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                                                                   Exhibit 10.70

                             CONFIDENTIAL TREATMENT

                       MANUFACTURING AND SUPPLY AGREEMENT

     This Manufacturing and Supply Agreement (the "SUPPLY AGREEMENT") is entered
into effective as of October 2, 2003 (the "EFFECTIVE DATE") by and between
CHIRON HEALTHCARE IRELAND LTD, a company organized under the laws of Ireland
with offices at United Drug House, Belgard Road, Tallaght, Dublin, Ireland
("CHIRON") and CUBIST PHARMACEUTICALS, INC., a Delaware corporation with its
principal offices at 65 Hayden Avenue, Lexington, MA 02421 ("CUBIST"). Chiron
and Cubist are each sometimes referred to herein individually as a "PARTY" and,
collectively, as the "PARTIES." CHIRON CORPORATION, a Delaware corporation
having its principal place of business at 4560 Horton Street, Emeryville,
California 94608 (the "CHIRON PARENT COMPANY"), is a party to this Supply
Agreement only with respect to certain selected provisions of this Supply
Agreement as specified herein.

                                   WITNESSETH

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

     WHEREAS, Chiron and Cubist, contemporaneously with the execution of this
Supply Agreement, have entered into the License Agreement (as defined below)
pursuant to which Cubist has granted to Chiron (i) exclusive rights in Europe
and certain other countries to all injectable forms of daptomycin, and (ii) a
right of first negotiation for rights to all other forms of daptomycin;

     WHEREAS, Cubist wishes to manufacture, or have manufactured, and supply all
of Chiron's requirements for Licensed Products (as defined in the License
Agreement), and Chiron wishes to be supplied its requirements for Licensed
Products by Cubist; and

     WHEREAS, Chiron and Cubist wish to enter into a manufacturing and supply
agreement that will govern the manufacture and supply of daptomycin products to
Chiron, as contemplated in the License Agreement.

     NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and in the License Agreement, the Parties agree as follows:

                                    ARTICLE 1
                               CERTAIN DEFINITIONS

     Any capitalized terms not defined in this Supply Agreement shall have the
meaning given to them in the License Agreement. Any references in this Supply
Agreement to Sections and Articles shall refer to Sections and Articles of this
Supply Agreement, unless stated otherwise. As used herein, the following terms
shall have the meanings specified below and terms defined herein in the plural
shall include the singular and vice-versa.

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     1.1 "API" shall mean the active pharmaceutical ingredient, daptomycin, to
be used in the manufacture of Filled Product.

     1.2 "API SPECIFICATIONS" shall mean those specifications for API as agreed
upon in writing by the Parties pursuant to Section 3.1 (and as such
specifications may be changed in accordance with Section 3.2).

     1.3 "APPLICABLE LAWS" shall mean all laws, statutes, ordinances, codes,
rules, regulations, guidelines, and procedures which have been enacted by
Regulatory Authorities and are in effect during the term hereof in each case to
the extent applicable to the performance by the Parties of their respective
obligations under this Supply Agreement or otherwise to the subject matter of
this Supply Agreement.

     1.4 [*]* shall have the meaning assigned to such term in [*].

     1.5 "CARRIER" shall mean the common carrier selected by Chiron to deliver
Filled Product ordered by Chiron.

     1.6 "CERTIFICATES OF ANALYSIS AND COMPLIANCE" shall mean the certificate of
analysis confirming the identity, strength, quality and purity of the Lot of
Filled Product to which it pertains together with the certificate of compliance
confirming that the same Lot of Filled Products were manufactured, tested,
stored and supplied in compliance with cGMPs and Applicable Laws, each such
certificate signed by an authorized signatory of Cubist.

     1.7 "CGMPS" shall mean the current good manufacturing practices required by
the Regulatory Authorities of each regulatory jurisdiction within the Territory
with respect to the manufacture, testing, storage and supply of Filled Products
for sale in such jurisdiction.

     1.8 "COMMERCIALLY REASONABLE EFFORTS" shall mean, solely for the purpose of
interpreting this Supply Agreement, with respect to an obligation to manufacture
or have manufactured Filled Product, the level of efforts required to carry out
such obligation in a sustained manner consistent with the efforts that a
similarly situated pharmaceutical company devotes to a product of similar market
potential, profit potential or strategic value and similar scientific,
technical, development and regulatory risks, based on conditions then
prevailing.

     1.9 "CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated as of October 31, 2002, by and between Chiron and Cubist.

     1.10 "CONFORMING PRODUCT," shall mean Filled Product that (a) was made from
API that conforms to applicable API Specifications, (b) was prepared and handled
in compliance with applicable cGMPs, Applicable Laws, master batch record and
any other procedures or documents agreed upon by the Parties, in writing, (c)
conforms with applicable Filled Product Specifications, (d) is not adulterated
within the meaning of the U.S. Food, Drug and Cosmetic Act or similar provisions
of any Applicable Laws, and (e) is packaged and shipped in accordance with the
applicable Packaging Specifications.

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     1.11 "CONTRACT MANUFACTURING AGREEMENTS" shall mean any and all agreements
pursuant to which API, Filled Product or any key ingredients thereof are
processed or manufactured on behalf of Cubist (including any such agreements for
any step in the manufacturing process), including without limitation, the Abbott
Laboratories, ACS Dobfar S.p.A. and DSM Capua S.p.A. contracts, together with
all amendments and extensions of such agreements.

     1.12 "CUBIST SUPPLIERS" shall have the meaning assigned to such term in
Section 2.3.

     1.13 "DEFECTIVE MANUFACTURED PRODUCT" shall mean any Filled Product
supplied by Cubist to Chiron pursuant to this Supply Agreement as to which
Cubist has materially breached any of its product warranties under Section 9.1
of this Supply Agreement.

     1.14 "DELIVERY DATE" shall have the meaning assigned to such term in
Section 4.3(a).

     1.15 "DISCREPANCY REPORTS" shall mean deviation reports pertaining to API
or Filled Products generated by Cubist or Cubist Suppliers that contain
information relating to deviations that may require reporting to Regulatory
Authorities.

     1.16 "DOLLAR" shall mean a United States dollar, and "$" shall be
interpreted accordingly.

     1.17 "DRUG MASTER FILE," or "DMF" shall mean a voluntary submission that
may be used to provide confidential, detailed information about the API and
facilities, processes, or articles used in the manufacturing, processing,
packaging, and storing of API or one or more other drug products.

     1.18 "EXCESS QUANTITIES" shall have the meaning assigned to such term in
Section 4.3(b)(ii).

     1.19 "EXISTING SUPPLIERS" shall have the meaning assigned to such term in
Section 2.3.

     1.20 "FACILITIES" shall mean those facilities agreed upon by the Parties,
in writing, at which API and/or Filled Product is to be manufactured hereunder.

     1.21 "FILLED PRODUCTS" shall mean the Licensed Products to be supplied
hereunder, lyophilized and in their primary containers (e.g., filled vials),
bulk-packaged and ready for final packaging and labeling for use in humans in
the Territory.

     1.22 "FILLED PRODUCT SPECIFICATIONS" shall mean those specifications for
Filled Product as agreed upon in writing by the Parties pursuant to Section 3.1
(and as such specifications may be changed in accordance with Section 3.2).

     1.23 "FINISHED PRODUCTS" shall mean the Filled Products supplied hereunder,
labeled and packaged in final form and ready for use in humans in the Territory.

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     1.24 "INCLUDING" shall mean "including without limitation."

     1.25 "INITIAL FORECAST" shall have the meaning assigned to such term in
Section 4.1.

     1.26 "INITIAL FORECAST MAXIMUM QUANTITIES" shall have the meaning assigned
to such term in Section 4.1.

     1.27 "JOINT COORDINATION TEAM" OR "JCT" shall mean the Cubist-Chiron
committee formed as described in Section 3.2(a) of the License Agreement.

     1.28 "LICENSE AGREEMENT" shall mean that certain License Agreement between
the Parties of even date herewith.

     1.29 "LOT" shall mean a single production run of Filled Product.

     1.30 "LOT DOCUMENTATION PACKAGE" shall mean all of the following related to
a given Lot: (a) with respect to API, Certificates of Analysis and Compliance, a
summary list of Discrepancy Reports, and the actual Discrepancy Reports upon
request by Chiron where required to release Filled Product in the Territory and
(b) with respect to Filled Product, Certificates of Analysis and Compliance,
batch production records, Discrepancy Reports, lot disposition form(s) signed by
Cubist and customs related documentation required to export from the country of
manufacture. In any event, Cubist shall provide Chiron all documentation
required by the Regulatory Authorities. If actual Discrepancy Reports are
necessary for Chiron to comply with the requirements of the Regulatory
Authorities in the Territory and Chiron has submitted such request to Cubist,
thereafter, Cubist shall provide with each Lot the actual Discrepancy Reports
(not merely the summaries thereof).

     1.31 "MANUFACTURING COST" shall have the meaning assigned to such term in
Section 7.1(b).

     1.32 "MANUFACTURING INFORMATION" shall have the meaning assigned to such
term in Section 5.3(d) of the License Agreement.

     1.33 "MAXIMUM QUANTITIES" shall have the meaning assigned to such term in
Section 4.2.

     1.34 "NON-BREACHING PARTY" shall have the meaning assigned to such term in
Section 11.4(a).

     1.35 "NON-CONFORMING PRODUCT," or "NON-CONFORMING," with respect to Filled
Product, shall mean any Filled Product that is not Conforming Product.

     1.36 "NOTIFIED PARTY" shall have the meaning assigned to such term in
Section 11.4(a).

     1.37 "PACKAGING SPECIFICATIONS" shall mean those specifications for the
packaging and shipment of Filled Product agreed upon in writing by the Parties
pursuant to Section 3.1.

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     1.38 "PRODUCT SHORTAGE" shall have the meaning assigned to such term in
Section 8.2.

     1.39 "PURCHASE ORDER" shall have the meaning assigned to such term in
Section 4.3.

     1.40 "QC" shall mean quality control.

     1.41 "QUALITY AGREEMENT" shall have the meaning assigned to such term in
Section 3.10.

     1.42 "REGULATORY APPROVAL" shall mean (i) in the United States, approval by
the FDA of an NDA or equivalent and satisfaction of any related applicable FDA
registration and notification requirements, and (ii) any equivalent approval in
any country other than the United States.

     1.43 "REGULATORY AUTHORITIES" shall mean foreign counterparts of the FDA in
the Territory, and other government agencies in the Territory charged with
enforcing laws, rules or regulations governing the manufacture, sale and/or
marketing of pharmaceuticals.

     1.44 "REMAINING SHELF-LIFE" shall have the meaning assigned to such term in
Section 3.4.

     1.45 "REQUIRED CHANGE" shall mean any proposed changes to the
Specifications or the manufacturing procedures for either API or Filled Product
made by either Party that is required by any regulatory agency or law or
regulation of any jurisdiction inside or outside the Territory.

     1.46 "REQUIRED CHANGE COSTS" shall have the meaning assigned to such term
in Section 3.2(c).

     1.47 "ROLLING FORECAST" shall have the meaning assigned to such term in
Section 4.2.

     1.48 "SPECIFICATIONS" shall mean API Specifications, Filled Product
Specifications and Packaging Specifications.

     1.49 "TERM" shall mean the term of this Supply Agreement as specified in
Section 11.1.

     1.50 "TRANSFER PRICE" shall have the meaning assigned to such term in
Section 7.1(a).

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                                    ARTICLE 2
                                SUPPLY; PLANNING

     2.1. SUPPLY OF FILLED PRODUCTS. During the Term, and subject to and upon
the terms and conditions of this Supply Agreement: (a) Cubist shall manufacture
(or have manufactured) API and Filled Products, and (b) Cubist shall supply
Chiron with all of its requirements for Filled Products, and Chiron shall
purchase all of its requirements for Filled Products from Cubist.

     2.2. COSTS OF PRODUCT MANUFACTURE. Except as otherwise provided in Section
3.2, Cubist shall bear all costs of API and Filled Product manufacture,
including costs of raw materials, equipment and facility acquisition and
modifications thereof, overhead, labor costs and manufacturing service fees paid
to Cubist Suppliers.

     2.3. SUB-CONTRACTING. The Parties acknowledge that, as of the Effective
Date, Cubist has entered into Contract Manufacturing Agreements with Abbott
Laboratories, ACS Dobfar S.p.A. and DSM Capua S.p.A (such Third Parties referred
to herein as the "EXISTING SUPPLIERS" and together with any other Third Party
suppliers of API or Filled Product referred to collectively as the "CUBIST
SUPPLIERS," PROVIDED, HOWEVER, such supplier shall not be a Cubist Supplier from
and after the date that its contractual arrangement with Cubist has terminated
or expired). Subject to the change control procedures in Section 3.2, prior to
entering into a Contract Manufacturing Agreement with a Third Party that is not
an Existing Supplier, and provided that Cubist expects that such Third Party
will manufacture API or Filled Products for use by Chiron in accordance with the
terms of this Supply Agreement, [*]. Notwithstanding any Contract Manufacturing
Agreements or anything provided herein, express or implied, to the contrary,
Cubist shall be responsible for meeting all of its obligations hereunder, and
where a provision hereof calls for Cubist to perform an obligation that Cubist
has sub-contracted to a Cubist Supplier, Cubist shall be liable for the
performance of such obligation.

     2.4. SECOND MANUFACTURING SOURCE(s)

          (a) FILLED PRODUCT. Within [*] after the first Commercial Launch in
the Territory, Cubist shall use Commercially Reasonable Efforts to establish and
thereafter during the Term maintain, or cause to be so established and
maintained, one or more facilities such that there are at least [*] facilities
located at least [*] apart licensed and qualified to manufacture Filled
Products. Each such facility shall have the capacity to supply commercial
quantities of Filled Product.

          (b) API. As of the Effective Date, Cubist is party to Contract
Manufacturing Agreements pursuant to which Cubist Suppliers have agreed to
process and manufacture API on behalf of Cubist at two (2) facilities that are,
or will be, licensed and qualified. After the expiration or termination of the
first to expire or terminate of the Contract Manufacturing Agreements relating
to API supply, Cubist may elect not to maintain a qualified second source of API
by considering, among other factors, (i) product quality, (ii) delivery
reliability, (iii) excess capacity, and (iv) price of suppliers, provided
however, prior to making any

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decision to reduce the number of qualified API suppliers to a single Facility
[*] In the event Cubist determines in its sole business judgment to maintain a
single facility to manufacture API, Cubist shall store a combination of API and
Filled Products at one or more locations that are each at least [*] from
Cubist's then current API supplier in quantities sufficient to meet global
demand for Licensed Products for a period of at least [*]. Cubist hereby agrees
that not less than [*] of such inventory quantities of API and Filled Products
shall consist of API. For as long as Cubist maintains a single facility for API,
[*] Any facility maintained by Cubist for the manufacture of API pursuant to
this Section 2.4(b) shall have the capacity to supply commercial quantities of
API.

          (c) KEY RAW MATERIALS. Cubist shall use Commercially Reasonable
Efforts to establish and maintain second sources for those other materials that
Cubist reasonably believes are key raw materials to be used for the processes of
manufacturing the API and the Filled Product.

          (d) ALTERNATE SUPPLIER QUALIFICATION. If Chiron reasonably believes
that Cubist's efforts to avoid interruption of supply are not sufficient at any
time while only a single Facility is licensed and qualified to manufacture API,
Chiron may [*] at such time, but Chiron shall not be entitled to source any
supply of API or Filled Products from such [*] except in accordance with the
provisions of Section 11.6. Upon election by Chiron to [*], Cubist agrees to
cooperate and assist Chiron in doing same, including [*] to the same extent as
if Chiron were [*]. Chiron shall be responsible for all costs and expenses
incurred by Cubist in connection with the rendering of such cooperation and
assistance. The Parties hereby acknowledge that nothing in this Section 2.4(d)
is intended to limit Chiron's rights under Section 11.6 hereof.

     2.5 GLOBAL MANUFACTURING PLAN. Cubist shall prepare and provide to Chiron,
not later than three (3) months after the acceptance by a Regulatory Authority
of any application for Regulatory Approval in any Major Market Country, a
detailed manufacturing plan for meeting near term and long range global demand
for the Licensed Product (the "MANUFACTURING PLAN"). The Manufacturing Plan
shall set forth the activities necessary or useful for the manufacture and
supply of Licensed Products (including Filled Product) for ensuring a reliable
source of same to meet world wide requirements of Chiron, Cubist and Other
Licensees for Licensed Products in their respective territories, and will
address, at minimum, the following:

     (i)    process development activities,

     (ii)   plan for capacity expansion as required to support global supply
requirements and Commercial Launch,

     (iii)  plans for bulk manufacture, formulation and filling of unlabeled
            vials,

     (iv)   production plans and inventory plans,

     (v)    stability testing and shelf-life extension plans,

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     (vi)   securing second source and/or backup for key manufacturing steps and
for key raw materials,

     (vii)  procedures followed by Cubist to obtain and maintain licenses,
registrations or authorizations for Licensed Product manufactured by Contract
Manufacturers to be sold in the Territory,

     (viii) each of the foregoing in respect of each indication and/or
formulation of each Licensed Product,

     (ix)   the identification of all Facilities licensed or expected to be
licensed by Regulatory Authorities to manufacture API and Filled Product for
supply hereunder, and

     (x)    expected Facility capacity, plans for validation of new Facilities
and processes, and regulatory inspection plans.

Cubist shall update the Manufacturing Plan annually and Cubist shall provide
such updated Manufacturing Plan to Chiron prior to the JCT's last scheduled
meeting during the then current year. Chiron shall have the right to review and
comment, via the JCT, on the Manufacturing Plan and any and all revisions and
updates thereto, and Cubist shall, in good faith, consider all comments made by
Chiron. Except as otherwise provided herein, Cubist shall bear all costs and
expenses in connection with any and all manufacturing activities engaged in by
Cubist and its Affiliates in connection with the Manufacturing Plan, regardless
of whether such activities occur within the Territory or outside the Territory.

                                   ARTICLE 3.
                  MANUFACTURE, PACKAGING AND QUALITY ASSURANCE

     3.1. ESTABLISHMENT OF SPECIFICATIONS AND MANUFACTURING PROCEDURES. The
Parties shall mutually agree in writing (such agreement not to be unreasonably
delayed or withheld), on a timely basis, on applicable API Specifications,
Filled Product Specifications and Packaging Specifications that meet the
requirements of the Regulatory Authorities and the Applicable Laws of each
country in which Finished Products are to be sold. The Parties shall work
expeditiously to agree upon such Specifications so as to permit Chiron to have
adequate stocks of Conforming Product on hand in advance of the anticipated
Commercial Launch in the Territory. The Parties acknowledge and agree that the
API Specifications, the Filled Product Specifications, the Packaging
Specifications and the manufacturing procedures for API and Filled Product shall
be based substantially on Cubist's US FDA approved specifications and
manufacturing procedures, but with all such modifications and additional
procedures as may be required for the API and Filled Product to comply with
cGMPs and the requirements under Applicable Laws. Any and all such modifications
and additional procedures shall be adopted in accordance with the provisions of
Section 3.2 hereof.

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     3.2. CHANGES IN SPECIFICATIONS OR MANUFACTURING PROCEDURES.

          (a) CUBIST CHANGES. Cubist shall notify Chiron in writing of any
changes that it proposes to make to the Specifications, or the manufacturing
procedures, for API or Filled Product.

               (i)   In the event that a change to the Specifications, or the
established manufacturing procedures, for API or Filled Product is being
proposed by Cubist at any time prior to obtaining Regulatory Approval in (A) the
European Union if Chiron is pursuing a centralized filing strategy for
Regulatory Approval in the European Union, or (B) the reference member state if
Chiron is pursuing a mutual recognition filing strategy for obtaining Regulatory
Approval in the European Union (such Regulatory Approval pursuant to either
clause (A) or clause (B) being hereinafter referred to as the [*], then Cubist
will [*].

               (ii)  Cubist shall deliver with the notice required pursuant to
Section 3.2(a) adequate documentation to enable Chiron to determine whether such
change requires Regulatory Approval. As soon as reasonably practicable but in no
event later than [*] after delivery of such notice, Chiron shall notify Cubist
if such proposed change would require Regulatory Approval in any country in the
Territory.

               (iii) If such proposed change is being proposed by Cubist at any
time after [*] has been obtained, then Cubist may proceed to implement such
change [*] with respect to API or Filled Product for all countries in the
Territory, PROVIDED that Cubist complies with all of the provisions set forth in
this Section 3.2(a) with respect to those countries as to which Chiron has
previously notified Cubist that such changes would require Regulatory Approval.
In the event that any such proposed change would require Regulatory Approval
within any country in the Territory, Chiron agrees that it will take the
necessary steps to obtain such Regulatory Approval as soon as reasonably
practicable (it being understood that time may be of the essence). Unless and
until Chiron has obtained Regulatory Approval for such proposed changes, Cubist
shall continue to supply Filled Product to Chiron in accordance with the
provisions of this Supply Agreement, and such Filled Product shall conform with
the Specifications and manufacturing processes previously approved and then in
effect for such Filled Product in each country of the Territory that requires
Regulatory Approval for such proposed changes.

               (iv)  Other than with respect to Required Changes in the
Territory (which is addressed in paragraph (c) below), Cubist shall pay for any
additional capital costs or other expenses of manufacturing API or Filled
Product over those which Cubist is then incurring to manufacture or have
manufactured API or Filled Product to implement each change made pursuant to
this Section 3.2(a), including each Required Change made in response to a
regulatory agency or law or regulation of any jurisdiction outside the
Territory. All of such additional capital costs or such other expenses of
manufacturing that are allocated to Cubist's Manufacturing Cost consistent with
United States generally accepted accounting principles shall result in an
adjustment of the Transfer Price paid by Chiron to Cubist pursuant to this
Supply Agreement for Filled Product.

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               (v)   Notwithstanding any provision herein to the contrary, if
Cubist requests a change to the Specifications or the manufacturing procedures
that is not required by a Regulatory Authority in the Territory but the
implementation of which would require Chiron to obtain Regulatory Approval of
such change, then [*] associated with obtaining and maintaining Regulatory
Approval in the Territory for such modification to the Specifications and
manufacturing procedures. At the request of Cubist, Chiron hereby agrees to
provide Cubist [*] as soon as reasonably practicable.

          (b) CHIRON CHANGES. Chiron will notify Cubist of any change that it
proposes to make to the Specifications, or the manufacturing procedures, for API
or Filled Product. Subject to paragraph (c) below, Cubist will use Commercially
Reasonable Efforts to determine whether it is capable of making such change.
Cubist shall notify Chiron as soon as reasonably practicable whether it is able
to implement such change, and shall indicate whether the implementation of such
change will result in any additional capital costs or other expenses of
manufacturing such Filled Product over those which Cubist is then incurring to
manufacture or have manufactured such Filled Product (whether any such
additional capital costs or other expenses of manufacturing consist of
non-recurring expenses or development or manufacturing costs). Subject to
paragraph (c) below, if Chiron agrees to pay for any such additional capital
costs or other expenses of manufacturing, then Cubist will use Commercially
Reasonable Efforts to implement such change, and, if Chiron does not agree to
pay for such additional capital costs or other expenses of manufacturing, then
Cubist will not be obligated to implement such change. None of such additional
capital costs or such other expenses of manufacturing that Chiron shall be
required to pay pursuant to this Section 3.2(b) [*] pursuant to this Supply
Agreement for Filled Product.

          (c) COST OF REQUIRED CHANGES IN THE TERRITORY. If a regulatory agency
or law or regulation of any jurisdiction inside the Territory requires any
changes in the Specifications, or the manufacturing procedures, for API or
Filled Product, then [*] in connection with such changes (in each case, whether
any such costs consist of capital costs or other expenses of manufacturing, the
"REQUIRED CHANGE COSTS") [*:] (i) [*] Required Change Costs [*], (ii) [*]
Required Change Costs [*] and (iii) [*] Required Change Costs shall be [*]. None
of the Required Change Costs [*] pursuant to this Section 3.2(c) shall be [*]
pursuant to this Supply Agreement for Filled Product. Capital costs that are
Required Change Costs shall be allocated to Required Change Costs consistent
with United States generally accepted accounting principles. Cubist shall bear
all costs and expenses of development activities in support of implementing
Specification or manufacturing procedure changes as they relate to this Section
3.2(c).

     3.3. STABILITY STUDIES. Cubist shall conduct or have conducted stability
studies on API and Filled Products as required by Regulatory Authorities and, in
any case, on at least one Lot of each Filled Product from each site where such
Filled Product is manufactured, in each case at least once per year following
the first Commercial Launch of such Filled Product in the Territory. Cubist
shall provide Chiron with an annual report of all data Cubist has obtained from
such stability studies during the year preceding the report. Cubist and Chiron
shall notify each other within 48 hours after becoming aware of any identified
stability failure for API or Filled Product.

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     3.4. SHELF-LIFE. The shelf-life of Filled Products, initially, shall be
such that Cubist can deliver Filled Products to the Carrier with a remaining
shelf-life of at least [*] (the "REMAINING SHELF-LIFE"), provided that the
shelf-life of Filled Product as approved by the applicable Regulatory
Authorities is at least [*]. Chiron shall promptly notify Cubist in writing if
any Regulatory Authority approves a shelf-life of Filled Product that is [*].
Upon receipt of such notice by Cubist, the Remaining Shelf-life shall be
increased by one half of the increase in the shelf-life of Filled Product
approved by such Regulatory Authority (i.e. if the Regulatory Authority
increased the shelf-life by [*], then the Remaining Shelf-life shall be
increased by [*]. Cubist shall use Commercially Reasonable Efforts to extend the
shelf-life of Filled Products each time it becomes reasonably practicable to do
so, and upon receipt of Regulatory Approval of such extension, the Remaining
Shelf-life shall be deemed to be extended to the same extent as provided in the
foregoing sentence.

     The Parties acknowledge and agree that the definition of Remaining
Shelf-life, and the ordering, forecasting and supply chain management
procedures, agreed upon and specified in this Supply Agreement, including
without limitation, the provisions in Articles 2, 3, 4 and 5, are based on the
assumption that the shelf-life of Filled Product approved by Regulatory
Authorities shall in no event be less than [*]. In the event that the approved
shelf-life of Filled Product is less than [*], Cubist and Chiron each agree to
promptly and in good faith agree upon reasonable adjustments to all affected
provisions, including without limitation, the provisions in Articles 2, 3, 4 and
5, with a view to achieving a commercially reasonable arrangement for the
manufacture and supply of Filled Product that has the maximum Remaining
Shelf-life under the circumstances.

     3.5. FILLED PRODUCT TESTING, DOCUMENTATION AND RELEASE. Cubist shall
maintain, and/or request that the Cubist Suppliers maintain, reasonably detailed
records pertaining to each stage of the manufacture, fill and finish of API and
Filled Products and the methods and facilities used therefor, including Lot
Documentation Packages. Cubist shall be responsible for releasing each lot of
API and Filled Product and shall certify that each such released lot was
manufactured and tested in accordance with applicable cGMPs, manufacturing
procedures, Specifications and Applicable Laws and providing Lot Documentation
Package confirming same. Cubist shall perform, or cause to be performed, all
reasonable testing in connection with the release of Filled Product as may be
required for satisfying the Regulatory Authorities or Applicable Laws or
monitoring QC.

     3.6. SHIPPING VALIDATION PROTOCOLS. Cubist and Chiron shall develop and
mutually agree upon protocols for the shipment of Filled Products into the
Territory. Thereafter, Cubist shall follow such protocols. Cubist shall bear the
costs and expenses associated with shipping validation.

     3.7. QC SAMPLES; DOCUMENTATION; ANALYTICAL METHODS. Cubist shall retain
samples from each Lot for a period of at least one (1) year after the expiration
date of such Lot. Cubist shall provide Chiron, at no additional cost, with all
reasonable assistance to transfer the ability to perform and validate analytical
methods useful in analyzing Filled

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Products and shall promptly transfer to Chiron any updates to such methods
approved and implemented during the Term.

     3.8. TERRITORY QC. Chiron shall be responsible for QC testing of Filled
Products required by Regulatory Authorities to be performed in the Territory.
Chiron will use test methods and processes agreed upon, in writing, by the
Parties, such agreement not to be unreasonably delayed or withheld. Chiron will
not alter such test methods or processes or adopt new tests without Cubist's
written approval, such approval not to be unreasonably withheld or delayed.

     3.9. FINISHED PRODUCT PACKAGING AND TESTING. Chiron shall be responsible
for the final packaging, labeling, QC testing, and release of Finished Products,
and the retention of Finished Product samples, as required by this Supply
Agreement and Regulatory Authorities in the Territory. Chiron also shall be
responsible for obtaining any necessary import permits for Finished Products,
and using test methods mutually agreed upon by the Parties, such agreement not
to be unreasonably delayed or withheld. Chiron shall afford Cubist reasonable
audit rights with respect to such retention samples and documentation pertaining
to such QC testing.

     3.10. QUALITY ASSURANCE AGREEMENT. As soon as reasonably practicable,
Chiron and Cubist shall enter into a separate quality assurance agreement on
terms to be mutually agreed upon by the parties acting reasonably and in good
faith (the "QUALITY Agreement"). Cubist shall enter into Quality Agreements with
each of the Cubist Suppliers and provide copies to Chiron. Such Quality
Agreements shall ensure that no Cubist Supplier shall make any changes to the
Specifications or the established manufacturing procedures for API or Filled
Product (including any changes to a registered DMF) without Cubist's prior
written consent.

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                                    ARTICLE 4
                                FORECASTS; ORDERS

     4.1. INITIAL FORECAST. Not more than [*] prior to the first anticipated
delivery date of Licensed Product, Chiron shall submit to Cubist the first
written forecast ("INITIAL FORECAST") of the quantities of Filled Products it
expects to purchase from Cubist during the succeeding [*]. Subject to Section
4.6, (a) the first [*] of the Initial Forecast shall not be binding upon Cubist,
(b) the [*] of the Initial Forecast shall be binding upon Chiron and Cubist, (c)
the [*] shall be binding to the extent that Chiron shall be obligated to
purchase and Cubist shall be obligated to supply not less than [*] of the
forecasted quantities of Filled Products, but Chiron may, at its option,
purchase, and Cubist shall be obligated to supply, up to [*] of the quantities
forecasted for those [*] (the latter quantities being referred to hereinafter as
the "INITIAL FORECAST MAXIMUM QUANTITIES") and (d) the [*] of the Initial
Forecast shall be non-binding.

     4.2 ROLLING FORECAST. Each month after the month in which Chiron's Initial
Forecast specified in Section 4.1 is submitted, Chiron shall submit to Cubist a
written forecast of the quantities of Filled Products it expects to purchase
from Cubist during the succeeding [*], and each month thereafter, Chiron will
provide Cubist with an update of such forecast (the "ROLLING FORECAST"). Subject
to Section 4.6, (a) the first [*] of the Rolling Forecast shall be binding upon
Chiron and Cubist, (b) the following [*] shall be binding to the extent that
Chiron shall be obligated to purchase and Cubist shall be obligated to supply
not less than [*] of the forecasted quantities of Filled Products, but Chiron
may, at its option, purchase, and Cubist shall be obligated to supply, up to [*]
of the quantities forecasted for those [*] (the latter quantities being referred
to hereinafter as the "ROLLING FORECAST MAXIMUM QUANTITIES", and the term
"MAXIMUM QUANTITIES" shall mean, either the Initial Forecast Maximum Quantities
(with respect to an Initial Forecast) or the Rolling Forecast Maximum Quantities
(with respect to the Rolling Forecasts), as the case may be), and (c) the [*] of
the Rolling Forecast shall be non-binding.

     4.3. PURCHASE ORDERS.

          (a) CONTENT. No later than the [*] of each calendar month in which a
forecast is submitted pursuant to Section 4.1 or 4.2 hereof, Chiron shall submit
to Cubist a written purchase order (a "PURCHASE ORDER") for (a) those quantities
of Finished Products that Chiron is bound to purchase pursuant to the Rolling
Forecast (the "MINIMUM QUANTITIES") and (b) any additional quantities of Filled
Products that Chiron desires Cubist to supply. Each Purchase Order shall be in a
form upon which the Parties have mutually agreed and shall specify for the
Filled Products ordered, among other things, (i) the quantities, types and
countries of final sale, (ii) the aggregate Transfer Price, and (iii) the date
on which the Carrier will take possession of such Filled Products (the date
requested, or within ten (10) days thereof being the "DELIVERY DATE").

     (b)  DELIVERY DATE. The Delivery Date for the first Purchase Order
delivered to Cubist shall be at least [*] following the date of receipt of such
Purchase Order by Cubist, and the Delivery Date for all other Purchase Orders
shall be at least [*] following the date of receipt of the applicable Purchase
Order by Cubist. Each such Purchase Order shall be

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automatically binding upon Cubist and Chiron to the extent of the quantities of
Filled Product for which such Purchase Order requests delivery; PROVIDED,
HOWEVER, that:

               (i)   if Chiron has failed to comply with its obligations under
Section 4.1 or 4.2 hereof, then, if such obligations are relevant to or pertain
in any way to such Purchase Order or to forecasts of the quantities of Filled
Product covered by such Purchase Order, such Purchase Order shall not be
automatically binding on Cubist, and

               (ii)  if the quantity of such Filled Product specified in such
Purchase Order is greater than the Maximum Quantities for such Purchase Order
("EXCESS QUANTITIES"), then such Purchase Order shall nonetheless be binding
upon Cubist and Chiron with respect to only the Maximum Quantities for such
Purchase Order, subject to Section 4.4.

     4.4. CONFIRMATION AND ACCEPTANCE OF PURCHASE ORDERS.

           (a) ACKNOWLEDGMENT. Cubist shall acknowledge, in writing, its receipt
of each Purchase Order upon receipt, and in cases in which Excess Quantities
have been ordered, shall notify Chiron in writing within [*] of receipt, of
whether it agrees to provide such Excess Quantities (in whole or in part).

           (b) EXCESS QUANTITIES. Any Excess Quantities that Cubist agrees to
supply, within such [*] period, shall be binding upon Cubist (together with the
ordered quantities up to the Maximum Quantities). In any event, Excess
Quantities that Cubist does not agree to supply within such [*] period (either
by refusing, in writing, or by failing to accept, in writing) shall not be
binding upon Cubist, provided, however, Cubist shall use Commercially Reasonable
Efforts to supply such quantities if and to the extent that such quantities are
available to Cubist without incurring any additional costs.

           (c) THIRD PARTY COMMITMENTS. In no event shall Cubist be required to
reduce its commitment allocated to Third Parties to supply such quantities to
Chiron. Before agreeing to supply Chiron with Excess Quantities, Cubist may
notify Chiron that it will do so only on the condition that Chiron pay its
documented excess costs specified in such notice as being in excess of the
applicable Transfer Price that Cubist will incur in order to provide the Excess
Quantities. If Chiron agrees to pay such excess costs to the extent such excess
costs are actually incurred or irrevocably committed, then the Excess Quantities
shall be binding on Cubist; otherwise, they shall not be, and in any event, such
excess costs shall in no way reduce the royalties payable to Cubist pursuant to
the License Agreement.

     4.5. FULFILLMENT OF PURCHASE ORDERS; GOVERNING TERMS. Cubist shall fill
each Purchase Order in accordance with the terms thereof and as further
specified in this Supply Agreement. In any case in which the terms of a Purchase
Order, acknowledgement thereof or other communication in connection therewith
are inconsistent with those in this Supply Agreement, the provisions of this
Supply Agreement shall control.

     4.6  EXCEPTIONS TO BINDING PURCHASE OBLIGATIONS.

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          (a) DOCUMENTATION DEFICIENCIES. Notwithstanding anything to the
contrary provided in this Article 4, to the extent that Chiron otherwise would
be bound to purchase Filled Products pursuant to a Rolling Forecast or Purchase
Order that became binding (in whole or in part) on Chiron at a time when Chiron
had reason to believe that Regulatory Authorities in the country or countries in
which such Filled Products would be sold would have granted Regulatory
Approval(s) of such products within ninety (90) days of the Delivery Date (or,
in cases where no Delivery Date has been established, within 90 days of the
earliest reasonably anticipated date of sale), but such Regulatory Approval(s)
were not then granted [*] documentation or other supporting information [*]
possession or control, [*] for such Filled Products set forth in the applicable
Rolling Forecast or Purchase Order, and [*]. If any such Filled Product has been
delivered to the Carrier pursuant to Section 5.2, upon [*] such Filled Product
to [*]. Notwithstanding anything to the contrary set forth in this Section
4.6(a), [*] and (i) such Filled Product [*] by Chiron, or (ii) the [*] for such
Filled Product at the time this [*] is less than [*] (subject to adjustment as
set forth in the last paragraph of Section 3.4).

          (b) THIRD PARTY PURCHASERS. In any case in which prior to the Delivery
Date, Chiron informs Cubist in writing that it wishes to cancel (in whole or in
part) a binding order for Filled Products, Cubist shall use Commercially
Reasonable Efforts to sell such Filled Products to other customers of Cubist at
a commercially reasonable price and to the extent that it does so, Chiron shall
not be bound to order or pay for such Filled Products, provided, however, if
Cubist sells such Filled Products for less than the Transfer Price, then Chiron
shall be obligated to pay to Cubist an amount equal to the aggregate Transfer
Price corresponding to the Purchase Order for which Chiron canceled its binding
order less the purchase price received by Cubist from other customers for such
Filled Product that would have otherwise been sold to Chiron pursuant to such
Purchase Order.

     4.7. SAFETY STOCKS. To help ensure the timely supply of Filled Products,
Cubist shall use Commercially Reasonable Efforts to keep a safety stock of at
least [*] inventory of Filled Products, based on the monthly average of
quantities forecasted in the Rolling Forecast.

                                    ARTICLE 5
                       DELIVERY; ACCEPTANCE AND REJECTION

     5.1. DELIVERY OF PRE-SHIPMENT SAMPLES. Upon written request by Chiron made
upon or after placement of any Purchase Order, Cubist shall (a) provide to the
Carrier, on a mutually agreed date in advance of the Delivery Date specified in
such Purchase Order, pre-shipment samples from Lots manufactured for an order of
Filled Product, and (b) as soon thereafter as reasonably practicable, provide
Chiron with the associated Lot Documentation Package. Chiron shall be
responsible for arranging for the pick-up of such pre-shipment samples on such
mutually agreed upon date at such facility by the Carrier. Cubist will direct
each Cubist Supplier to permit the Carrier to pick-up such pre-shipment samples
at the facility. The Carrier shall transport such pre-shipment samples on behalf
of, and at the direction of, Chiron to the destination designated by Chiron.
Chiron shall be responsible for the full cost of transportation, exportation and
importation of such pre-shipment samples, including, without limitation, the
cost of freight, postage, shipping, insurance and export or

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import duties, and costs invoiced by Cubist Suppliers in order to fulfill such
requests for pre-shipment samples.

     5.2. DELIVERY OF ORDERED FILLED PRODUCT.

          (a) DELIVERY. On the Delivery Date and following (a) Chiron's
acceptance of Filled Product, in cases in which Chiron has requested and
received pre-shipment samples pursuant to Section 5.1, or (b) release by Cubist
of ordered Filled Product, in cases where Chiron has not requested and received
pre-shipment samples, Cubist shall deliver Filled Products to Chiron by making
available, or causing the Cubist Suppliers to make available, such Filled
Product, along with the completed and appropriately signed Certificates of
Analysis and Compliance and shipping and customs documentation required for the
Carrier to export from the country of manufacture, for pick-up at Cubist's or a
Cubist Supplier's facility specified in the applicable Purchase Order with
respect to such Filled Products.

          (b) SAMPLES. Cubist or the Cubist Supplier shall retain a sample of
Filled Product for each Lot included in each shipment. Chiron shall be
responsible for arranging for the pick-up of such Filled Products on the
Delivery Date at such facility by the Carrier.

          (c) CARRIERS. Cubist will direct each Cubist Supplier to permit the
Carrier to pick-up such Filled Product at the facility. The Carrier shall
transport such Filled Products on behalf of, and at the direction of, Chiron to
the destination designated by Chiron.

          (d) COSTS. Chiron shall be responsible for the full cost of
transportation, exportation and importation of such Filled Products, including,
without limitation, the cost of freight, postage, shipping, insurance and export
or import duties. The Carrier shall provide a written receipt evidencing that
there has been compliance with all delivery requirements in accordance with the
provisions of this Section 5.2.

     5.3. TITLE AND RISK OF LOSS. Title to and risk of loss of all Filled
Product shall pass to Chiron upon delivery to the Carrier by Cubist or a Cubist
Supplier. Each shipment of Filled Product shall be CIP (Incoterms 2000) Cubist's
or a Cubist Supplier's Facility. Chiron or the Carrier shall be responsible for
clearing such shipments through customs in the country of manufacture and in the
Territory, at Chiron's sole expense, however Cubist shall provide reasonable
assistance if it possesses or controls documentation or information that is
necessary to clear such shipments through customs.

     5.4. ACCEPTANCE AND REJECTION

          (a) PROCEDURE FOR REJECTION. Chiron may reject any Non-Conforming
Product by delivering written notice thereof to Cubist within [*] of Chiron's
receipt of (a) pre-shipment samples and the related Lot Documentation Package,
in cases in which Chiron has requested and received pre-shipment samples
pursuant to Section 5.1, or (b) ordered Filled Product and related Lot
Documentation Package, in cases in which Chiron has not requested and received
pre-shipment samples of ordered Filled Product. If no such notice of rejection
is given within [*], Chiron shall be deemed to have accepted such Filled
Product.

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          (b) DOCUMENTATION SUPPORTING REJECTION. If Chiron provides a notice of
rejection pursuant to Section 5.4(a), it shall include with such notice: (i) a
report of analysis of a sample of the shipment analyzed, conducted in accordance
with the testing protocols in the applicable Filled Product Specifications, (ii)
a sample from the rejected shipment to be used by Cubist in assessing whether
Cubist agrees that such rejection was proper, (iii) copies of any and all
records pertaining to the test methods used and results thereof and (iv) data
generated with respect to the status (including temperature measurements) of the
rejected Filled Product, at all times from and after delivery thereof to the
Carrier.

          (c) RESPONSE OF CUBIST. Cubist shall have a period of [*] from receipt
of Chiron's notice of rejection to notify Chiron, in writing, of whether or not
it agrees that the product at issue is Non-Conforming Product and to provide
Chiron with (i) its report of analysis of the sample received from Chiron (and
any other samples tested), (ii) copies of all records pertaining to the test
methods employed in such analysis (along with the results thereof) and (iii)
data generated with respect to the status (including temperature measurements)
of such sample(s) at all times while in the possession or control of Cubist.

          (d) DISAGREEMENTS OVER CONFORMITY. The Parties shall cooperate in good
faith to determine whether a rejection of Filled Product pursuant to Section
5.4(a) was appropriate. If the Parties disagree, a sample of such Filled Product
shall be submitted to a mutually acceptable independent laboratory for
resolution of the disagreement. Such laboratory's determination shall be final,
determinative and binding upon the Parties. The costs of such laboratory testing
shall be borne by Chiron unless the laboratory determines that such Filled
Product is a Defective Manufactured Product, in which case Cubist shall bear
such costs. If the Parties have agreed, or if such laboratory determines that
such Filled Product is not a Defective Manufactured Product, then such Filled
Product shall be deemed to have been accepted by Chiron, and Chiron will pay the
Transfer Price therefor, in accordance with Article 7.

     5.5. REPLACEMENT PRODUCT. Within [*] of receipt of a written request by
Chiron for the replacement of Filled Product rejected pursuant to Section
5.4(a), Cubist shall use, and shall direct Cubist Supplier's to use,
Commercially Reasonable Efforts to replace such Filled Product. If Cubist has
agreed or a laboratory selected pursuant to Section 5.4(d) has determined that
the rejected product is a Defective Manufactured Product, the replacement Filled
Product shall be supplied at Cubist's sole cost. Otherwise, the replacement
Filled Product shall be invoiced and paid for in accordance with Article 7.
Final disposition (e.g., storage or destruction) of Defective Manufactured
Product shall be the responsibility of and at the expense of Cubist, otherwise,
final disposition of such rejected Filled Product that is not Defective
Manufactured Product shall be at the expense of Chiron.

     5.6 CREDIT FOR COSTS OF UNSTABLE FILLED PRODUCT.

          (a) PROCEDURE. Notwithstanding anything provided to the contrary in
this Supply Agreement, if at any time Cubist believes that a delivery of Filled
Product to Chiron is not stable during its Remaining Shelf-life, then Cubist
shall promptly notify Chiron of such concern and request that Chiron submit a
sample of such Filled Product for stability

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verification in accordance with the procedure set forth in this Section 5.6. If
at any time after delivery of Filled Product to Chiron, Chiron reasonably
believes that such Filled Product is not stable during its Remaining Shelf-life,
then Chiron shall deliver a sample of such Filled Product to Cubist and a
certification that Chiron properly stored the Filled Product in question. Cubist
shall analyze such sample provided by Chiron together with the sample retained
by Cubist corresponding to the applicable Lot and shipment of such Filled
Product.

          (b) CUBIST RESPONSE. Cubist shall have a period of [*] from receipt of
Chiron's sample to notify Chiron, in writing, of whether or not it agrees that
the product at issue is not stable during its Remaining Shelf-life and to
provide Chiron with (i) its report of analysis of the sample received from
Chiron and the Cubist sample, (ii) copies of all records pertaining to the test
methods employed in such analysis (along with the results thereof) and (iii)
data generated with respect to the status (including temperature measurements)
of such samples at all times while in the possession or control of Cubist.

          (c) DISAGREEMENTS OVER CONFORMITY. If the parties disagree, samples of
both the Filled Product in question and the corresponding retention sample shall
be submitted to a mutually acceptable independent laboratory for resolution of
the disagreement in accordance with the provisions of Section 5.4(d). If such
independent laboratory determines that such Filled Product is not stable during
its Remaining Shelf-life, and such instability is not a result of Chiron's
mishandling of such Filled Product (including improper storage thereof or any
other actions taken by Chiron described in Section 9.1(b)), then such Filled
Product shall be considered Defective Manufactured Product for purposes of
Article 5 of this Supply Agreement.

                                   ARTICLE 6.
                               REGULATORY MATTERS

     6.1. REGULATORY APPROVALS. Chiron shall be responsible for preparing and
filing all submissions for Regulatory Approval of Finished Products. Except as
otherwise provided below in this Section 6.1, Cubist, at no additional cost to
Chiron, shall:

          (a) provide Chiron with any and all requested data created in
connection with the development of API and Filled Products which are necessary
to support submissions for Regulatory Approval in the Territory;

          (b) develop data requested by Chiron concerning the manufacture, QC or
testing of API or Filled Products, which are necessary to support submissions
for Regulatory Approval in the Territory; and

          (c) cooperate with Chiron and provide such additional assistance in
connection with such filings as Chiron may reasonably request.

     To the extent that Chiron needs to submit and make available any
Manufacturing Information in connection with obtaining Regulatory Approval in
the Territory, the Parties agree that, to the fullest extent permissible under
applicable law, rules and regulations, such Manufacturing Information shall be
made available to the applicable Regulatory Authorities

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in the Territory via a Drug Master File appropriately formatted for the country
in which such DMF is filed and [*] (i.e. upon Chiron's [*] of this Supply
Agreement to manufacture or have manufactured Licensed Products). Drug Master
Files will be maintained and kept up to date by Cubist or the Cubist Suppliers.
Chiron will be notified of changes proposed to the DMF [*] in accordance with
change control procedures set forth in Section 3.2 of this Supply Agreement.
Chiron shall be responsible for notifying the Regulatory Authorities in the
Territory, as required by applicable laws, of the updating of the DMF by Cubist
or the Cubist Suppliers.

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

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

     6.2. RECORD-KEEPING.

          (a) BY CUBIST. Cubist shall (a) prepare (or have prepared) all records
reasonably necessary to support and shall verify compliance of API and Filled
Products with applicable Specifications and with all applicable laws,
regulations and quality assurance manufacturing documentation, including
applicable standard operating procedures, validation records and batch
production records, and (b) maintain all such records for a period of not less
than three (3) years from the expiration date of each Lot to which such records
pertain or such longer period as may be required under Applicable Laws.

          (b) BY CHIRON. Chiron shall prepare all records required by all
applicable laws and regulations to be prepared and maintained by it relating to
the distribution, sale and marketing of Finished Products in the Territory, and
shall prepare all records reasonably necessary to support and shall verify its
compliance with Specifications for Finished Product packaging. Chiron shall
maintain all such records for a period of not less than five (5) years from the
respective dates they were created or such longer period as may be required
under Applicable Laws.

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     6.3. CHIRON AUDIT RIGHTS. Chiron shall be entitled to conduct quality
assurance/quality control audits, including audits of the Facilities, as may be
required to enable Chiron to obtain and hold the marketing authorizations,
manufacturing authorizations and other Regulatory Approvals in its name,
provided, however, Chiron shall not have access to the records of any Cubist
Supplier unless such access is necessary to comply with regulatory requirements
in the Territory. All Information reviewed by Chiron, or to which Chiron obtains
access, in the course of any audits conducted by Chiron pursuant to this Section
6.3 shall be subject to the confidentiality provisions of Section 12.1 hereof
(which Section incorporates by reference the confidentiality provisions of the
License Agreement and makes them applicable to this Supply Agreement).

     6.4. GOVERNMENTAL INQUIRIES AND INSPECTIONS.

          (a) Cubist shall notify Chiron within [*] (i) of Cubist becoming aware
of any matters that are likely to affect the regulatory status of any Filled
Product or the ability of Cubist to supply Filled Product or Licensed Product in
accordance with Chiron's forecast requirements, and (ii) Cubist's receipt of any
notice of any inquiries, notifications or inspection activity by any
governmental agency in regard to a Filled Product or any Licensed Product.
Chiron shall be permitted to have a representative present during any such
governmental inquiry or inspection by a governmental agency in the Territory.
Cubist shall use reasonable efforts to furnish to Chiron (A) within [*] of
receipt, any report or correspondence issued by such governmental authority in
connection with such inquiry, notification or inspection and (B) at least [*]
prior to the time they are to be provided to a governmental authority, copies of
any and all proposed responses or explanations relating to items set forth
above, in each case purged only of trade secrets or other confidential or
proprietary information of Cubist that are unrelated to its obligations under
this Supply Agreement or to Filled Products. Prior to submission, Cubist shall
discuss with Chiron all such proposed responses or explanations and shall give
due consideration, in the preparation of final responses or explanations, to all
comments made by Chiron that reasonably relate to the Filled Products at issue.

          (b) Chiron shall notify Cubist within [*] following its receipt of any
notice of any inquiry, notification or inspection activity by any governmental
agency in regard to a Filled Product or a Finished Product. Chiron shall use
reasonable efforts to furnish to Cubist, (i) within [*] of receipt, a copy of
any report or correspondence issued by such governmental authority in connection
with such inquiry, notification or inspection and (ii) at least [*] prior to the
time they are to be provided to a governmental authority, copies of any and all
proposed responses or explanations relating to items set forth above, in each
case purged only of trade secrets or other confidential or proprietary
information of Chiron that are unrelated to its obligations under this Supply
Agreement, Filled Products or Finished Products. Prior to submission, Chiron
shall discuss with Cubist all such proposed responses or explanations and shall
give due consideration, in the preparation of final responses or explanations,
to all comments made by Cubist that reasonably relate to the Filled Products or
Finished Products at issue.

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     6.5. SAFETY; ADVERSE EVENT REPORTING.

          (a) GENERAL. The Parties shall promptly exchange any and all
appropriate safety data, and the Parties shall report, and take other
appropriate actions in relation to, adverse events with Licensed Products to
each other, all in accordance with a reporting protocol that will be established
by the JCT. In addition, each Party shall have the right to review the other
Party's internal processes and procedures for the collection and processing of
safety data. Without limiting the generality of the foregoing, each Party shall
maintain a record of all non-medical and medical product-related complaints and
reports of adverse events that it receives with respect to any Licensed Product
and each Party shall notify the other Party of any complaint received by it and,
within [*] of the initial receipt, provide the other Party with a copy of such
complaint(s) and adverse event reports.

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

          (c) REPORTING IN THE TERRITORY. Chiron shall be responsible for
reporting to Regulatory Authorities in the Territory any adverse experience and
safety issues for Licensed Products in compliance with the requirements of the
applicable laws, rules and regulations, and shall promptly thereafter provide to
Cubist a copy of such report. Cubist shall require each of its Other Licensees
to comply with obligations corresponding to those in this Section 6.5.

          (d) GLOBAL DATABASE. Cubist shall be responsible for compiling a
validated global database that captures all adverse events reported to Cubist
from any source and maintaining said database as defined in any associated
Quality Agreement. Cubist shall also provide Chiron with as close to immediate
access as possible to such global database so as to support the applications for
Regulatory Approval and the maintenance of marketing authorizations in the
Territory, PROVIDED that it is technically feasible to do so and that Chiron
makes payment of any incremental license fees that may be required in order add
Chiron as an authorized user.

          6.6 RECALLS AND VOLUNTARY WITHDRAWALS.

          (a) The Parties shall exchange their internal standard operating
procedures ("SOPS") as to product recalls and the treatment of product
complaints and inquiries as to safety, quality or efficacy reasonably in advance
of the date of Commercial Launch of any Licensed Product in the Territory. If
either Party becomes aware of information about any Licensed Product indicating
that it may not conform to the Specifications for Licensed Product then in
effect, or that there are potential adulteration, misbranding and/or other
issues regarding safety or effectiveness, it shall promptly so notify the other
Party. The JCT shall meet to discuss such circumstances and to consider
appropriate courses of action, which

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courses of action with respect to each recall shall be consistent with the
internal SOP of the Party having the right to control such recall pursuant to
this Section 6.6. Except to the extent otherwise provided in Section 6.6(b)
below, Chiron shall control, at its sole expense, all recalls of Licensed
Product within the Territory. Cubist shall control, at its sole expense, all
recalls of Licensed Product outside the Territory. Chiron shall maintain
complete and accurate records of any recall for such periods as may be required
by legal requirements, but in any event for no less than three (3) years.

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

     6.7. SAFETY AND WASTE-HANDLING PROCEDURES. Cubist shall, and shall direct
the Cubist Suppliers to (a) be responsible for (i) maintaining safety procedures
for the handling and manufacture of any and all API, Filled Products and raw
materials used in the manufacture thereof and (ii) the generation, treatment,
storage and disposal of wastes relating thereto, all of which shall comply with
all federal, state and local environmental and occupational safety and health
requirements, and (b) permit Chiron to audit and comment on such procedures.

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                                   ARTICLE 7.
                            COMPENSATION AND PAYMENT

     7.1. TRANSFER PRICING

          (a) TRANSFER PRICE. Subject to the conditions set forth below in this
Section 7.1, the transfer price for the Licensed Product sold to Chiron shall be
[*] (the "TRANSFER PRICE").

          (b) MANUFACTURING COST. For the purposes of this Supply Agreement,
"Manufacturing Cost" shall mean the actual cost of manufacturing Licensed
Product, consisting of (i) [*] and (ii) [*]; all such costs determined and
allocated in accordance with United States' generally accepted accounting
principles, and the determination of Manufacturing Cost shall at all times be
subject to audit pursuant to Section 11.1 of the License Agreement. None of the
Required Change Costs borne by the Parties pursuant to Section 3.2(c) shall be
included in Cubist's Manufacturing Cost for purposes of calculating the Transfer
Price.

     7.2. PARTIES' CHARGES FOR SERVICES. Any charges permitted to be made for a
Party's services hereunder, including any levied pursuant to Section 3.2(c),
shall be at a rate not to exceed the direct cost of the Party providing such
services, determined in accordance with United States' generally accepted
accounting principles, plus [*] of such costs.

     7.3. INVOICES. Cubist shall invoice Chiron at the time of delivery to the
Carrier of each shipment of Filled Products for (a) the applicable Transfer
Price multiplied by the number of vials of Filled Product delivered to Chiron in
such shipment in accordance with Section 5.2; and (b) any other amounts payable
by Chiron to Cubist under this Supply Agreement.

     7.4. PAYMENTS. All payments to be made by Chiron hereunder shall be made in
Dollars, by check made to the order of Cubist or wire transfer in immediately
available funds to such bank account in the United States as designated in
writing by Cubist from time to time. Payments made by Chiron hereunder shall be
due within [*] of the date of the relevant invoice. Any amounts not paid by
Chiron when due shall be subject to interest from and including the date payment
is due through and including the date that Cubist receives payment at an annual
rate equal to [*] quoted in the Money Rates section of the Wall Street Journal
(New York Edition), calculated daily on the basis of a 365-day year, or similar
reputable data source, or, if lower, the highest rate permitted under applicable
law.

     7.5. TAXES. Chiron shall pay all governmental charges, import and export
compliance fees, value added taxes, consumption taxes, customs, duties and other
taxes imposed by any governmental taxing authority in connection with the supply
by Cubist of Filled Products to Chiron hereunder.

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     7.6. NO REDUCTIONS OR OFFSETS. Except to the extent expressly provided in
this Supply Agreement, Chiron and its Affiliates shall make payment to Cubist of
all amounts that Chiron is required to pay to Cubist pursuant to this Article 7
without any reduction, offset or setoff. In addition, in the event that the
amount of royalties due from Chiron to Cubist pursuant to the License Agreement
is less than the aggregate Transfer Price previously paid to Cubist for such
units, then Chiron acknowledges and agrees that it shall not be entitled to any
refund or credit of such previously paid Transfer Price, and that Cubist shall
not be liable or responsible for, or owe Chiron any monies as a result of, such
deficiency.

                                   ARTICLE 8.
                         SHORTAGES AND FAILURE TO SUPPLY

     8.1. ALLOCATION IN THE EVENT OF SHORTAGES. Cubist shall promptly notify
Chiron if for any reason Cubist may not meet Chiron's forecasted requirements of
Filled Products, and promptly convene a meeting of the JCT to discuss the
shortage. In the event that Cubist's ability to supply Filled Products is
insufficient to fill Chiron's outstanding Purchase Orders (which Purchase Orders
are delivered by Chiron in accordance with all of the applicable provisions of
Article 4 hereof), then, during the Term and for so long as Cubist is unable to
supply a sufficient quantity of Filled Products to fill such outstanding
Purchase Orders of Chiron, Cubist shall allocate available supply of Filled
Products among all parties marketing the Licensed Products (including without
limitation, Cubist and its U.S. marketing partner, all Other Licensees and each
of their respective distributors and sublicensees, if any) on a PRO-RATA basis
based on the [*] immediately preceding the expected Delivery Date corresponding
to the applicable Purchase Order. For purposes of the preceding sentence, a
party's "pro-rata" share shall be based on, for each month during the [*]
period: (a) with respect to a [*] of the Licensed Product for such month, [*],
and (b) to the extent [*] for such month, [*]. Notwithstanding anything to the
contrary set forth in this Section 8.1, in no event shall Cubist be required to
supply Chiron with units of Filled Product for the [*] following Commercial
Launch of Licensed Product in the first country in the Territory in an amount
greater than [*] of the quantity of all units of such Filled Product available
to Cubist for allocation to all parties under this Section 8.1 at such time.

     8.2. PRODUCT SHORTAGE. A "PRODUCT SHORTAGE" shall occur if, at any time
during the Term, the quantities of Filled Product that are not Defective
Manufactured Product and that are supplied by Cubist to Chiron are less than (a)
[*] of Chiron's requirements over a period of [*] or (b) [*] of Chiron's
requirements over a period of [*], or (c) [*] of Chiron's requirements over a
period of [*], and in each case such requirements were properly forecasted and
ordered by Chiron pursuant to, and in accordance with, the provisions of Article
4 hereof. In the event of a Product Shortage, Chiron may terminate this Supply
Agreement in accordance with the provisions of Section 11.4.

                                   ARTICLE 9.
                         REPRESENTATIONS AND WARRANTIES

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     9.1. CUBIST'S PRODUCT WARRANTIES.

          (a) WARRANTY. Subject to the provisions set forth below in this
Section 9.1, Cubist warrants to Chiron that:

               (i)   all units of Filled Products supplied by Cubist to Chiron
pursuant to this Supply Agreement shall be Conforming Products at the time of
the delivery of such units of Filled Products by Cubist to the Carrier in
accordance with the provisions of Section 5.1 or Section 5.2 hereof;

               (ii)  all units of Filled Products supplied by Cubist to Chiron
pursuant to this Supply Agreement shall, at the time of delivery of such units
of Filled Products by Cubist to the Carrier in accordance with the provisions of
Section 5.1 or Section 5.2 hereof, have a remaining shelf-life that is not less
than the Remaining Shelf-Life, as evidenced by the date of manufacture of such
units of Filled Products specified on the applicable Lot Documentation Package
with respect to such units of Filled Products; and

               (iii) all units of Filled Products supplied by Cubist to Chiron
pursuant to this Supply Agreement shall continue to meet the Specifications
therefor during the Remaining Shelf-life thereof.

          (b) EXCEPTION. The warranties set forth in the foregoing Section
9.1(a) shall not apply to, and Cubist shall not be in breach of such warranties
with respect to, any units of Filled Product that have been altered,
adulterated, misused, mishandled or improperly stored, packaged or transported
in each case by a person other than Cubist, its Affiliates or the Cubist
Suppliers, or any of their respective employees or agents.

          (c) DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS
SECTION 9.1, CUBIST MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED OR STATUTORY,
WITH RESPECT TO FILLED PRODUCTS, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NOTHING IN THIS DISCLAIMER
IS INTENDED TO LIMIT THE REMEDIES THAT CHIRON MAY HAVE AGAINST CUBIST WITH
RESPECT TO THIRD PARTY PRODUCTS LIABILITY CLAIMS PURSUANT TO SECTION 10.3 OF THE
LICENSE AGREEMENT.

          (d) EXCLUSIVE REMEDY. In the event that it is established pursuant to
the provisions of Section 5.4 or Section 5.6 that Cubist is in breach of its
warranties set forth in the foregoing provisions of this Section 9.1 with
respect to any units of Filled Product supplied by Cubist to Chiron pursuant to
this Supply Agreement, Cubist's sole and exclusive liability, and Chiron's
exclusive remedy, shall be, at Cubist's election, (i) to replace such units of
Filled Product pursuant to, and in accordance with, the provisions of Section
5.5, or (ii) to credit or refund Chiron for the monies paid Chiron for such
units of Filled Product, PROVIDED that Chiron returns to Cubist such units of
Filled Product. For the avoidance of doubt, the limitation set forth in this
Section 9.1(d) shall not limit (i) Cubist's obligation to indemnify Chiron
pursuant to Sections 10.1 and 10.3 of the License Agreement (but such obligation
to indemnify shall be subject to the limitation of liability provisions of
Section 10.6 of the

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License Agreement), and (ii) Chiron's remedies under Sections 8.1 and 11.6 of
this Supply Agreement.

     9.2. CUBIST'S CONTRACT MANUFACTURING REPRESENTATIONS. Cubist represents and
warrants to Chiron that (a) pursuant to its Contract Manufacturing Agreement
with ACS Dobfar S.p.A., Cubist has the right to order and purchase [*] of [*]
over a [*] commencing in calendar year [*], and (b) pursuant to its Contract
Manufacturing Agreement with DSM Capua S.p.A., Cubist has the right to order and
purchase [*] of final purified [*] over a [*] beginning on the date of
commencement of commercial production of Daptomycin in the DSM facility and (c)
pursuant to its Contract Manufacturing Agreement with Abbott Laboratories,
Cubist has the right to order and purchase not less than [*] of [*] during the
[*] commencing upon the first commercial sale.

     9.3. MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants to the other as follows:

          (a) CORPORATE EXISTENCE AND POWER. It is a corporation duly organized,
validly existing and in good standing under the laws of the state in which it is
incorporated, and has full corporate power and authority and the legal right to
own and operate its property and assets and to carry on its business as it is
now being conducted and as contemplated in this Supply Agreement.

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

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

                                   ARTICLE 10.
             INDEMNIFICATION, INSURANCE AND LIMITATION OF LIABILITY

     10.1 INDEMNITY; LIMITATION OF LIABILITY. The Parties agree that the rights
and obligations of each on matters of indemnification, limitations of liability
and insurance under this Supply Agreement shall be as agreed upon and set forth
in Article 10 of the License Agreement and in any other section of the License
Agreement or this Supply Agreement that expressly sets forth provisions
concerning matters of indemnification, limitations of liability or insurance.

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                                   ARTICLE 11.
                              TERM AND TERMINATION

     11.1 TERM. The term of this Supply Agreement shall commence on the
Effective Date and shall, unless otherwise mutually agreed in writing by the
Parties, remain in effect until the earlier of (i) the effective date of the
termination of this Supply Agreement pursuant to Section 11.2, 11.3 or 11.4
below or (ii) the effective date of the termination of the License Agreement by
either Chiron or Cubist pursuant to, and in accordance with, the provisions of
Article 13 of the License Agreement at any time prior to the expiration of the
term of the License Agreement pursuant to clause (ii) of Section 13.1 of the
License Agreement.

     11.2 SPECIAL TERMINATION RIGHTS OF CUBIST.

          (a)  In the event that, at any time during the Term, the term of the
License Agreement expires pursuant to clause (ii) of Section 13.1 of the License
Agreement, then Cubist shall have the right to terminate this Supply Agreement
by giving written notice of termination to Chiron at least [*] prior to the
effective date of any termination pursuant to this Section 11.2(a).

          (b)  In the event that, at any time during the Term, the obligation of
Chiron to make payment of royalties to Cubist under Section 7.3 of the License
Agreement with respect to sales of a Licensed Product in any given country
within the Territory shall have ended by virtue of the application of the
provisions of Section 7.3(d)(i) or Section 7.3(d)(iii) of the License Agreement,
then Cubist shall have the right to terminate all of Cubist's obligations under
this Supply Agreement to manufacture and supply units of Filled Product to
Chiron for use in connection with labeling and packaging units of such Licensed
Product for sale by Chiron or its Affiliates or distributors in such country. In
the event that Cubist desires to exercise its termination rights under this
Section 11.2(b), Cubist shall exercise such termination rights by giving notice
of termination to Chiron at least thirty (30) days prior to the effective date
of any termination pursuant to this Section 11.2(b). From and after the
effective date of any such termination, Cubist shall have no further obligation
to supply to Chiron, and Chiron shall have no further obligation to source and
purchase from Cubist, units of Filled Product pursuant to this Supply Agreement
for use in connection with labeling and packaging units of such Licensed Product
for sale by Chiron or its Affiliates or distributors in such subject country;
PROVIDED, HOWEVER, that, notwithstanding the foregoing, Cubist and Chiron shall
continue to be bound by any binding forecasts that cover any of such units of
Filled Product to the extent that such binding forecasts were delivered by
Chiron in accordance with the provisions of Article 4 hereof prior to the
effective date of any such termination, in which case Cubist shall remain
obligated to supply to Chiron, and Chiron shall remain obligated to purchase and
source from Cubist, in accordance with the terms of this Supply Agreement all of
the units of Filled Product covered by such binding forecasts.

     11.3 SPECIAL TERMINATION RIGHTS OF CHIRON.

          (a)  In the event that, at any time during the Term, the term of the
License Agreement expires pursuant to clause (ii) of Section 13.1 of the License
Agreement, then

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Chiron shall have the right to terminate this Supply Agreement by giving written
notice of termination to Cubist at least [*] prior to the effective date of any
termination pursuant to this Section 11.3(a).

          (b)  In the event that, at any time during the Term, the obligation of
Chiron to make payment of royalties to Cubist under Section 7.3 of the License
Agreement with respect to sales of a Licensed Product in any given country
within the Territory shall have ended by virtue of the application of the
provisions of Section 7.3(d)(i) or Section 7.3(d)(iii) of the License Agreement,
then Chiron shall have the right to terminate all of Chiron's obligations under
this Supply Agreement to source and purchase units of Filled Product from Cubist
for use by Chiron in connection with labeling and packaging units of such
Licensed Product for sale by Chiron or its Affiliates or distributors in such
country. In the event that Chiron desires to exercise its termination rights
under this Section 11.3(b), Chiron shall exercise such termination rights by
giving written notice of termination to Cubist at least [*] prior to the
effective date of any termination pursuant to this Section 11.3(b). From and
after the effective date of any such termination, Cubist shall have no further
obligation to supply to Chiron, and Chiron shall have no further obligation to
source and purchase from Cubist, units of Filled Product pursuant to this Supply
Agreement for use in connection with labeling and packaging units of such
Finished Product for sale by Chiron or its Affiliates or distributors in such
subject country; PROVIDED, HOWEVER, that, notwithstanding the foregoing, Cubist
and Chiron shall continue to be bound by any binding forecasts that cover any of
such units of Filled Product to the extent that such binding forecasts were
delivered by Chiron in accordance with the provisions of Article 4 hereof prior
to the effective date of any such termination, in which case Cubist shall remain
obligated to supply to Chiron, and Chiron shall remain obligated to purchase and
source from Cubist, in accordance with the terms of this Supply Agreement all of
the units of Filled Product covered by such binding forecasts.

     11.4 TERMINATION FOR BREACH.

     (a)  NOTICE. If either Party believes that the other Party is in material
breach of this Supply Agreement, then the Party holding such belief (the
"NON-BREACHING PARTY") may deliver notice of such breach to the other Party (the
"NOTIFIED PARTY"). The Notified Party shall have ninety (90) days to cure such
breach, PROVIDED that, if cure cannot be reasonably effected within such ninety
(90) day period, the Notified Party may elect to deliver to the Non-breaching
Party within such ninety (90) day period a plan to cure such breach within a
timeframe that is reasonably prompt in light of the circumstances then
prevailing, and the Non-breaching Party shall have the right to approve or
reject in writing such proposed plan in its absolute discretion. If the
Non-breaching Party approves in writing such proposed plan, then the cure period
will be extended in accordance with the terms of such plan and the Notified
Party shall use Commercially Reasonable Efforts to carry out such plan and cure
the breach in accordance with the provisions of such plan. For purposes of
evaluating whether Cubist has successfully cured a material breach of this
Supply Agreement arising from a Product Shortage, quantities of Filled Product
supplied by Cubist during the applicable cure period set forth above in this
Section 11.4(a) shall first be allocated to the current orders during such cure
period and only after Cubist has satisfied one hundred percent (100%) of the

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current orders during such cure period shall any excess quantities be allocated
towards curing the Product Shortage.

          (b)  FAILURE TO CURE. If the Notified Party fails to cure such breach
as provided for in Section 11.4(a) above, the Non-breaching Party may terminate
this Supply Agreement either in its entirety or with respect to one or more
Filled Products upon written notice to the Notified Party, PROVIDED THAT, the
Non-breaching Party gives such written notice of termination within [*] after
the Notified Party has failed to cure such breach as provided for in Section
11.4(a).

          (c)  DISPUTES. If a Party gives notice of termination under this
Section 11.4 and the other Party disputes whether such termination is proper
under this Section 11.4, then the issue of whether this Supply Agreement may
properly be terminated upon expiration of the notice period (unless such breach
is cured as provided in Section 11.4(a) above) shall be resolved in accordance
with Article 14 of the License Agreement. Both Parties shall continue to perform
their obligations under the Supply Agreement and License Agreement that are not
the subject of dispute while the dispute is being resolved.

          (d)  TERMINATION AS TO CERTAIN FILLED PRODUCTS. Notwithstanding the
foregoing provisions of this Section 11.4, either Party may exercise its right
to terminate this Supply Agreement pursuant to this Section 11.4 with respect to
one or more particular Filled Products as to which the other Party has breached
its obligations under this Supply Agreement or as to which the other Party has
breached its obligations under the License Agreement with respect to any
Finished Products related to such Filled Products, rather than with respect to
the entire Agreement, in which case the notice provided by the Non-breaching
Party pursuant to Section 11.4(a) shall specify that this Supply Agreement is
being terminated pursuant to this Section 11.4 only with respect to certain
Filled Products listed in such notice. If the Non-breaching Party makes such an
election under this Section 11.4(d), then subsections (a) through (c) of this
Section 11.4 shall be deemed to refer to termination of this Supply Agreement
only with respect to those Filled Products set forth in the notice provided
pursuant to Section 11.4(a).

          (e)  TERMINATION AS TO CERTAIN COUNTRIES. Notwithstanding the
foregoing provisions of this Section 11.4, in the event that Cubist materially
breaches any of its obligations under this Supply Agreement and such material
breach is the effective cause for Chiron not being able to obtain or maintain
Regulatory Approval to sell a Finished Product in one or more countries in the
Territory, Chiron may exercise its right to terminate, pursuant to this Section
11.4, this Supply Agreement only with respect to such country or countries in
the Territory, rather than with respect to all countries in the Territory, in
which case the notice provided by Chiron pursuant to Section 11.4(a) shall
specify that this Supply Agreement is being terminated pursuant to this Section
11.4 only with respect to those of such countries that are listed in such notice
and with respect to such Finished Product. If Chiron makes such an election
under this Section 11.4(e), then subsections (a) through (d) of this Section
11.4 shall be deemed to refer to termination of this Supply Agreement only with
respect to those of such countries that are listed in the notice provided
pursuant to Section 11.4(a).

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     11.5. EFFECT OF TERMINATION; SURVIVAL. Upon expiration or termination of
this Supply Agreement for any reason, the rights and obligations of the Parties
under this Supply Agreement shall terminate and be of no further force or effect
whatsoever; PROVIDED, HOWEVER, that (A) the expiration or termination of this
Supply Agreement for any reason shall not release either Party from any
liability, obligation or agreement that already had accrued prior to the
effective date of expiration or termination, including (i) Cubist's obligation
to deliver in accordance with the provisions of Article 5 hereof any units of
Filled Product covered by any binding forecast delivered by Chiron in accordance
with the provisions of Article 4 hereof prior to the effective date of such
expiration or termination, or (ii) Chiron's obligation to accept in accordance
with the provisions of Article 5 hereof and, upon acceptance, to pay for any
such units of Filled Product, and (B) the expiration or termination of this
Supply Agreement for any reason shall not release either Party from any
liability, obligation or agreement that survives such expiration or termination
pursuant to the next sentence of this Section 11.5. Unless expressly provided to
the contrary, the provisions of Articles 1, 7, 10 and 12, Sections 6.6(b), 9.1,
9.2 and 11.6, and this Section 11.5 shall survive the expiration or termination
of this Supply Agreement. The provisions of Articles 5 and 8 and Section 3.4
shall survive the expiration or termination of this Supply Agreement to the
extent applicable to binding Purchase Orders that are outstanding at the time of
such expiration or termination.

     11.6 BACK-UP SUPPLY RIGHTS OF CHIRON.

          (a)  PRODUCT SHORTAGE. In the event that (i) Chiron terminates this
Supply Agreement in its entirety pursuant to Section 11.4 due to a material
breach by Cubist of its obligation to supply Filled Products to Chiron pursuant
to this Supply Agreement, (ii) such failure to supply meets the criteria of a
Product Shortage, (iii) such failure to supply by Cubist was or is not due to
the occurrence of a Force Majeure, and (iv) such material breach is not cured in
accordance with the provisions of Section 11.4(a) of this Supply Agreement
within the applicable cure period, then Chiron shall be entitled to exercise its
rights under this Section 11.6, PROVIDED that, prior to exercising such rights,
Chiron shall have given at least thirty (30) days prior written notice (the
"SECTION 11.6 NOTICE") to Cubist that Chiron intends to exercise its back-up
supply rights under this Section 11.6. Chiron shall have given the Section 11.6
Notice not later than [*] after the end of the cure period to remedy the Product
Shortage that gave rise to such material breach.

          (b)  INABILITY TO OBTAIN REGULATORY APPROVAL. In the event that (i)
Cubist materially breaches any of its obligations under this Supply Agreement,
(ii) such material breach is the effective cause for Chiron not being able to
obtain or maintain Regulatory Approval to sell Finished Products in one or more
countries in the Territory, and (iii) Chiron terminates this Supply Agreement
pursuant to Section 11.4(e) only with respect to such country or countries but
not all of the countries in the Territory, then Chiron shall be entitled to
exercise its rights under Section 11.6(c), PROVIDED that, prior to exercising
such rights, Chiron shall have given at least thirty (30) days prior written
notice to Cubist that Chiron intends to exercise its back-up supply rights under
Section 11.6(c) and identifies the country or countries within the Territory as
to which Chiron intents to exercise such back-up supply rights.

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          (c)  CUBIST SUPPLIERS. From and after the date upon which Chiron
exercises its back-up supply rights in accordance with the provisions of Section
11.6(a) or Section 11.6(b), as the case may be, Chiron shall be free to deal
directly with the Cubist Suppliers to obtain quantities of API and Filled
Product from the Cubist Suppliers that (x) in the case of the exercise of
back-up supply rights pursuant to Section 11.6(a), are sufficient to satisfy
Chiron's requirements of Finished Products for sale in the Territory, and (y) in
the case of the exercise of back-up supply rights pursuant to Section 11.6(b),
are sufficient to satisfy Chiron's requirement of Finished Products for sale in
the country or countries within the Territory as to which Chiron exercised such
back-up supply rights. At the request of Chiron, Cubist shall provide such
cooperation and assistance as Chiron shall reasonably request in connection with
the establishment by Chiron of a direct relationship with the Cubist Suppliers.
Cubist shall be responsible for all costs and expenses incurred by Cubist in
connection with the rendering of such cooperation and assistance. The foregoing
provisions of this Section 11.6(c) while authorizing both Chiron and Cubist
Suppliers to freely engage in negotiations for the supply of API and Filled
Product from a finite capacity of the Cubist Suppliers to manufacture and supply
same, shall not by itself be construed to authorize Chiron to interfere PER SE
with Cubist's existing contracts with its suppliers, it being understood and
acknowledged by Cubist that any given point in time there is a finite capacity
of the Cubist Suppliers to manufacture and supply API and Filled Product, and
Chiron, under the circumstances of negotiating with the Cubist Suppliers for
manufacture and supply of API and Filled Product for Chiron's requirements, may
compete with Cubist for the use of such finite capacity.

          (d)  ALTERNATE MANUFACTURING SOURCE. At any time from and after the
date upon which Chiron exercises its back-up supply rights in accordance with
the provisions of Section 11.6(a) (but not its back-up supply rights in
accordance with the provisions of Section 11.6(b)), Chiron shall be free to
establish a manufacturing source for API and/or Filled Product that is not a
Cubist Supplier. Subject to the conditions and limitations set forth below in
this Section 11.6(d), Section 11.6(e) and Section 11.6(f), at the request of
Chiron, Cubist shall provide such cooperation and assistance, and shall request
that the Cubist Suppliers provide such cooperation and assistance, to Chiron as
Chiron shall reasonably request in connection with the establishment by Chiron
of any such alternate manufacturing source. Subject to the conditions and
limitations set forth below in this Section 11.6(d), Section 11.6(e) and Section
11.6(f) below, such cooperation and assistance may include reasonable assistance
to enable or facilitate the preparation and maintenance by Chiron or its
alternate manufacturing source of licenses, registrations, permits,
qualifications and approvals from the relevant Regulatory Authorities so that
such alternate supplier shall have satisfied all legal and regulatory
requirements necessary to commence manufacture and supply of Filled Products to
Chiron for sale in the Territory. Cubist shall be responsible for all costs and
expenses incurred by Cubist and/or the Cubist Suppliers in connection with
rendering such cooperation and assistance. In no event shall Cubist be required
to do anything, or to cause, direct or request the Cubist Suppliers to do
anything, pursuant to this Section 11.6(d) that would disadvantage, diminish or
impair Cubist's ability to obtain or maintain continuous and uninterrupted
supply of Finished Product for sale by Cubist or its Affiliates, Other Licensees
or distributors outside the Territory.

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          (e)  TECHNOLOGY TRANSFER. Subject to the provisions of this Section
11.6(e), at the request of Chiron, Cubist shall transfer directly to the
alternate manufacturing source designated by Chiron any and all Cubist Know-How
or other Information with respect to the manufacture of Filled Products,
PROVIDED that such alternate manufacturing source shall have entered into a
nondisclosure agreement with Cubist in form and substance reasonably
satisfactory to Cubist for purposes of appropriately and reasonably protecting
the confidentiality and restricting the use of any such Cubist Know-How or other
Information to be transferred by Cubist.

          (f)  REGULATORY FILINGS. To the extent that Chiron or any alternate
manufacturing source designated by Chiron pursuant to Section 11.6(d) needs to
submit and make available to Regulatory Authorities in the Territory any Cubist
Know-How or other Information concerning the manufacturing of API, Filled
Products and/or Finished Products by any such alternate manufacturing source,
the Parties agree that, to the fullest extent possible, such Cubist Know-How or
other Information shall be made available to the applicable Regulatory
Authorities in the Territory via a Drug Master File to be established by Cubist
or any such alternate manufacturing source and that Chiron shall not have access
to the Information in such Drug Master File. The applicable Regulatory
Authorities in the Territory shall have full access to all of the Information in
such Drug Master File to the extent necessary for such applicable Regulatory
Authorities to consider and act upon the qualification of any such alternate
manufacturing source or to consider and act upon any filings for Regulatory
Approvals in the Territory that are submitted by Chiron, and Chiron shall have
the right to reference all of the Cubist Know-How and Information in such Drug
Master File to the extent necessary to file applications for Regulatory
Approvals of Finished Products in the Territory and to obtain such Regulatory
Approvals. If and to the extent that Chiron needs to submit and make available
any Cubist Know-How or other Information concerning the manufacturing of API,
Filled Products and/or Finished Products in connection with any submission by
Chiron of any application for Regulatory Approvals of Finished Products within
the Territory and the applicable regulatory requirements shall not permit the
submission of such Cubist Know-How or other Information via a Drug Master File,
then the Parties agree that such Cubist Know-How and other Information shall be
made available to Chiron for the sole purpose of filing applications for
Regulatory Approvals of Finished Products in the Territory and obtaining such
Regulatory Approvals, and that Chiron shall not be entitled to use such Cubist
Know-How or other Information for any other purpose whatsoever other than to
manufacture or have manufactured API, Filled Products and/or Finished Products.
Any Cubist Know-How or other Information pertaining to the manufacturing of API,
Filled Products and/or Finished Products, as the case may be, that is made
available to Chiron pursuant to this Section 11.6(f) shall be treated for all
purposes of this Supply Agreement as Confidential Information of Cubist and
shall be subject to the confidentiality obligations under Section 12.1 hereof
(which Section incorporates by reference the confidentiality obligations of
Article 13 of the License Agreement and makes them applicable to this Supply
Agreement).

          (g)  MANUFACTURING COSTS. Notwithstanding any provisions in this
Supply Agreement or the License Agreement to the contrary, from and after the
time that Chiron exercises its back-up supply rights in accordance with the
provisions of this Section 11.6,

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Chiron shall be entitled, subject to the provisions set forth below in this
Section 11.6(g) and Section 11.6(h), to offset Chiron's Manufacturing Cost for
units of Filled Product against any royalties payable by Chiron to Cubist under
the License Agreement from sales in the Territory of Licensed Product consisting
of such units of such Filled Product. Chiron's Manufacturing Costs shall be
determined in accordance with the following subparagraphs (i), (ii) and (iii) of
this Section 11.6(g):

               (i)   BACK-UP SUPPLY FOR FILLING AND FINISHING ONLY. If Chiron
               exercises its back-up supply rights under this Section 11.6 with
               respect to Filled Product but not API and in the event that
               Cubist continues to supply API to Chiron pursuant to this Supply
               Agreement at Cubist's Manufacturing Cost for such API, then, for
               purposes of this Section 11.6(g) and notwithstanding anything in
               Section 7.1(b) to the contrary, Chiron's Manufacturing Cost for
               Filled Product shall consist of (i) the transfer price payable by
               Chiron to Cubist in connection with supply of API and (ii)
               Chiron's Manufacturing Cost attributable only to filling and
               finishing units of Filled Product up to an amount equal to [*] of
               the portion of Cubist's Manufacturing Cost immediately prior to
               the exercise by Chiron of its back-up supply rights pursuant to
               this Section 11.6 that is attributable to filling and finishing
               units of Filled Product.

               (ii)  BACK-UP SUPPLY FOR BOTH API AND FILLED PRODUCT. If Chiron
               exercises its back-up supply rights under this Section 11.6 with
               respect to both API and Filled Product, then, for purposes of
               this Section 11.6(g) and notwithstanding anything in Section
               7.1(b) to the contrary, Chiron's Manufacturing Cost for Filled
               Product shall be no greater than an amount equal to [*] of the
               Transfer Price in effect immediately prior to the exercise by
               Chiron of its back-up supply rights pursuant to this Section
               11.6.

               (iii) CUBIST ABLE TO SUPPLY. In the event that, at any time and
               from time to time after Chiron exercises its back-up supply
               rights pursuant to this Section 11.6, Cubist is ready, willing
               and able to supply Filled Products to Chiron and Chiron is, in
               accordance with the provisions of Section 11.6(h) below, able to
               consider re-establishing a supply relationship with Cubist, then,
               for purposes of this Section 11.6(g) and notwithstanding anything
               in Section 7.1(b) or in the foregoing provisions of this Section
               11.6(g) to the contrary, Chiron's Manufacturing Cost for Filled
               Product shall be an amount per unit of Filled Product no greater
               [*] at which Cubist would be prepared at the time of such quote
               to supply units of Filled Product to Chiron.

Subject to Section 11.6(h), any offset pursuant to this Section 11.6(g) of
Chiron's Manufacturing Cost for units of Filled Product against any royalties
payable by Chiron to

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Cubist under the License Agreement for sales in the Territory of Licensed
Product consisting of such units of such Filled Product shall be in lieu of
offsetting against such royalties, as contemplated under the License Agreement,
the Transfer Price that Chiron would have paid to Cubist if Cubist had supplied
such units of Filled Product pursuant to this Supply Agreement. In the event
that the amount of royalties due from Chiron to Cubist pursuant to the License
Agreement for sales in the Territory of units of Licensed Product is less than
the aggregate Chiron Manufacturing Cost incurred by Chiron with respect to such
units, Cubist shall not be liable or responsible for, or owe Chiron any monies
as a result of, such deficiency.

          (h)  RE-SUPPLY BY CUBIST. In the event that Chiron exercises its
back-up supply rights in accordance with the provisions of this Section 11.6,
Chiron shall use Commercially Reasonable Efforts to minimize the length of time
that it is contractually obligated to source API and/or Filled Product from a
supplier other than Cubist and to minimize the applicable transfer price that
Chiron agrees to pay to such supplier other than Cubist in connection with API
and/or units of Filled Product supplied by such supplier. In the event that
Chiron is at or near the end of the terms of the contracts for supply of
Licensed Product with Third Parties (subsequent to having exercised its back-up
supply rights herein) or in the event that, prior to the end of the term of any
such contracts, Chiron is no longer contractually obligated to source all or any
portion of Chiron's requirements for API and/or any Filled Product under any
such contracts, then Chiron will notify Cubist thereof and thereafter, Cubist,
to the extent that it remains so interested, shall be included among the
interested contract manufacturers and suppliers with whom Chiron holds
discussions for the supply of all or any portion of Chiron's requirements for
API and/or such Filled Product. Cubist acknowledges that, subject to the
provisions of Section 11.6(g) above, beyond inclusion and participation in the
discussions for such rights, Cubist has no additional right or expectation
whatsoever, and Chiron has no additional obligation to Cubist in respect of such
co-negotiation rights. Without limiting the generality of the foregoing, Cubist
acknowledges that Chiron shall have complete liberty to select its manufacturer
and supplier for API and/or Filled Product as Chiron sees fit.

                                   ARTICLE 12.
                                  MISCELLANEOUS

     12.1. APPLICABLE LICENSE AGREEMENT PROVISIONS. The following provisions of
the License Agreement are incorporated herein by reference and shall apply to
this Supply Agreement in the same manner as which they apply to the License
Agreement: Articles 12 (Confidentiality) and 14 (Dispute Resolution), except as
otherwise provided in Section 5.3(d), and Sections 15.2 (Force Majeure), 15.5
(No Strict Construction), 15.7 (Performance by Affiliates), 15.8 (Counterparts),
15.9 (Further Actions), 15.10 (Severability), 15.11 (Headings) and 15.12 (No
Waiver).

     12.2. ENTIRE AGREEMENT; AMENDMENT. This Supply Agreement, the License
Agreement, the Stock Purchase Agreement and the Confidentiality Agreement set
forth the complete, final and exclusive agreement, and the covenants, promises,
agreements, warranties, representations, conditions and understandings, between
the Parties with respect to

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the subject matter hereof and supersedes and terminates all prior agreements and
understandings between the Parties. In the event of any conflict between the
terms of this Supply Agreement and the terms of the License Agreement, the terms
of this Supply Agreement shall control, except in instances where this Supply
Agreement explicitly references a specific provision of the License Agreement,
in which instances the License Agreement shall control. There are no covenants,
promises, agreements, warranties, representations, conditions or understandings,
either oral or written, between the Parties other than as are set forth herein
and in the other three referenced agreements between the Parties. No subsequent
alteration, amendment, change or addition to this Supply Agreement shall be
binding upon the Parties unless reduced to writing and signed by an authorized
officer of each Party.

     12.3. ASSIGNMENT. Neither party may sell, assign, sublicense or otherwise
transfer this Supply Agreement except in accordance with the provisions of
Section 15.6 of the License Agreement.

     12.4. NOTICES. Any legal notice required or permitted to be given under
this Supply Agreement shall be in writing, shall specifically refer to this
Supply Agreement and shall be mailed by first class certified or registered
mail, postage prepaid, express delivery service or personally delivered, or sent
by facsimile, electronic transmission confirmed, to the addresses or facsimile
numbers of the Parties shall be as described below, unless changed by a notice
so given hereunder. Notice shall be deemed given on the date of receipt.

     For Chiron:

           To:                               With a Copy to:
           --                                --------------

           Chiron Healthcare Ireland Ltd.    Chiron Corporation
           United Drug House                 4560 Horton Street
           Belgard Road,                     Emeryville, CA  94608
           Tallaght, Dublin, Ireland         Attn: General Counsel
           Fax:  +353 (1) 458-5583           Fax: (510) 923-5360

     For Cubist:

           To:                               With a Copy to:
           --                                --------------

           Cubist Pharmaceuticals, Inc.      Bingham McCutchen LLP
           65 Hayden Avenue                  150 Federal Street
           Lexington, MA  02421              Boston, MA  02110
           Attn: General Counsel             Attn: Julio E. Vega, Esq.
           Fax: (781) 860-1407               Fax: (617) 951-8736

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     12.5. COMPLIANCE WITH LAW. In performing their obligations hereunder, both
Parties shall comply with all Applicable Laws and shall obtain and maintain all
approvals, licenses and permits required thereby.

     12.6. GUARANTY. Chiron Parent Company hereby unconditionally and
irrevocably guarantees, as primary obligor, to Cubist, the due and punctual
payment and performance as and when due of the obligations, responsibilities,
undertakings, representations, warranties, payment covenants, obligations and
agreements of Chiron and its Affiliates under this Supply Agreement.

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IN WITNESS WHEREOF, the Parties hereto have executed this Supply Agreement to be
effective as of the Effective Date.

CHIRON HEALTHCARE                         CUBIST PHARMACEUTICALS, INC.
   IRELAND LTD.

By: /s/ Craig A. Wheeler                 By: /s/ Oliver S. Fetzer
   -----------------------------------       -----------------------------------

Name: Craig A. Wheeler                   Name: Oliver S. Fetzer
     ---------------------------------         ---------------------------------

Title: President,                        Title: Senior Vice President and
       Chiron Biopharmaceuticals                Chief Business Officer
      --------------------------------          --------------------------------

Date:  October 2, 2003                   Date:  October 2, 2003
      --------------------------------          --------------------------------

Agreed only as to Section 12.6 by:

CHIRON CORPORATION

By: /s/ Craig A. Wheeler
   -----------------------------------

Title: President,
       Chiron Biopharmaceuticals
      --------------------------------

Date: October 2, 2003
      --------------------------------

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Exhibit 10.70  

 
 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
  (Ed H. Bowman, Jr.)    
    

        This Employment Agreement (the "Agreement") by and between SOURCECORP, Incorporated, a Delaware corporation, and  SOURCECORP Management, L.P., a Texas limited partnership and indirect wholly owned subsidiary of  SOURCECORP, Incorporated (collectively, the "Company"), and Ed H.
Bowman, Jr. ("Employee") is hereby entered into December 19, 2003 and effective
as of January 1, 2004. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. 

R
E C I T A L S 

        The
following statements are true and correct: 

        As
of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions. 

        Employee
is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar
with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company.
In consideration for Employee's promises herein, the Company agrees to provide Employee with such confidential information; in return, Employee recognizes and acknowledges that such information must
be maintained in confidence, and to further such protection agrees to the provisions of Section 3 of this Agreement. 

        Therefore,
in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: 

A
G R E E M E N T S 

        1.     Employment and Duties. 

        (a)   The
Company hereby employs Employee as President and Chief Executive Officer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to
and expected of a President and Chief Executive Officer and will report directly to the Board of Directors of the Company (the "Board"). Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to Section 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company. 

        (b)   Employee
shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except
to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate Section 3 hereof. The foregoing limitations
shall not be construed as prohibiting Employee from (A) serving on the boards of directors of other companies or (B) making personal investments in such form or manner as will neither
require his services, other than to a minimal extent, in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of Section 3 hereof. 

        2.     Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows: 

        (a)   Base Salary. The base salary payable to Employee shall be $635,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than bi-weekly. On at least an annual basis, the Board will review Employee's performance and may make increases to 

 

such
base salary if, in its discretion, any such increase is warranted. Such recommended increase would, in all likelihood, require approval by the Board or a duly constituted committee thereof. 

        (b)   Incentive Bonus Plan. Employee shall be eligible for a bonus opportunity of up to 100% of his annual base salary in
accordance with the Company's Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company's discretion). The bonus payment and the Company's
targeted performance shall be determined and approved by the Board or the compensation committee thereof. 

        (c)   Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and
compensation from the Company in such form and to such extent as specified below: 

        (i)    Payment
of all premiums for coverage for Employee and his dependent family members under health, hospitalization, disability, dental, life and other insurance plans that
the Company may have in effect from time to time, and not less favorable than the benefits provided to other Company executives. 

        (ii)   Reimbursement
for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services
pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy. 

        (iii)  Four
(4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under
the Company's policies in effect from time to time (prorated for any year in which Employee is employed for less than the full year). 

        (iv)  An
automobile allowance in the amount of $1,000 per month. 

        (v)   The
Company shall reimburse Employee up to $300 per month for club dues actually incurred by Employee, provided that such
club is used at least 50% of the time for business purposes. 

        (vi)  The
Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all
other
Company-wide employee benefits as available from time to time, which will include participation in the Company's Incentive Compensation Plan. 

        (vii) The
Company shall provide Employee with reasonable assistance in personal tax planning from the Company's auditors. 

        (viii) Participation
in the Company's 401(k) Plan and Non-Qualified Plan. 

        (ix)  The
Company shall, under Employee's direction, establish a Supplemental Retirement Plan/Survivor Protection Plan to be placed inside the Company's
Non-Qualified Plan and provide Employee with such benefit. 

        (x)   The
Company shall reimburse Employee up to $17,000 per year for expenditures on health costs, insurance, financial planning or tax planning benefits (or similar
benefits, or such other benefits at the discretion of the Company) or club dues, all as selected by Employee. 

        3.     Non-Competition Agreement. 

        (a)   Subject
to Sections 5(d) and (f) and Section 12, Employee will not, during the period of his employment by or with the Company, and for a period of two
(2) years immediately following the termination of his employment with the Company, for any reason whatsoever, directly or indirectly, for 

2

 

himself
or on behalf of or in conjunction with any other person, company, partnership, corporation, business or entity of whatever nature: 

        (i)    engage,
as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, in any business selling any products or services in direct competition with the Company, within 100 miles of (i) the principal executive offices of the
Company or (ii) any place to which the Company provides products or services or in which the Company (including the subsidiaries thereof) is in the process of initiating business operations
during the term of this covenant (the "Territory"); 

        (ii)   call
upon any person who is, at that time, within the Territory, an employee of the Company (including the subsidiaries thereof) in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of the employ of the Company (including the subsidiaries thereof), provided that Employee shall be permitted to call upon and hire
any member of his immediate family; 

        (iii)  call
upon any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a customer of the Company (including the
subsidiaries thereof) within the Territory for the purpose of soliciting or selling products or services in direct competition with the Company within the Territory; 

        (iv)  call
upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, which candidate was either called upon by the Company
(including the subsidiaries thereof) or for which the Company made an acquisition analysis, for the purpose of acquiring such entity; or 

        (v)   disclose
customers, whether in existence or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever. 

        As
used in Section 3(a), references to the business, customers, Territory, etc. of the Company refer to the status of the Company prior to any Change in Control
(i.e., such breadth of business, customers, Territory, etc. shall not automatically be expanded to include those of a successor to the Company resulting
from a Change in Control). Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than three percent (3%) of the capital
stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter. 

        (b)   Because
of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenant, and because of the immediate and irreparable
damage that could be caused to the Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by the Company in the event of breach by him by
injunctions and restraining orders without the necessity of posting any bond therefor. 

        (c)   In
the course of Employee's employment with the Company, Employee will become exposed to certain of the Company's confidential information and business relationships,
which the above covenants are designed to protect and Employee agrees to keep such confidential information in the strictest confidence. It is agreed by the parties that the foregoing covenants in
this Section 3 impose a reasonable restraint on Employee in light of the activities and business of the Company (including the Company's subsidiaries) on the date of the execution of this
Agreement and the current plans of the Company (including the Company's subsidiaries); but it is also the intent of the Company and Employee that such covenants be construed and enforced in accordance
with the changing activities, business and locations of the Company (including the Company's subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the
employment of Employee, subject 

3

 

to
the following paragraph. For example, if, during the Term of this Agreement, the Company (including the Company's subsidiaries) engages in new and different activities, enters a new business or
established new locations for its current activities or business in addition to or other than the activities or business enumerated under the Recitals above or the locations currently established
therefor, then Employee will be precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business
within 100 miles of its then-established operating location(s) through the term of this covenant. 

        It
is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in
competition with the Company (including the Company's subsidiaries), or similar activities or business in locations the operation of which, under such circumstances, does not violate clause (i)
of this Section 3, and in any event such new business, activities or location are not in violation of this Section 3 or of Employee's obligations under this Section 3, if any,
Employee shall not be chargeable with a violation of this Section 3 if the Company (including the Company's subsidiaries) shall thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii) location, as applicable. 

        (d)   The
covenants in this Section 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other
covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the
parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed to such extent. 

        (e)   All
of the covenants in this Section 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or
cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. It is
specifically agreed that the period of two (2) years following Employee's employment set forth at the beginning of this Section 3, during which the agreements and covenants of Employee
made in this Section 3 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this Section 3. 

        4.     Place of Performance. 

        (a)   Employee's
place of employment is the Company's headquarters in Dallas, Texas. Employee understands that he may be requested by the Board to relocate from his present
residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and
responsibilities. In the event that Employee is requested to relocate and agrees to do so, the Company will pay all relocation costs to move Employee, his immediate family and their personal property
and effects. Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging
and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes. The general
intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the
personal life of Employee and his family. 

        (b)   Notwithstanding
the above, if Employee is requested by the Board to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this
Agreement under the terms of Section 5(c). 

4

 

        5.     Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue through
December 31, 2008; however, on each December 31, the term of this Agreement shall automatically renew for a five-year period (such that upon such renewal, the new remaining
term shall be five years), unless written notice is given on or prior to the December 31st of any year during the term (including any renewal thereof) that it will not be renewed,
and upon such notice, the balance of the term shall be five (5) years from the January 1st following such notice (the "Term"). This Agreement and Employee's employment may
be terminated in any one of the following ways: 

        (a)   Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's
estate. 

        (b)   Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent
from his full-time duties hereunder for four (4) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of
such four (4) month period, but which shall not be effective earlier than the last day of such four (4) month
period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume his full-time duties at the conclusion of such notice period. Also, Employee may
terminate his employment hereunder if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his
life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and
such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall receive from the Company, in a
lump-sum payment due within ten (10) days of the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of
this Agreement or for one (1) year, whichever amount is greater. 

        (c)   Good Cause. The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause,
which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of the written notice of same) of any of Employee's material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud or misconduct with respect to
the business or affairs of the Company which materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. 

        (d)   Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement
and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. At the Company's election, Employee may be required to serve all or part of such thirty
days in an inactive or reduced capacity. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment ("Severance Pay") due on
the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for two (2) years, whichever amount is
greater. Further, any termination without cause by the Company shall operate to shorten the period set forth in Section 3(a) and during which the terms of Section 3 apply to one
(1) year from the date of termination of employment. 

        (e)   Change in Control. Refer to Section 12 below. 

5

 

        (f)    Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used
herein, "Good Reason" shall mean the continuance of any of the following
after ten (10) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement: 

        (i)    the
assignment to Employee of any duties materially and adversely inconsistent with Employee's position as specified in Section 1 hereof (or such other position
to which he may be promoted), including status, offices, responsibilities or persons to whom Employee reports as contemplated under Section 1 of this Agreement, or any other action by the
Company which results in a material and adverse change in such position, status, offices, titles or responsibilities; 

        (ii)   Employee's
removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by Sections 5(a), (b),
(c) and (e); or 

        (iii)  any
other material breach of this Agreement by the Company that is not cured within the ten (10) day time period set forth in Section 5(f) above,
including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement. 

In
the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of Section 16 below, the Company shall pay all
amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce
his rights hereunder. In addition, Employee shall be entitled to receive Severance Pay equivalent to the base salary at the rate then in effect for whatever time period is remaining under the Term of
this Agreement or for two (2) years, whichever amount is greater. Further, none of the provisions of Section 3 shall apply in the event this Agreement is terminated by Employee for Good
Reason. 

        (g)   Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason
pursuant to Section 5(f), Employee shall receive no severance compensation. 

Upon
termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and
reimbursements due through the effective date of termination. Additional compensation subsequent to such a termination of this Agreement, if any, will be due and payable to Employee only to the extent
and in the manner expressly provided above or in Section 16. Except as otherwise provided in this Section 5, all other rights and obligations of the Company and Employee under this
Agreement shall cease as of the effective date of termination of this Agreement; however, the Company's obligations under Section 9 herein and Employee's obligations under Sections 3, 6, 7, 8
and 10 herein shall survive such termination in accordance with their terms. 

        6.     Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists
and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company's subsidiaries) or its representatives, vendors or customers which pertain to the business
of the Company (including the Company's subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company's subsidiaries) which is collected by
Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 

        7.     Inventions. Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year
thereafter, and which are directly related to the business or 

6

 

activities
of the Company (including the Company's subsidiaries) and which Employee conceives as a result of his employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall
deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 

        8.     Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the
specific terms of the Company's (including the Company's subsidiaries) relationships or agreements with its significant vendors or customers or any other significant and material trade secret of the
Company (including the Company's subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever, except as is disclosed
in the ordinary course of business. 

        9.     Indemnification. In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then
the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation,
and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee
may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel. Further, while Employee is expected at all times to use his best efforts to faithfully discharge his
duties under this Agreement, Employee cannot be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited gross, willful and wanton negligence and
misconduct or performed criminal and fraudulent acts which materially damage the business of the Company. 

        10.   No Prior Agreements. Employee hereby represents and warrants to the Company that the execution of this Agreement by
Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now
have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement. 

        11.   Assignment; Binding Effect. Employee understands that he has been selected for employment by the Company on the basis of
his personal qualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement and the Company agrees not to assign all or
any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control). Subject to the preceding two (2) sentences and the express provisions of
Section 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and
assigns. 

        12.   Change in Control. 

        (a)   Unless
he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company may be merged or consolidated with or
into another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder. 

7

 

        (b)   In
the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated
closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the
closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control
shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be five (5) times the sum of Employee's
annual salary plus maximum bonus opportunity in effect immediately prior to the Change in Control and the non-competition provisions of Section 3 shall not apply whatsoever. Payment
shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee's written notice. 

        (c)   In
any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the
Company's obligations hereunder or Employee receives notice after (or within 15 business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole
discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the
transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be five times the sum of Employee's annual salary plus
maximum bonus opportunity in effect immediately prior to the Change in Control and the non-competition provisions of Section 3 shall all apply. Payment shall be made either at
closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee. 

        (d)   For
purposes of applying Section 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of
the closing date of the transaction giving rise to the Change in Control or Employee's notice as described above, and all compensation, reimbursements and lump-sum payments due Employee
must be paid in full by the Company at such time. Further, Employee will be given sufficient time in order to comply with the Securities and Exchange Commission's regulations to elect whether to
exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's stock option or similar
plan, as amended or any warrants, such that he may convert the options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires. 

        (e)   A
"Change in Control" shall be deemed to have occurred if: 

        (i)    any
person, other than the Company or an employee benefit plan of the Company, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company and immediately after such acquisition such person is, directly or indirectly, the
Beneficial Owner of voting securities representing 30% or more of the total voting power of all of the then-outstanding voting securities of the Company; 

        (ii)   the
individuals (A) who, as of the closing date of the Company's initial public offering, constitute the Board of Directors of the Company (the "Original
Directors") or (B) who thereafter are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their
election) or (C) who are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at
least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original 

8

 

Directors"
immediately following their election), cease for any reason to constitute a majority of the members of the Board of Directors of the Company; 

        (iii)  the
consummation of a merger, consolidation, recapitalization or reorganization of the Company, a reverse stock split of outstanding voting securities of the Company,
or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by
the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by holders of at least 75% of the outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or 

        (iv)  the
consummation of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company's
assets (i.e., 50% or more of the total assets of the Company (including the Company's subsidiaries)). 

        (f)    Continuation of Benefits. (i) Following the termination of the Executive's employment in connection with a Change
in Control (as contemplated by Section 12(b) or 12(c) of this Agreement) (a "Change in Control Termination") and until the earlier of (A) three (3) years following such Change in
Control Termination or (B) the date on which the Executive becomes employed by a new employer (other than to the successor to the Company following such Change in Control), the Company shall,
at its expense, provide the Executive with medical, dental, life insurance, disability and accidental death and dismemberment benefits ("Insurance Benefits") at the highest level provided to the
Executive immediately prior to the Change in Control; provided, however, if the Executive becomes employed by a new employer that maintains Insurance Benefits that either (x) do not cover the
Executive with respect to a pre-existing condition that was covered under the Company's Insurance Benefits, or (y) do not cover the Executive for a designated waiting period, or
(z) do not provide for a certain benefit, the Executive's coverage under the Company's Insurance Benefits shall continue (with respect to such area of non-coverage described in (x),
(y) or (z), as applicable), without limitation, until the earlier of the end of the applicable period of non-coverage under the new employer's Insurance Benefits or the third
anniversary of the Change in Control. 

        (ii)   Following
a Change in Control Termination the special benefit allowance of $15,000 contemplated by Section 2(c)(x) of this Agreement will continue for
3 years thereafter. 

        (iii)  Following
a Change in Control Termination and until the earlier of (A) three (3) years following such Change in Control Termination or (B) the
date on which the Executive becomes employed by a new employer (other than to the successor to the Company following such Change in Control), the Company shall reimburse all reasonable expenses
incurred by the Executive for reasonable office and secretarial expenses and for reasonable professional outplacement services by qualified consultants selected by the Executive. 

        (iv)  The
Executive shall not be required to seek other employment following a Change in Control Termination and any compensation earned from other employment shall not
reduce the amounts otherwise payable under this Agreement. 

        (g)   If
any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the
Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate "Total Payments") would be subject to the excise tax imposed by
Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Employee shall be entitled to receive from the Company an additional payment (the "Gross-up
Payment") (i.e., in addition to such other severance benefits, Change in Control benefits or 

9

 

any
other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all
Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. 

        For
purposes of this Section Employee's applicable Federal, state and local taxes shall be computed at the maximum marginal rates, taking into account the effect of any loss of personal
exemptions resulting from receipt of the Gross-Up Payment. 

        All
determinations required to be made under this Section 12, including whether a Gross-Up Payment is required under this Section, and the assumptions to be used in
determining the Gross-Up Payment, shall be made by the Company's current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in
Control (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there
will likely be a Change in Control, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in Control or is otherwise unavailable, Employee (together with all other employees with
comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm with
respect to such determinations described above shall be borne solely by the Company. 

        Employee
agrees (unless requested otherwise by the Company) to use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Employee
owes an amount of Excise Tax greater than the amount determined pursuant to this Section; provided, that Employee shall be entitled to reimbursement by
the Company (on an after tax basis) of all fees and expenses reasonably incurred by Employee in contesting such determination. In the event the Internal Revenue Service or any court of competent
jurisdiction determines that Employee owes an amount of Excise Tax that is greater than the amount previously taken into account and paid under this Agreement (such additional Excise Tax being the
"Additional Excise Tax"), the Company shall promptly pay to Employee the amount of such shortfall. In the case of any payment that the Company is required to make to Employee pursuant to the preceding
sentence (a "Later Payment"), the Company shall also pay to Employee an additional amount such that after payment by Employee of all of Employee's applicable Federal, state and local taxes, including
any interest and penalties assessed by any taxing authority, on the Later Payment, Employee will retain from the Later Payment an amount equal to the Additional Excise Tax, which Employee shall use to
pay the Additional Excise Tax. 

        (h)   In
the event of a Change in Control, the Company shall require that the ultimate parent entity (or if no parent entity, the acquiring entity itself) of any entity that
acquires control (through ownership of securities or assets, consistent with the definitional triggers of a Change in Control set forth above) of the Company in connection with such Change in Control
assume or guaranty the Company's obligations under Sections 12(f) and 12(g) of this Agreement. 

        13.   Complete Agreement. This Agreement is not a promise of future employment. Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any
prior or contemporaneous oral or written agreements. Notwithstanding the foregoing, Employee acknowledges the existence of the Company's employee handbook and related acknowledgement and understands
that to the extent there is a direct conflict 

10

 

between
those and this Agreement, the provisions of this Agreement shall govern with respect to any such conflicting provisions. This written Agreement may not be later modified except by a further
writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 

        14.   Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: 

	To the Company:	 	SOURCECORP, Incorporated

3232 McKinney Avenue

Suite 1000

Dallas, Texas 75204

Attn: Chairman
	

with a copy to:	
 	
SOURCECORP, Incorporated

3232 McKinney Avenue

Suite 1000

Dallas, Texas 75204

Attn: General Counsel
	

with a copy to:	
 	

Charles C. Reeder, Esq.

Locke Liddell & Sapp LLP

2200 Ross Avenue

Suite 2200

Dallas, Texas 75201
	

To Employee:	
 	

Ed H. Bowman, Jr.

3102 Drexel Drive

Dallas, Texas 75205

Notice
shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or
when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this Section 14. 

        15.   Severability; Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this
Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings
herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 

        16.   Arbitration. Any unresolved dispute or controversy arising under or in connection with this Agreement or Employee's
employment shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce
this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in Sections 5(b) and 5(c), respectively, or that
the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The costs of any arbitration proceeding shall be borne by the party or parties not prevailing in such proceeding as determined by the arbitrators. This Section shall survive
any termination of this Agreement. 

[Balance of page intentionally left blank]

11

 

        17.   Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware. 

	 	 	EMPLOYEE:
	

 	
 	

/s/Ed H. Bowman, Jr.
 Ed H. Bowman, Jr.
	

 	
 	
SOURCECORP, INCORPORATED
	

 	
 	

By:	
 	

/s/Thomas C. Walker

	 	 	Title:	 	Chairman and Chief Development Officer
	

 	
 	
SOURCECORP Management, L.P.
	

 	
 	

By:	
 	

SRCP Management, Inc.,

General Partner
	

 	
 	

 	
 	

By:	
 	

/s/ Thomas C. Walker

	 	 	 	 	Title:	 	Vice President

12

QuickLinks

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (Ed H. Bowman, Jr.)

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