom such payment is due, such party shall be relieved of any further
obligation to perform under this Agreement until all outstanding payments are
brought current.


 


(b)           Bankruptcy.  Either party may terminate this Agreement
effective upon written notice to the other party, if the other party becomes
insolvent or admits in writing its inability to pay its debts as they become
due, files a petition for bankruptcy, makes an assignment for the benefit of
its creditors or has a receiver, trustee or other court officer appointed for
its properties or assets.


 


15.4         Force
Majeure.  If any default or delay
occurs which prevents or materially impairs a party’s performance and is due to
a cause beyond the party’s reasonable control, and provided that the default or
delay is not caused by or the fault of such party, including but not limited to
an act of God, flood, fire, explosion, earthquake, war, revolution, civil
commotion, blockade or embargo, the affected party shall promptly notify the
other party in writing of such cause and shall exercise reasonable commercial
efforts to resume performance under this Agreement as soon as possible.  Neither party will be liable to the other
party for any loss or damage due to such cause, and the Term will not be
extended thereby.  Neither party may
terminate this Agreement because of such default or delay except upon thirty
(30) days prior written notice to the other party if the default or delay has
existed for three (3) months and is continuing at the end of the thirty
(30) day notice period.


 


15.5         Effect
of Termination. Expiration or termination of this Agreement shall be
without prejudice to any rights or obligations that accrued to the benefit of
either party prior to such expiration or termination.  The rights and obligations of the parties
shall continue under Articles 5, 6 and 7 (only with respect to outstanding
Purchase Orders), 9, 10, 11, 12, 13, 16, 17 and 18, and Sections 3.4, 15.5,
notwithstanding expiration or termination of this Agreement.


 


ARTICLE 16


LIMITATIONS OF LIABILITY


 


16.1         CARDINAL HEALTH’S TOTAL LIABILITY FOR LOSSES
TO API, BULK DRUG PRODUCT OR OTHER MATERIALS PROVIDED BY CUSTOMER (OTHER THAN
AS A RESULT OF [ ]*), WHETHER OR NOT INCORPORATED INTO FINISHED PRODUCT SHALL
NOT EXCEED [ ]* PER BATCH, EXCEPT WHERE SUCH LOSSES OCCUR SPECIFICALLY AS A
RESULT OF CARDINAL HEALTH’S FAILURE TO [ ]* OF PRODUCT, OR [ ]* OF PRODUCT INTO
[ ]* IN ACCORDANCE WITH THE SPECIFICATIONS, IN WHICH CASE, CARDINAL HEALTH’S
LIABILITY FOR SUCH LOST PRODUCT SHALL NOT EXCEED THE LESSER OF [ ]* FOR EACH [
]* OF LOST PRODUCT OR [ ]*.  FOR PURPOSES
OF THIS SECTION, THE TERM “LOST PRODUCT” SHALL ONLY MEAN LOSSES OF PRODUCT (A) WHICH
ARE REJECTED AFTER COMPLETION OF INSPECTION OF [ ]* PRODUCT, AND (B) WHICH
RESULT SOLELY FROM CARDINAL HEALTH’S FAILURE TO [ ]* OF PRODUCT, OR [ ]* OF
PRODUCT INTO [ ]* IN ACCORDANCE WITH THE SPECIFICATIONS, AND (C) SOLELY TO
THE EXTENT SUCH LOSSES OF PRODUCT EXCEED [ ]* OF THE TOTAL NUMBER OF [ ]* VIALS
THAT PASSED INSPECTION FROM THE SAME BATCH.  
IN NO EVENT SHALL


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


20





















 


CARDINAL
HEALTH’S TOTAL LIABILITY UNDER THIS AGREEMENT (INCLUDING WITHOUT LIMITATION SECTION 16.3)
EXCEED, OTHER THAN FOR [ ]*, THE GREATER OF: (I) [ ]*; OR (II) [ ]* OF [ ]*
PAID BY CUBIST TO CARDINAL HEALTH [ ]*;
PROVIDED, HOWEVER, IN THE CASE OF (II), IN NO EVENT SHALL CARDINAL HEALTH’S
TOTAL LIABILITY EXCEED [  ]*.


 


16.3         WITH
THE EXCEPTION OF [ ]*, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE UNDER
THIS AGREEMENT.


 


ARTICLE 17


NOTICE


 


Any
notice from either party to the other party will be effective upon receipt and
must be personally delivered to such party or sent to such party by deposit in
the United States mail, first class, postage prepaid or telecopy transmission
(with written confirmation copy to follow via United States mail), to the
address for such party below or such other address as a party may designate
from time to time in accordance with this Section:


 


	
  To Cubist:

  	
   

  	
  Cubist
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  65 Hayden Avenue

  
	
   

  	
   

  	
  Lexington, MA
  02421

  
	
   

  	
   

  	
  Attn: VP
  Manufacturing

  
	
   

  	
   

  	
  Facsimile:
  781.861.1585

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Cubist
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  65 Hayden Avenue

  
	
   

  	
   

  	
  Lexington, MA
  02421

  
	
   

  	
   

  	
  Attn: General
  Counsel

  
	
   

  	
   

  	
  Facsimile:
  781.860.1407

  



 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


21





















 


	
  To Cardinal
  Health:

  	
   

  	
  Cardinal Health
  PTS, LLC

  
	
   

  	
   

  	
  4401 Alexander
  Blvd., NE

  
	
   

  	
   

  	
  Albuquerque, NM
  87107

  
	
   

  	
   

  	
  Attn: General
  Manager

  
	
   

  	
   

  	
  Facsimile: (505)
  345-7513

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Cardinal
  Health, Inc.

  
	
   

  	
   

  	
  7000 Cardinal
  Place

  
	
   

  	
   

  	
  Dublin, Ohio
  43017

  
	
   

  	
   

  	
  Attn: Vice President and Associate General

  Counsel, Pharmaceutical Technologies

  & Services

  
	
   

  	
   

  	
  Facsimile: (614)
  757-5051

  



 


ARTICLE 18


MISCELLANEOUS


 


18.1         Entire
Agreement; Amendments.  This
Agreement and the Development Agreement constitute the entire understanding
between the parties and supersede any contracts, agreements or understanding
(oral or written) of the parties with respect to the subject matter
hereof.  In the case of any conflict
between the terms and conditions of this Agreement and those of the Development
Agreement with respect to the subject matter hereof, the terms and conditions
of this Agreement shall control.    For
the avoidance of doubt, the Packaging Agreement shall remain in full force and
effect with respect to Cubicin processed by a third party in accordance with
the terms and conditions thereof and shall not be amended in any respect by
this Agreement.  No term of this
Agreement may be amended except upon written agreement of both parties, unless
otherwise provided in this Agreement.


 


18.2         Captions.  The captions in this Agreement are for
convenience only and are not to be interpreted or construed as a substantive
part of this Agreement


 


18.3         Further
Assurances.  The parties agree to
execute, acknowledge and deliver such further instruments and all such other
incidental acts as may be reasonably necessary or appropriate to carry out the
purpose and intent of this Agreement.


 


18.4         No
Waiver.  Failure by either party to
insist upon strict compliance with any term of this Agreement in one (1) or
more instances will not be deemed to be a waiver of its rights to insist upon
such strict compliance with respect to any subsequent failure.


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


22





















 


18.5         Severability.  If any term of this Agreement is declared
invalid or unenforceable by a court or other body of competent jurisdiction,
the remaining terms of this Agreement will continue in full force and effect.


 


18.6         Independent
Contractors.  The relationship of the
parties is that of independent contractors, and neither party will incur any
debts or make any commitments for the other party except to the extent
expressly provided in this Agreement. 
Nothing in this Agreement is intended to create or will be construed as
creating between the parties the relationship of joint ventures, co-partners,
employer/employee or principal and agent.


 


18.7         Successors
and Assigns.  This Agreement will be
binding upon and inure to the benefit of the parties, their successors and
permitted assigns.  Neither party may
assign this Agreement, in whole or in part, without the prior written consent
of the other party, except that either party may without the other party’s
consent assign this Agreement to an Affiliate or to a successor to
substantially all of the business or assets of the assigning company.


 


18.8         Governing
Law.  This Agreement shall be
governed by and construed under the laws of the Commonwealth of Massachusetts,
excluding its conflicts of law provisions.


 


18.9         Alternative
Dispute Resolution.  If a dispute,
controversy or disagreement (“Dispute”) arises between the parties in connection
with this Agreement, then the Dispute shall be presented to the respective
presidents or Senior Executives of Cardinal Health and Cubist for their
consideration and resolution.  If such
parties cannot reach a resolution of the Dispute within twenty-one (21) days of
presentation to the respective presidents or Senior Executives, then such
Dispute shall be resolved by binding Alternative Dispute Resolution in
accordance with the then existing commercial arbitration rules of The CPR
Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, New York, NY
10017.  Arbitration shall be conducted in
the jurisdiction of the defendant party.


 


18.10       Prevailing
Party.  In any dispute resolution
proceeding between the parties in connection with this Agreement, the
prevailing party will be entitled to its reasonable attorney’s fees and costs
in such proceeding.


 


18.11       Injunctive
Relief.  Notwithstanding Sections
18.9 and 18.10 or anything else herein to the contrary, a party may seek a
temporary restraining order or a preliminary injunction from any court of
competent jurisdiction in order to prevent immediate or irreparable injury,
loss, or damage on a provisional basis, pending the decision of the
arbitrator(s) on the ultimate merits of any Dispute.  Despite such action, the parties will
continue to participate in good faith in the resolution of a Dispute in
accordance with Section 18.9.


 


18.12       Counterparts.  This Agreement may be executed in one (1) or
more counterparts, each of which will be deemed an original but all of which
together will constitute one (1) and the same instrument.


 


18.13       Public
Announcements. Neither party will make any press release or other public
disclosure regarding this Agreement or the transactions contemplated hereby
without the other


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


23





















 


party’s express prior
written consent, except as required under applicable law or by any governmental
agency, in which case the party required to make the press release or public
disclosure shall use commercially reasonable efforts to obtain the approval of
the other party as to the form, nature and extent of the press release or
public disclosure prior to issuing the press release or making the public
disclosure.


 


IN
WITNESS WHEREOF, the parties have caused their duly authorized representative
to execute this Agreement effective as of the date first written above.


 


	
  CARDINAL HEALTH
  PTS, LLC

  	
   

  	
  CUBIST
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
													



 


 


Cardinal Health, Inc., the parent
company of Cardinal Health PTS, LLC, hereby guarantees performance by Cardinal
Health PTS, LLC of the contractual obligations set forth in Section 14.1
of this Agreement.


 


AGREED
TO AND ACCEPTED BY:


 


	
  CARDINAL HEALTH,
  INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


24





















 


EXHIBIT A


[ ]*


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


25





















 


EXHIBIT B


[ ]*


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


26





















 


EXHIBIT B-1


[ ]*


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


27





















 


EXHIBIT C


[ ]*


 










* Confidential Treatment Requested.  Omitted portions filed with the Commission.


 


28