Document:

Exhibit
10.4

 

CONFIDENTIAL
TREATMENT

 

MANUFACTURING
AND SUPPLY AGREEMENT

 

This Manufacturing and Supply Agreement (Agreement)
is entered into as of September 30, 2001 (Effective Date)
by and between ACS Dobfar, SpA, an Italian corporation (ACSD) and Cubist
Pharmaceuticals, Inc., a Delaware corporation (Cubist).

 

BACKGROUND

 

Cubist is a drug company focused on the development
and commercialization of daptomycin antibiotic drug. Cubist has commenced Phase
III clinical trials of daptomycin and intends to obtain approval to market and
sell the drug for the treatment of serious and life threatening infections in
humans.

 

ACSD has expertise in the manufacture of drugs on a
contract basis. ACSD wishes to provide scale-up services and to construct a
production facility dedicated to the manufacturing of daptomycin for Cubist,
and to sell bulk daptomycin exclusively to Cubist. Cubist desires to have ACSD
construct a production facility, and manufacture and supply Cubist with
daptomycin for marketing and sale in all jurisdictions. This Agreement sets
forth the terms under which ACSD will construct a dedicated production facility
and manufacture and supply daptomycin to Cubist.

 

NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
ACSD and Cubist agree as follows:

 

1.         
DEFINITIONS

 

Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meaning set forth below.

 

Affiliate means with respect to either party, any entity that,
directly or indirectly, is controlled by, controls or is under common control
with such party. For purposes of this Agreement, control means, with respect to
any party, the direct or indirect ownership of more than fifty percent (50%) of
the voting or income interest in such party or the possession otherwise,
directly or indirectly, of the power to direct the management or policies of
such party.

 

Batch Record means a record of the procedures followed by ACS with
respect to the manufacture, handling and storage of Product. The Batch Record
consists of [*], such as [*].

 

[*.]

 

Certificate of Analysis (COA) means a document which is generated for
each batch of Product and which certifies that Product was manufactured in a
cGMP compliant facility and meets the filed regulatory release testing
specifications.

 

Change Order is defined in Section 2.4 herein.

 

Change Order Request is defined in Section 2.4 herein.

 

Confidential Information means all data, specifications, training and any other
know-how related to the design, development, manufacture, or performance of the
Product, as well as all other information and data provided by either party to
the other party pursuant to this Agreement in written or other tangible

 

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

 

 

1

 

medium and marked as confidential, or if disclosed
orally or displayed, confirmed in writing within [*] days after disclosure,
except any portion thereof which:

 

(a)         
is known to the
receiving party, as evidenced by the receiving party’s written records, before
receipt thereof under this Agreement;

 

(b)         
is disclosed to
the receiving party by a third person who is under no obligation of
confidentiality to the disclosing party hereunder with respect to such
information and who otherwise has a right to make such disclosure;

 

(c)         
is or becomes
generally known in the trade through no fault of the receiving party; or

 

(d)         
is independently
developed by the receiving party without access to such information, as
evidenced by the receiving party’s written records.

 

Contract Year means each twelve (12) month period during the term of
this Agreement beginning on the Effective Date.

 

Contractor means any manufacturer, packager, or other Product
support service provider who performs processing and/or packaging of a Product
or any intermediate step of manufacture, or other Product support service.

 

Critical Equipment means any equipment that comes into contact with
Product or is essential to the manufacturing process or is designed to assure
that Product has the identity, strength, quality and purity that it is represented
to possess.

 

Cubist Technology means individually and collectively the:

 

(a)         
intellectual
property rights embodied or disclosed in:

 

	
  (i)

  	
   

  	
  Cubist patent
  application(s) and patents,

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  any patent application
  filed as a continuation, division, or continuation-in-part of the
  application(s) described in clause (a)(i), patents issuing therefrom and
  reissues, reexaminations and extensions of such patents; and

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  any foreign counterpart
  to the application(s) described in clauses (a)(i)-(ii) (including divisions,
  continuations, confirmations, additions, renewals or continuations-in-part of
  such patent applications), patents issuing therefrom and extensions thereof,
  and

  

 

(b)         
all other
Confidential Information, discoveries, inventions, know-how, techniques,
methodologies, modifications, improvements, works of authorship, designs and
data (whether or not protectable under patent, copyright, trade secrecy or
similar laws) that are conceived, discovered, developed, created or reduced to
practice or tangible medium of expression by consultants (other than those
consultants that are also affiliated with ACSD in connection with the
transactions contemplated by this Agreement) or employees of Cubist at any
time, concurrent with or related to the transactions contemplated by the
Development and Facility Construction Timetable, or based on the results of the
transactions contemplated by the Timetable and Facility Construction Plan.
Cubist Technology specifically includes, but is not limited to, all process
development technology developed for Cubist as part of the Materials Transfer
& Confidentiality Agreement between Cubist and ACSD dated February 11,
1998.

 

cGMP means Current Good Manufacturing Practices and is
further defined in Section 3.1 herein.

 

Daptomycin means the compound daptomycin the chemical structure
of which is detailed in Exhibit A or a pharmaceutically acceptable salt thereof
or a pharmaceutically acceptable formulation thereof.

 

Deviation means documented evidence of an excursion from
operating, manufacturing, testing instructions or procedures. A Deviation does
not permanently change an existing procedure, it is intended to be a specific
or one time excursion.

 

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

 

 

2

 

Drug Master File (DMF) is a submission to the FDA that provides detailed
information about the Facility, Process and Materials used in the manufacture
of Product, and that is used to support an NDA and other regulatory
submissions.

 

Facility means the cGMP drug production facility in Anagni,
Italy constructed and equipped by ACSD exclusively for the manufacture of
Product.

 

Facility Approval means the FDA approval of the NDA Manufacturing
Supplement for the Facility.

 

Facility Approval Target Date is defined in Section 2.1 herein.

 

Facility Completion means the construction, equipment, testing, and
qualification of the Facility according to the terms of this Agreement.

 

Facility Completion Target Date is defined in Section 2.1 herein

 

FDA means the United States Food and Drug Administration
or any successor entity thereto or any equivalent U.S. or foreign governmental
regulatory agency with jurisdiction to grant Product Approvals.

 

Force Majeure means any event beyond the control of the parties,
including, but not limited to, fire, earthquakes, flood, riots, epidemics, war,
or embargoes.

 

Formal Investigation means a written report detailing the specifics of an
investigation resulting from an exceptional event, and which includes a
description of the incident, investigation, conclusions and corrective action
or action plan, if applicable.

 

In-Process Specifications mean the chemical, physical, biological
and microbial testing methods and results required for the commercial
manufacture of Product in accordance with Process, and which are listed in
Exhibit B herein, provided that such specifications shall at all times comply
with the relevant regulations of the FDA or other regulatory agency in the
country of sale, and provided that such specifications may be modified
from time to time in accordance with this Agreement.

 

Lot Number means a controlled number used to identify a specific
lot or batch of Product or Material.

 

Material means any actives, excipients, or components, which
are used in the manufacture of Product.

 

Nonconforming Materials Report means a document used to describe the
disposition of Product or Material that fails to meet established
specifications.

 

Manufacturing Compliance Report is defined in Section 8.3 herein.

 

Material Review Board (MRB) means a Cubist multidisciplinary
committee responsible for the review, evaluation and disposition of
non-conforming materials and Product.

 

NDA means a new drug application filed with the FDA to
obtain marketing approval for Product in the United States or any comparable
application fled with the regulatory authorities of a country other than the
United States to obtain marketing approval for Product in that country.

 

NDA Manufacturing Supplement means an application filed with the FDA,
or any comparable application filed with the regulatory authorities of a
country other than the United States, to obtain approval to manufacture Product
at the Facility.

 

Process means the commercial process employing the [*].

 

Product means Daptomycin bulk drug substance that meets
Product Specifications and is manufactured for Cubist in accordance with
Sections 2 and 3 and Exhibits B, C and D of this Agreement.

 

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

 

 

3

 

Product Approval means those regulatory or other approvals required for
the manufacture, importation, promotion, pricing, marketing and sale of the
Product in any particular country.

 

Product Price Premium is defined in Section 6.2 herein.

 

Product Specifications mean the chemical, physical, biological and microbial
testing methods and results required for the release of Product and listed in
Exhibit C herein, provided that such specifications shall at all times comply
with the relevant regulations of the FDA or other regulatory agency in the
country of sale, and provided that such specifications may be modified
from time to time in accordance with this Agreement.

 

Purchase Forecast is defined in Section 5.3 herein.

 

Reprocessing means duplication of a step or steps in a
manufacturing process in order to bring Product into conformance with Product
Specifications without altering the safety, identity, strength, quality, or
purity of Product beyond established requirements.

 

RMA means Return Material Authorization and is further
defined in Section 6.5(b) herein.

 

SOP means standard operating procedure.

 

Specification Review Committee (SRC) means a Cubist multidisciplinary
committee responsible for the review and approval of new specifications and
changes to existing specifications as they relate to Product or Process.

 

Stability Review Group (SRG) means a Cubist multidisciplinary
committee responsible for the review and approval of new stability protocols
and changes to existing stability protocols as they relate to Product. In
addition it is responsible for the routine review of stability data and
evaluation of any trends that are noted.

 

USD means United States Dollars.

 

Vialed Drug Product means Product that has been filled into single dosage
vials, lyophilized, and released according to Cubist’s secondary manufacturing
process specifications.

 

2.         
CONSTRUCTION OF PRODUCTION FACILITY IN ANAGNI

 

2.1         
Facility Construction and Timetable

 

By [*]
(the Facility Completion
Target Date), ACSD
will [*] and make [*] in accordance with current Good Manufacturing Practices.
ACSD’s obligations hereunder include, but are not limited to:

 

(a)         
construction of
[*] to perform the Process in a dedicated Facility;

 

(b)         
provision of [*]
of Product;

 

(c)         
the installation
of all [*] and [*]; and

 

(d)         
obtaining
approval from the [*].

 

Subject to adjustment in accordance with Section 2.2,
ACSD will make its best efforts to complete all activities and to meet all
dates set forth in this Agreement. The performance of [*] of the Facility is
expected no later than [*] with
all data and reports [*] by [*].
The target date for [*] for the ACSD facility (the Facility Approval Target Date) is [*].

 

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

 

 

4

 

2.2         
Date Adjustments

 

Cubist and ACSD each agree to perform the tasks
assigned to each in this Agreement. Each party acknowledges that delays in
performance by either party may cause delays in performance by the other
party. If [*] fails to meet its obligations under this Agreement in a timely
manner so as to cause a [*] delay in [*] performance, all dependent dates shall
be adjusted day-for-day to account for the delay caused by [*]. If [*] failure
is due to additional written requirements from [*], then such dates may be
adjusted by mutual written agreement.

 

2.3         
Inspection

 

Cubist will have the right to observe and inspect the
progress of work at the Facility at all reasonable times, both during the
construction process and at any time thereafter, and to confer with ACSD
regarding compliance with the dates set forth in Section 2.1 above, Product
Specifications, In-Process Specifications, cGMP, and other legal, regulatory or
contractual requirements.

 

2.4         
Change Procedures

 

(a)         
ACSD will notify
and consult with Cubist immediately concerning any potential delay in
completion or validation of the Facility. ACSD acknowledges that time is of the
essence for this Agreement, and that significant delays in the completion of
the Facility may cause Cubist material harm. Cubist and ACSD will, from time
to time during the construction process, confer regarding the quality standards
for materials and layout of operations within the Facility. [*]. Cubist
may request amendments to the building, equipment, or Process to:

 

	
  (i)

  	
   

  	
  effect [*] in the
  Facility,

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  to [*], or

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  to accommodate [*].

  

 

(b)         
If Cubist wishes
to make a change it shall notify ACSD of the requested change in writing,
specifying the change with sufficient details to [*] (each, a Change Order Request). Within [*] business days following the
date of ACSD’s receipt of a Change Order Request, ACSD shall deliver a document
that:

 

	
  (i)

  	
   

  	
  assesses the impact of
  the change on the total cost of the Timetable and Facility Construction Plan,
  and

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  incorporates a description
  of the requested change and its proposed cost (a Change Order).

  

 

If Cubist accepts the Change Order in writing, then
the provisions of this Agreement shall be deemed amended to incorporate such
Change Order. The cost stated in the Change Order shall be deemed an adjustment
to the charges specified in this Agreement.

 

It is the expectation of both parties that the dates
and milestones set forth in this Agreement has been defined broadly enough to
accomplish both parties’ goals and that no Change Orders will be required.

 

2.5         
ACSD Capital Investment

 

Subject to Section 4 below, the [*]. Any increases in
capital expenditures required by Cubist will be specified in writing and will
be [*].

 

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

 

 

5

 

3.          PRODUCTION

 

3.1          Manufacturing Quality

 

ACSD shall manufacture Product for Cubist in
accordance with Exhibit D of this Agreement and under Current Good Manufacturing
Practices (cGMPs) as required by
the FDA and set forth in Title 21 Code of Federal Regulations Parts 210 and 211
(§§210.1-211.204 et. seq.), with particular emphasis on 211.22, 211.25 and
211.28 or the equivalents thereto pertaining to the responsibilities of a
quality unit, personnel qualifications and personnel responsibilities
respectively.

 

According to the provisions of Exhibit D, ACSD will
develop a cGMP-compliant quality unit at the Facility. This quality unit will
follow and implement policies and procedures mutually authorized by ACSD and
Cubist. Compliance with this Agreement is dependent upon, among other factors,
ACSD hiring or training a full-time senior level quality manager reasonably
acceptable to Cubist dedicated to, and located at, the Facility, to establish
and lead the cGMP-compliant quality unit.

 

ACSD will develop a cGMP compliant quality control
test laboratory for the testing and release of Product.

 

3.2          Process Validation

 

ACSD will develop and complete a validation process at
the Facility in accordance with Exhibit D herein, and [*]. Validation
parameters and limits for the process must span the actual process parameters
and limits developed and documented during the manufacture of consistency
batches at commercial scale. All post-validation process changes [*]. Cubist
will provide test method validation reports and small-scale purification
validation studies as such reports become available. ACSD will provide Cubist
with a master validation plan for the Facility and Process.

 

3.3          Process Improvements

 

Following Facility Approval, ACSD may continue
operating [*] with the [*]. Development undertaken for the purpose of [*] will
be [*]. ACSD will [*].  All modifications in raw materials, conditions or
processing related to the manufacture of Product will be implemented [*]. 
The [*] following a successful and complete cGMP change control process
outlined in the [*].

 

3.4          Stability Program Batches

 

ACSD will supply Cubist with samples from the first
[*] validation batches of Product to be placed on stability as defined by
Cubist’s approved stability protocols. In addition, ACSD will supply Cubist
with samples from a minimum of [*] commercial batch per year. Cubist will be
responsible for conducting all stability testing. ACSD agrees to ship stability
samples under defined storage conditions to either Cubist or a site designated
by Cubist.

 

4.          CUBIST INVESTMENT

 

According to the provisions of this Section 4, Cubist
will contribute to ACSD up to eight million five hundred thousand dollars (USD 8,500,000) in equity, milestones,
Product Price Premiums, resin investment, process development, quality systems
and facility qualification support as specified below.

 

4.1          Equity Contribution

 

Within thirty (30)* days of execution of this
Agreement Cubist will transfer to ACSD shares of Cubist Common Stock with an
aggregate value of two million dollars (USD
2,000,000). This equity contribution will comply with terms and
conditions specified in Exhibit E.

 

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

 

 

6

 

4.2          Milestones

 

Cubist will pay to ACSD:

 

•    [*] upon [*] and [*]; and

 

•    [*] upon [*].

 

4.3          Product Price Premiums

 

Cubist will pay to ACSD [*] through a [*] specified in
Section 6.2.

 

4.4          Resin Investment

 

ACSD expects to spend [*]. In the event that Product
is not approved for commercial sale by [*].

 

4.5          Process Development, Quality Systems,
Facility Qualification Support

 

Cubist will contribute such expertise, training, and
support staff and services, [*], as is reasonably necessary to assist ACSD in
the [*].

 

5.          PURCHASE OF PRODUCT

 

5.1          Purchase Commitment

 

Contingent upon the receipt of the necessary Product
and Facility Approvals, Cubist will purchase [*] of Product during the term of
this Agreement. During the period prior to the receipt of Product Approvals,
Cubist may, but is not obligated to, purchase Product produced using commercial
Process in accordance with Exhibits B, C and D herein. Any such Product
purchases [*] of Product that Cubist is required to purchase. Subject to the
conditions of this Agreement, Cubist agrees to make the following yearly purchases:

 

	
  Year

  	
   

  	
  Purchase[*] (kg)

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
  [*]

  	
   

  

 

The above schedule will be extended for any delays
caused by ACSD.

 

5.2          Delay in Purchases / Payment of
Product Price Premiums

 

In the event that Facility Approval is received, but
Cubist does not choose to purchase [*], Cubist may defer the purchase and
the payment for Product until the following year, [ *]. Any delays caused by
ACSD (including, but not limited to delays in construction, validation,
qualification, documentation, regulatory approvals and other ACSD activities
under this Agreement) will extend the Cubist purchase commitment schedule, as
described in Section 5.1 herein, on a day for day basis to account for such
ACSD delays.

 

5.3          Purchase Forecasts

 

During the term of this Agreement, Cubist shall
provide to ACSD, within the first [*] business days of each quarter, on a
quarterly basis, a rolling forecast for orders of Product with respect to the
following [*] quarters (Purchase
Forecast). Cubist
shall be [*] of the amount of Product forecast for the [*] of any Purchase
Forecast, and shall

 

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

 

 

7

 

execute a binding purchase order to that effect. The
forecast for the remaining [*] of any Purchase Forecast shall be non-binding.

 

5.4          Product Orders

 

Orders for Product shall be placed by written purchase
order and submitted by mail or facsimile, or by other means agreed upon by the
parties. Due to the expected variance in Product yield, an exact purchase
amount may not be possible and the Cubist purchase orders will accordingly
include a [*]. Amounts in excess of the stated [*]. No order shall be binding
upon ACSD until it has been accepted by ACSD in writing. ACSD shall accept or
reject all orders within [*] days following receipt of same and shall deliver
all orders that are accepted within [*] days of the projected delivery date.

 

5.5          Changed Purchase Orders

 

In the event that Cubist cancels, reschedules or
otherwise reduces a purchase order less than [*] days in advance of the
scheduled batch initiation, Cubist shall [*] of the price of the Product that
is [*]. Cubist may not [*] less than [*]days in [*]. Cubist may [*]
days in [*].

 

5.6          Obligation to Supply

 

	
  (a)

  	
   

  	
  ACSD shall use best
  efforts to accept and fill each order for Product submitted by Cubist
  including orders that exceed the Purchase Forecast by [*], provided that such
  request is delivered to ACSD [*] days prior to [*]. ACSD shall not be in
  breach of this Section 5.6 if ACSD’s failure to supply Product is due to a
  Force Majeure event or if ACSD’s failure is limited to [*]. Delivery dates
  will be set independently from Product release and invoice dates as described
  in Section 5.7;

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If ACSD is unable to
  supply the Product ordered by Cubist in accordance with the terms of this
  Agreement, then ACSD shall [*], and any such [*]. If ACSD is unable to [*]
  days after its initial failure to supply, then ACSD shall consult with Cubist
  and the parties shall work together to remedy the problem. In such an event,
  Cubist may, at its option, and upon notice to ACSD:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  [*] and/or

  

 

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

 

 

8

 

	
   

  	
   

  	
  (ii)

  	
   

  	
  in the event that the
  parties agree that Cubist will [*];

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  In order to minimize
  adverse consequences from any interruption in ACSD’s ability to supply Cubist
  with Product, ACSD shall maintain a back-up supply of raw materials
  sufficient to support Cubist’s forecasted production needs for a period of
  [*] months following any failure of ACSD to timely supply Cubist with
  Product. The costs of purchasing and maintaining this back-up supply of raw
  materials will be borne by [*]. Upon removal of any units of raw materials
  from the back-up supply, [*]*, in accordance with cGMP
  First-To-Expire-First-Out rules, so that an adequate back-up supply is
  maintained at all times. The parties shall confer [*] to review their
  aggregate requirements for raw material and will adjust the size of the
  back-up supply of raw materials in order to maintain at least [*] month
  supply of raw material [*] shall also increase the size of the back-up supply
  from time to time as warranted by commercially prudent risk management
  practices.

  

 

5.7          Product Warehousing and Payment
Schedule

 

Storage of Product after release by ACSD will be the
responsibility of [*] for a quantity amounting to the greater of [*] supply or
[*] of Product as [*]. Delivery of Product to finish/fill organizations will be
scheduled and mutually agreed upon by Cubist and ACSD. Cubist will be invoiced
at the time [*]. The payment for released Product that is warehoused at ACSD or
contract freezer warehouse facilities will follow promptly behind the invoicing
of material that is ready for shipment provided that a Certificate of Analysis
is sent to Cubist, and such Certificate of Analysis is reviewed and accepted by
Cubist. In addition, a batch payment becomes due upon review and approval of
the Batch Record and batch Certificate of Analysis by Cubist.

 

5.8          Third Party Supply

 

If Cubist notifies ACSD that Cubist will obtain the
Product through a third party [*] then Cubist may purchase Product from a
[*]. Cubist may continue to exercise [*] and substantiates such claim to
Cubist’s reasonable satisfaction. [*], Cubist shall commence purchasing Product
from ACSD, provided that:

 

	
  (a)

  	
   

  	
  Cubist shall [*] and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  ACSD shall [*].

  

 

6.0          TERMS OF SALE

 

6.1          Product Price

 

	
  (a)

  	
   

  	
  Subject to the
  provisions of Sections 5, 6 and 7, Cubist will purchase Product from ACSD at
  a price of [*];

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Subject to [*], Cubist
  and ACSD agree to re-evaluate the cost structure of Product manufacturing [*]
  days after the [*] anniversary of the Facility Approval, and to negotiate in
  good faith an appropriate adjustment to the price of the Product specified in
  Section 6.1 (a).

  

 

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

 

 

9

 

6.2          Product Price Premiums

 

Cubist will pay ACSD a [*] on the price of Product (Product Price Premium) purchased
over [*]. Once the [*] have accrued to [*], Cubist will immediately stop paying
the Product Price Premiums and will pay [*] of Product, as provided in Section
6.1 herein.

 

	
  Year

  	
   

  	
  Purchase [*]

  	
   

  	
  Product Price Premium

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [*]

  	
   

  

 

The above schedule [*]. In the event that Cubist [*].
Any delays caused by ACSD (including, but not limited, to delays in
construction, validation, qualification, documentation and other ACSD
activities under this Agreement) will extend Cubist’s obligation to pay the
Product Price Premiums.

 

6.3          Payment

 

	
  (a)

  	
   

  	
  Cubist shall pay for
  Product within [*] days after the date of receipt by Cubist of ACSD’s
  invoice, Certificate of Analysis, Batch Records, and Manufacturing Compliance
  Reports as required by Exhibit D with respect to such Product. [*], all taxes
  and charges that may be imposed by any government taxing authority on
  the amounts paid by [*]. In the event and to the extent that [*], Cubist
  may [*].

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Cubist shall make
  payments required under this Section 6.3 by wire transfer to a bank
  identified by ACSD in writing. All payments shall be calculated, invoiced,
  stated and paid in United States Dollars (USD).

  

 

6.4          Shipping

 

ACSD shall arrange for shipment of the Product ordered
by Cubist via common carrier of Cubist’s choice, [*]to the port of entry
specified by Cubist. [*] shall pay all shipping, insurance, customs, duties and
other governmental charges relating to the importation and sale of the Product,
if any, and shall have all responsibility for storing and clearing the Product
through all customs and importation requirements. ACSD acknowledges that
validation of shipping procedures by Cubist will require ACSD to prepare
shipments that comply with validation parameters, comply with cGMP regulations
related to shipping and conform to relevant SOPs.

 

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

 

 

10

 

6.5          Quality, Documentation, Facility
Expectation and Acceptance

 

	
  (a)

  	
   

  	
  Each shipment of
  Product from ACSD shall contain Certificates of Analysis for the Product
  being shipped as are necessary to show that the Product is in conformity with
  the Product Specifications and Product Approval. Cubist shall have reviewed
  and approved Batch Records and quality control records for all Products to be
  shipped prior to shipment. Cubist shall notify ACSD within [*] days of the receipt
  of a shipment of the Product of any apparent non-conformity of the Product to
  the Product Specifications; provided that with respect to obvious
  nonconformities, Cubist will promptly notify ACSD in order that ACSD
  may notify its shipper and insurer. If Cubist fails to so notify ACSD,
  it will be deemed to have accepted the Product; provided that ACSD’s
  obligations under Sections 10.2 and 11.1 herein shall survive acceptance of
  the Product by Cubist. [*].

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Cubist shall not be
  required to pay ACSD for any Product which has been properly rejected or for
  which unresolved Deviations remain. [*]. Samples of all defective units of
  the Product shall be returned to ACSD using the procedure specified in this
  Section 6.5(b). Cubist shall notify ACSD in writing of its rejection of
  Product under Section 6.5(a), and shall request a Return Material
  Authorization (RMA) number, which ACSD shall issue
  promptly. Within [*] days of receipt of such RMA number Cubist shall return
  rejected Product to ACSD freight prepaid and properly insured, along with a
  reasonably detailed statement of the claimed defect and proof of date of
  purchase. In the event ACSD determines that the returned Product is defective
  and Product has been properly rejected by Cubist, ACSD shall replace such
  defective Product free of charge. ACSD shall return to Cubist, freight
  prepaid, all replaced Product, along with reimbursement of the shipment
  charges for return of the nonconforming Product if ACSD requires said
  nonconforming Product to be returned. In the event, that ACSD determines that
  the returned Product is not defective and the parties are unable to resolve
  such dispute to their mutual satisfaction within [*] business days of ACSD’s
  determination, ACSD shall submit a sample of such returned Product to an
  independent laboratory reasonably acceptable to Cubist for testing against
  the Product Specifications and the test results obtained by such laboratory
  shall be final and controlling as between Cubist and ACSD. The fees and
  expenses of such laboratory testing shall be borne entirely by the party
  against whom such laboratory’s findings are made. In the event the test
  results indicate that the Product in question does not conform to the Product
  Specifications, ACSD shall replace such Product at no additional cost to
  Cubist within [*] business days after receipt of such results if replacement
  Product stock is available, and in any case as soon as possible after receipt
  of such results.

  

 

7.          EXCLUSIVITY

 

ACSD covenants that it will not

 

	
  (a)

  	
   

  	
  promote, sell or
  deliver any Product or Daptomycin or

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  provide Product or
  Daptomycin to any third party except as specifically designated by Cubist in
  writing.

  

 

8.          REGULATORY ACTIVITIES

 

8.1          General and Permanent Conditions

 

	
  (a)

  	
   

  	
  ACSD shall cooperate
  with Cubist to

  

 

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

 

 

11

	
   

  	
   

  	
  (i)

  	
   

  	
  obtain all necessary
  regulatory approvals, including but not limited to, DMF and Facility
  Approvals,

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  maintain all such
  Facility approvals in effect throughout the term of this Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  ACSD shall obtain
  approval to manufacture Product from the Italian Ministry of Health and other
  applicable local authorities as required by law or regulation;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Provide Cubist with all
  necessary documentation to support Cubist regulatory filings.

  

 

8.2          Certificates of Analysis

 

ACSD shall perform, or cause to be performed, sample
tests on each lot of Product to be purchased pursuant to this Agreement before
delivery to Cubist. Each test report shall set forth the items tested,
In-Process Specifications, Product Specifications and test results in a
Certificate of Analysis, containing the types of information which shall have
been requested by Cubist, for each lot delivered. ACSD shall send or cause to
be sent such certificates to Cubist prior to shipment of each lot. The
Certificate of Analysis will be accompanied by a certified Batch Record signed by
ACSD’s quality assurance department and co-signed by the technical director of
the Facility. Review of the production documents including, but not limited to,
Certificates of Analysis by a Cubist representative on site will be permitted
under mutually agreed conditions.

 

8.3          Manufacturing Compliance Reports

 

ACSD shall provide or cause to be provided, for each
lot of Product purchased pursuant to this Agreement, a manufacturing compliance
report, which

 

	
  (a)

  	
   

  	
  outlines the process
  sub-lots and the processing organization used for the formation of the batch;
  and

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  contains Deviation
  reports, investigations, resolved discrepancies and other information, memos
  and other documentation concerning the quality of each batch of Product as
  requested by Cubist; and

  	 

	
   

  	
   

  	
   

  	 

	
  (c)

  	
   

  	
  includes a
  certification that the lot of Product was manufactured in accordance with the
  In-Process and Product Specifications and the then current Good Manufacturing
  Practices of the FDA, including without limitation practices and procedures
  listed in Exhibit D.

  	 

 

In the event the FDA or other governmental regulatory
agency notifies ACSD that it intends to visit or inspect the Facility, ACSD
shall immediately provide notice of such visit or inspection to Cubist and
Cubist shall have the right to participate in such visit or inspection. ACSD
shall advise Cubist immediately if an authorized agent of the FDA or other
governmental regulatory agency visits the Facility without prior notice. ACSD
shall furnish to Cubist the report by such agency of such visit within [*]
business days of ACSD’s receipt of such report. ACSD shall not respond in
writing to any regulatory agency without the prior review and written approval
of such response by Cubist. In the event ACSD fails to meet the cGMPs, ACSD
will be responsible, at ACSD’s expense, for

 

	
  (a)

  	
   

  	
  conducting an
  investigation to define the probable causes for the failure,

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  providing an acceptable
  cGMP investigation report to Cubist for review and written approval and

  	 

	
   

  	
   

  	
   

  	 

	
  (c)

  	
   

  	
  achieving compliance
  with cGMPs.

  	 

 

Additionally, ACSD will provide adequate staffing and
training for manufacturing and quality control for the production of Product.
In addition, a functional quality unit responsible for quality requirements
described in Exhibit D must operate in the Facility for the issuance of
document change control, cGMP policies, verification, compliance demonstration
and cGMP documentation of all manufacturing operations including but not
limited to Product impact parameters such as environmental monitoring,
cleaning, process validation, preventative maintenance, calibration and similar
support functions outlined in the ICH and FDA guidelines for the safe and
efficacious production of pharmaceutical products. This

 

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

 

 

12

 

documentation will include all Deviations and
investigations performed as part of the Product release procedure that will be
mutually developed by the parties.

 

8.4          Access to Facility; Cubist’s Right to
Monitor

 

	
  (a)

  	
   

  	
  Cubist shall at all
  times upon reasonable notice and during normal business hours have the right
  to inspect the Facility to ascertain compliance with cGMPs. In addition,
  Cubist shall have the right to designate a Cubist employee or an independent
  consultant to monitor the Process at the Facility at Cubist’s sole expense.

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  ACSD shall not change
  the specified raw materials or the Process for the manufacture of Product
  without the prior written consent of Cubist; Cubist may require ACSD to
  make changes in raw materials or the Process subject to mutually agreed price
  adjustments; ACSD will not use the Facility for any purpose except the
  manufacture of Product and will not supply Product to any party except
  Cubist.

  	 

 

8.5          Product Recalls

 

	
  If

  	
  (a)

  	
   

  	
  any regulatory
  authority withdraws the approval to sell the Product in such country or
  issues a directive or requests that the Product be recalled from the market
  for Product safety reasons or

  
	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (b)

  	
   

  	
  any regulatory
  authority or court of competent jurisdiction issues a request, directive or
  order that the Product be recalled, or

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (c)

  	
   

  	
  Cubist shall reasonably
  determine that the Product should be recalled

  	 

 

then the parties shall take all appropriate corrective
actions, and shall cooperate in any governmental investigations surrounding the
recall.

 

In the event that such recall results from any cause
or event arising from defective manufacture, storage or handling of the Product
by ACSD (excluding defects relating to packaging or labeling supplied by or
prepared at the direction of Cubist), then ACSD shall be responsible for all
expenses of the recall. ACSD shall, at Cubist’s option, either refund the
purchase price for recalled Product plus the cost of vialing the Product
(not to exceed [*] per vial of Product (in vialed form) with a maximum
liability of [*] per batch of Product (in vialed form)) or replace recalled
Product held by Cubist or its customers, including in each case Product
embodied in vialed form consistent with directions received from the
appropriate governmental authority within a reasonable time at ACSD expense,
including freight and applicable duties, unless the recall is due to an act or
omission of Cubist or its agents. [*]. For the purposes of this Agreement, the
expenses of recall shall include, without limitation, the expenses of
notification and destruction or return of the recalled Product and all other
costs incurred in connection with such recall, but shall not include [*].

 

In the event a regulatory authority orders the
withdrawal of Product from any country, Cubist shall not be obligated to
purchase the Product or sell the Product in such country from the date of such
withdrawal until Cubist is again authorized to sell Product in such country.
ACSD shall not be obligated to supply the Product to Cubist in such country for
such period. If such a withdrawal decision is final and not appealable, this
Agreement shall terminate with respect to such country.

 

8.6          Compliance with Laws

 

ACSD and Cubist will comply with all applicable laws
and regulations pertaining to the manufacture use or sale of the Product and
performance of their respective duties under this Agreement. The compliance
obligations of each party shall include but not be limited to regulatory
compliance in the areas of safety, health and the environment.

 

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

 

 

13

 

9.          CONFIDENTIALITY; PROPRIETARY RIGHTS

 

 

9.1.          Publicity

 

The parties shall:

 

	
  (a)

  	
   

  	
  keep the material terms
  of this Agreement confidential,

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  agree upon the text and
  the exact timing of an initial public announcement relating to the
  transactions contemplated by this Agreement as soon as possible after the
  Effective Date (such agreement not to be unreasonably withheld by either
  party), and

  	 

	
   

  	
   

  	
   

  	 

	
  (c)

  	
   

  	
  agree on the text and
  the timing of any subsequent public announcements regarding this Agreement or
  the transactions contemplated herein.

  	 

 

Neither party shall use the name of the other party or
any director, officer or employee of the other party or any adaptation thereof
in any advertising, promotional or sales literature or publicity without the
prior written approval of the other party. If this Agreement is required to be
filed by either Party with the Securities and Exchange Commission or another
applicable securities regulatory authority, to the extent reasonable, such
party shall request confidential treatment for any provisions of this Agreement
that the other party believes would disclose trade secrets, confidential
commercial or financial information that would impair the value of the
contractual rights represented by this Agreement or provide detailed commercial
and financial information to competitors or third parties.

 

9.2.          Confidentiality

 

It is contemplated that in the course of the
performance of this Agreement each party may, from time to time, disclose
Confidential Information to the other. Each party agrees that any Confidential
Information disclosed by either party in accordance with this Agreement shall
be maintained in secrecy and each will use all reasonable diligence to prevent
disclosure except to personnel and consultants, provided that disclosure to
such personnel or consultants is necessary in order to accomplish the purposes
for which the Information was disclosed to the receiving party and provided
further that such personnel and consultants agree to be bound by the
Confidentiality provision of the Agreement. Each party agrees that it will
protect and maintain the confidentiality of the Confidential Information that
it receives from the other with at least the same degree of care as it uses to
protect its own confidential information. Each party hereby further agrees that
it will not use the Information for any purpose other than as contemplated by
this Agreement.

 

Any and all Confidential Information received by
either party from the other, upon request shall be promptly returned, [*].

 

It is understood that no patent right or license is
hereby granted by this Agreement and that the disclosure of Confidential
Information does not result in any obligation to grant either party any right
in and to such Information.

 

9.3          Proprietary Rights.

 

	
  (a)

  	
   

  	
  This Agreement does not
  convey to ACSD any rights in the Cubist Technology by implication, estoppel
  or otherwise except for the rights expressly granted under this Agreement.
  Title to the Cubist Technology, Process, and Product (and the intellectual
  property rights embodied in the Product) shall at all times remain vested in
  Cubist.

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  ACSD will implement and
  conduct the Process but will not research, modify or enhance the Process
  without authorization from Cubist; provided that in the event Process
  improvements are realized in implementing and running the Process then ACSD
  will take all necessary steps to assign, free of charge, ownership of the
  improvements specific to the Product in Cubist.

  	 

 

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

 

 

14

 

	
  (c)

  	
   

  	
  Subject to the terms
  and conditions of this Agreement, Cubist hereby grants to ACSD, and ACSD
  hereby accepts, a non-exclusive, royalty-free right and license, excluding
  the right to grant sublicenses, to practice the Process and to make, have
  made, export and sell Product exclusively to Cubist.

  

 

9.4          Proprietary Rights Notices

 

ACSD shall mark or have marked all containers or
packages of Product in accordance with the patent marking laws of the
jurisdiction in which such units of Product are manufactured or sold.

 

10.          REPRESENTATIONS AND WARRANTIES

 

10.1        Authorization; Enforceability

 

Each of ACSD and Cubist represent and warrant to the
other that:

 

	
  (a)

  	
   

  	
  it is a corporation
  duly organized, validly existing and in good standing under the laws of its
  incorporating jurisdiction;

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  it has all requisite
  corporate power and authority to enter into this Agreement;

  	 

	
   

  	
   

  	
   

  	 

	
  (c)

  	
   

  	
  it is duly authorized
  to execute and deliver this Agreement and to perform its obligations
  hereunder and consummate the transactions contemplated hereby; and

  	 

	
   

  	
   

  	
   

  	 

	
  (d)

  	
   

  	
  this Agreement is a
  valid and binding obligation of such party enforceable in accordance with its
  terms.

  	 

 

10.2        Product Warranty

 

ACSD represents and warrants to Cubist that all
Product supplied to Cubist hereunder shall:

 

	
  (a)

  	
   

  	
  conform to the Product
  Specifications; and

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  be manufactured,
  labeled, packaged and tested (while in the possession or control of ACSD) in
  accordance with the In-Process Specifications, the applicable cGMPs, and the
  applicable laws and regulations in the United States and the EU relating to
  the manufacture, labeling, packaging and testing of the Product, including
  all FDA and EU standards as defined by regulations, guidelines and
  International Conference on Harmonization advisory documents.

  	 

 

THE FOREGOING WARRANTY IS THE SOLE AND EXCLUSIVE
WARRANTY GIVEN BY ACSD WITH RESPECT TO THE PRODUCT, AND ACSD GIVES AND MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR MEDICAL
PURPOSE AND IMPLIED MEDICAL WARRANTIES ARISING UNDER TRADE USAGE OR CUSTOM OR
ANY EXPRESS OR IMPLIED WARRANTIES OF PATENT VALIDITY OR FREEDOM TO PRACTICE OR
FROM PATENT INFRINGEMENT.

 

11.          RISK ALLOCATION

 

11.1        ACSD Indemnification

 

ACSD, which as used herein shall include its
directors, employees, representatives and Affiliates, shall defend, indemnify
and hold harmless Cubist, its directors, employees and consultants from and
against any and all losses (including reasonable attorney’s fees) arising from
or related to:

 

	
  (a)

  	
   

  	
  any material breach of
  this Agreement, including but not limited to, ACSD’s representations and
  warranties herein;

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  any negligence,
  recklessness or intentional misconduct by ACSD in performing its obligations
  under this Agreement or with respect to the manufacture, storage, handling or
  delivery of the Product; or

  	 

 

 

15

 

	
  (c)

  	
   

  	
  any failure of the
  Product or failure of the Product to comply with Product Specifications, but
  in each case only if such defect or failure did not arise or result from the
  improper use, administration, storage or handling of the Product by a third
  party.

  

 

The foregoing indemnification action shall not apply
in the event and to the extent that a court of competent jurisdiction
determines that such losses arose as a result of Cubist’s negligence,
intentional misconduct or breach of this Agreement.

 

11.2        Cubist Indemnification

 

Cubist, which as used herein shall include its
directors, employees, representatives and Affiliates, shall defend, indemnify
and hold harmless ACSD from and against any and all losses arising from or
related to:

 

	
  (a)

  	
   

  	
  any material breach of
  Cubist’s representations and warranties under this Agreement;

  
	
   

  	
   

  	
   

  	 

	
  (b)

  	
   

  	
  any negligence,
  recklessness or intentional misconduct by Cubist in performing its
  obligations under this Agreement or with respect to its storage, handling,
  shipping, use, marketing, distribution or sale of the Product;

  	 

	
   

  	
   

  	
   

  	 

	
  (c)

  	
   

  	
  any representation or
  warranty made by Cubist to its customers or users with respect to the Product
  other than representations or warranties that

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  (i)

  	
   

  	
  the Product conforms to
  the Product Specifications or

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  (ii)

  	
   

  	
  the Product is not, at
  the time of delivery by ACSD to Cubist, adulterated within the meaning of the
  FDA regulations;

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  (d)

  	
   

  	
  any packaging or
  labeling of any Product to the extent that such packaging or labeling has
  been supplied by or at the direction of Cubist and applied in accordance with
  instructions from Cubist;

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  (e)

  	
   

  	
  an inherent defect in
  the Product, including such a claim arising from an injury to a person
  resulting from proper use, administration, storage and handling of the
  Product in accordance with the Product instructions, but only if such defect
  or failure did not arise or result from the improper use, administration,
  storage or handling of the Product by a person other than the Indemnifying
  Party; or

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  (f)

  	
   

  	
  an allegation that the
  Product infringes or misappropriates any intellectual property right of any
  third party (including without limitation, any patent, copyright, trade
  secret or trademark); provided that Cubist will not be obligated to indemnify
  ACSD pursuant to Section 11.2(f) in the event and to the extent that the
  alleged infringement is caused by:

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  (i)

  	
   

  	
  ACSD’s misuse or
  modification of the Product; or

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  (ii)

  	
   

  	
  ACSD’s use of the
  Product in combination with any products or materials not provided by Cubist
  (except for products and materials with which the Product is designed to be
  used, as provided in the In-Process or Product Specifications).

  	 

 

The foregoing indemnification obligation shall not
apply in the event and to the extent that a court of competent jurisdiction
determines that such losses arose as a result of ACSD’s negligence, intentional
misconduct or breach of this Agreement.

 

11.3        Insurance

 

	
  (a)

  	
   

  	
  ACSD shall purchase and
  maintain in force during the term of this Agreement and at its expense:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  premises liability
  insurance and all-risk property insurance including boiler and machinery
  coverage, written at replacement cost value and with replacement cost
  endorsement and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  workmen’s compensation
  or similar insurance in form and amounts required by law and employer’s
  liability insurance, covering employees of ACSD having coverage

  

 

 

16

 

	
   

  	
   

  	
   

  	
   

  	
  limits at least equal
  to those covering similar types of ACSD employees at other locations.
  Certificates of such insurance shall be provided to Cubist upon the execution
  of this Agreement. The insurance policies specified in clause 11.3(a)(i)
  shall name Cubist as an additional named insured;

  	 

	
  (b)

  	
   

  	
  Each party shall
  purchase and maintain insurance or self-insurance adequate to cover its
  obligations hereunder and which are consistent with normal business practices
  of prudent companies similarly situated at all times during this Agreement.
  It is understood that such insurance shall not be construed to create a limit
  of either party’s liability with respect to its indemnification obligations
  under this Section 11;

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Each party shall
  provide the other with written evidence of the insurance required under
  Sections 11.3(a) and 11.3(b) (or financial information that describes the
  amounts available under any self-insurance facility) upon request. Each party
  shall provide the other with written notice at least [*] days prior to the
  cancellation, non-renewal or material change in such insurance or
  self-insurance which materially adversely affects the rights of the other
  party hereunder. If such party does not obtain replacement insurance or take
  other measures that allow it to provide comparable coverage within such [*]
  day period, the other party shall have the right to terminate this Agreement
  effective at the end of such [*] day period without notice or any additional
  waiting periods.

  

 

12.          TERM AND TERMINATION

 

12.1        Term

 

This Agreement shall take effect as of the Effective
Date and shall remain in effect until the sixth anniversary of Facility
Approval or until ACSD has received all payments due under Section 6.2 unless
sooner terminated in accordance with Section 12.2 or extended in accordance
with this Section 12.1. Thereafter, this Agreement shall automatically renew
for additional two-year terms. Not later than the fifth (5th)
anniversary of the Effective Date, Cubist shall notify ACSD in writing whether
Cubist desires to extend the Agreement for an additional two years. All
applicable terms and conditions of this Agreement shall remain in effect during
such extension term, unless expressly amended in writing by the parties. Cubist
may renew this Agreement for additional two-year extension terms by
providing written renewal notice to ACSD not later than twelve (12) months]
prior to the expiration of the then current extension term.

 

12.2        Termination

 

	
  (a)

  	
   

  	
  Either party
  may terminate this Agreement at any time:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  upon ninety (90) days
  written notice to the other party in the event that the other party shall
  have breached any of its material obligations hereunder and shall not have
  cured such default prior to the expiration of the ninety (90) day period; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  upon written notice to
  the other party in the event that any bankruptcy, insolvency or receivership
  proceeding or the like (including out-of-court arrangements involving a party
  that cannot pay its debts as they mature) is commenced by or against the
  other party unless, in the case of an involuntary proceeding, it is dismissed
  within sixty (60) days;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Cubist
  may terminate this Agreement with notice to ACSD

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  in the event that ACSD
  fails to achieve its obligations under Section 2.1 within 180 (one hundred
  and eighty) days of the Facility Completion Target Date or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  in the event that
  Facility Approval is not received within one hundred and eighty (180) days of
  the Facility Approval Target Date due to ACSD failure by to meet its
  obligations under this Agreement.

  

 

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

 

 

17

 

	
  Prior to Cubist
  terminating this Agreement under this Paragraph 12.2(b), but no later than
  one hundred and eighty days from the applicable Target Date, ACSD will be
  given reasonable opportunity to present to Cubist a plan of corrective
  action. If Cubist and ACSD mutually agree on the plan in writing, ACSD will
  be provided an additional period of time, specified and agreed to in writing
  by both parties, to remedy the delay in meeting its obligations;

  

 

	
  (c)

  	
   

  	
  Cubist
  may terminate this Agreement upon one hundred and eighty (180) days
  notice to ACSD if Cubist or an affiliate or sublicensee terminates the
  manufacture or sale of the Product;

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Cubist
  may terminate this Agreement in the event that the FDA does not approve
  the Product within a commercially reasonable timeframe;

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  The parties
  may also terminate this Agreement at any time with one hundred and
  eighty (180) days notice upon mutual written agreement between Cubist and
  ACSD.

  

 

12.3        Effect of Termination

 

	
  (a)

  	
   

  	
  Upon any termination
  (including expiration) of this Agreement:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  ACSD and Cubist will
  terminate all tasks being performed pursuant to Section 3 in an orderly
  manner, as soon as practical and in accordance with a written schedule agreed
  to by Cubist and ACSD to minimize disruption to customers for the Product;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  All licenses from
  Cubist to ACSD shall terminate with the exception of those necessary to
  fulfill ACSD’s obligations to Cubist in accordance with this Section 12.3;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)

  	
   

  	
  Each party will return
  to the other party or certify in writing to the other party that it has
  destroyed all documents and other tangible items it or its employees or
  agents have received or created pursuant to this Agreement pertaining,
  referring or relating to the Confidential Information of the other party,
  except that each party may retain one (1) complete copy of Confidential
  Information for use in accordance with Section 8.3(a)(i) for archival
  purposes to assure compliance with this Agreement; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)

  	
   

  	
  ACSD shall promptly
  notify Cubist of the quantity of Product in inventory and in production and
  Cubist shall have the right but not the obligation to purchase such inventory
  of Product in accordance with the provisions of Sections 5 & 6 or, in the
  alternative, to direct such other disposition of Product as Cubist
  specifies.  In addition, ACSD will accept orders from Cubist on a C.O.D.
  basis for additional Product that Cubist is, as of the date of termination
  notice, contractually obligated to furnish to its customers, if Cubist does
  not have sufficient Product in its inventory to fulfill such obligations,
  provided Cubist notifies ACSD of any and all such transactions in writing
  within 30 (thirty) days of the termination date;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If this Agreement is
  terminated by Cubist pursuant to Section 12.2(a) or Section 12.2(b), ACSD
  shall reimburse Cubist for the Premium within thirty (30) days following
  termination. In all other cases, if termination occurs after the receipt of
  Product Approvals and Cubist has not recovered the Premium as of the date of
  termination, Cubist will forfeit the balance of the un-recovered Premium,
  which shall be considered liquidated damages for Cubist’s early termination
  of the Agreement;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Termination of this
  Agreement shall not affect rights and obligations of either party that
  may have accrued prior to the effective date of termination or any
  obligation specifically stated to survive termination. The provisions of
  Sections 1,7,8.5,9,10,11,12,13 and 14 shall survive any expiration or
  termination of this Agreement.

  

 

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

 

 

18

 

13.          DISPUTE RESOLUTION

 

In the event that any dispute arises relating to this
Agreement, ACSD and Cubist shall each designate a representative to meet and
attempt to resolve the dispute through good faith discussions. If the
representatives are unable to resolve such dispute to their mutual satisfaction
within [*] days after they commence discussions, then either party
may seek alternate resolution or legal or equitable relief.

 

14.          GENERAL PROVISIONS

 

14.1        Governing Law

 

This Agreement shall be governed and construed in
accordance with the laws of Massachusetts, to the exclusion of both its rules
on conflicts of laws and the provisions of the “United Nations Convention on
Contracts for the International Sale of Goods”.

 

14.2        Amendment and Waiver

 

No provision of or right under this Agreement shall be
deemed to have been waived by any act or acquiescence on the part of either
party, its agents or employees, but only by an instrument in writing signed by
an authorized officer of each party. No waiver by either party of any breach of
this Agreement by the other party shall be effective as to any other breach,
whether of the same or any other term or condition and whether occurring before
or after the date of such waiver.

 

14.3        Independent Contractors

 

Each party represents that it is acting on its own
behalf as an independent contractor and is not acting as an agent for or on
behalf of any third party. This Agreement and the relations hereby established
by and between ACSD and Cubist do not constitute a partnership, joint venture,
franchise, agency or contract of employment. Cubist is not granted, and shall
not exercise, the right or authority to assume or create any obligation or
responsibility on behalf of or in the name of ACSD or its Affiliates.

 

14.4        Assignment

 

Neither party may assign this Agreement or any of
such party’s rights and obligations hereunder to any third party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Either party may assign this Agreement, and such
party’s rights and obligations hereunder, to an Affiliate (including a
subsidiary) which controls, is controlled by, or is under common control with a
party so long as the assigning party remains primarily liable for its
obligations hereunder. In addition, either party may assign this
Agreement, and its rights and obligations hereunder, to any third party that
purchases substantially all of the assigning party’s stock or assets relating
to that portion of such party’s business that is related to the subject of this
Agreement. Any attempted assignment, delegation or transfer in contravention of
this Agreement shall be null and void.

 

14.5        Successors and Assigns

 

This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.

 

14.6        Notices

 

Unless otherwise provided herein, any notice, report,
payment or document to be given by one party to the other shall be in writing
and shall be deemed given when received:

 

If to ACSD:

ACS Dobfar, SpA

20067 Tribiano (Milan)

Viale Addetta, 6/8/10
Italy

Attention:  Marco
Falciani

Phone:  0113902-90693218

Fax:  0113902-90693204

 

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

 

 

19

 

If to Cubist:

Cubist Pharmaceuticals, Inc.

65 Hayden Avenue

Lexington, MA 02421 U.S.A.

Attention:  Alan Watson

Telefax No.:  (781) 861-0566

Telephone No.:  (781) 860-8660

 

or to such other place as either party
may designate as to itself by written notice to the other party.

 

14.7        Severability

 

In the event any provision of this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof. The parties agree that they will negotiate in good faith or
will permit a court or arbitrator to replace any provision hereof so held
invalid, illegal or unenforceable with a valid provision which is as similar as
possible in substance to the invalid, illegal or unenforceable provision.

 

14.8        Conflict or Inconsistency

 

In the event of any conflict or inconsistency between
the terms and conditions hereof and any terms or conditions set forth in any
purchase order or other document relating to the transactions contemplated by
this Agreement, the terms and conditions set forth in this Agreement shall
prevail.

 

14.9        Entire Agreement

 

The terms and provisions contained in this Agreement
(including the Exhibits) constitute the entire understanding of the parties
with respect to the transactions and matters contemplated hereby and supersede
all previous communications, representations, agreements and understandings
relating to the subject matter hereof. No representations, inducements, promises
or agreements, whether oral or otherwise, between the parties not contained in
this Agreement or incorporated by reference in this Agreement shall be of any
force or effect. No agreement or understanding extending this Agreement or
varying its terms (including any inconsistent terms in any purchase order,
acknowledgment or similar form) shall be binding upon either party unless it is
in a writing specifically referring to this Agreement and signed by the duly
authorized representative of the applicable party.

 

14.10      Rules of Construction

 

The parties agree that they have participated equally
in the formation of this Agreement and that the language and terms of this
Agreement shall not be construed against either party by reason of the extent
to which such party or its professional advisors participated in the
preparation of this Agreement.

 

14.11      Force Majeure

 

Except as otherwise provided in this Agreement, in the
event that a delay or failure of a party to comply with any obligation created
by this Agreement is caused by a Force Majeure condition, that obligation shall
be suspended during the continuance of the Force Majeure condition.

 

14.12      Further Assurances

 

Each party covenants and agrees that, subsequent to
the execution and delivery of this Agreement and without any additional
consideration, it will execute and deliver any further legal instruments and
perform any acts which are or may become reasonably necessary to
effectuate the purposes of this Agreement.

 

 

20

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly authorized officers, and
have duly delivered and executed this Agreement under seal as of the date first
set forth above.

 

	
  ACS DOBFAR SpA

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Marco Falciani

  	
   

  
	
   

  	
  Title:  President

  
	
   

  	
  Date:  November 13, 2001

  
	
   

  	
   

  
	
   

  	
   

  
	
  CUBIST PHARMACEUTICALS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Scott M. Rocklage

  	
   

  
	
   

  	
  Title:  Chairman and CEO

  
	
   

  	
  Date:  9/28/01

  

 

 

21

 

List
of Exhibits

 

	
  Exhibit A

  	
   

  	
  Daptomycin Structure

  
	
  Exhibit B

  	
   

  	
  In-Process
  Specifications

  
	
  Exhibit C

  	
   

  	
  Product Specifications

  
	
  Exhibit D

  	
   

  	
  Quality Requirements

  
	
  Exhibit E

  	
   

  	
  Terms of Stock Purchase
  Agreement

  

 

 

22

 

Exhibit A

 

Daptomycin
Structure

 

[*]

 

 

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

 

 

23

 

Exhibit
B

 

In-Process
Testing Procedures and Specifications:

 

[*]

 

 

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

 

 

24

 

Exhibit
C

 

Product
Release Test Methods and Specifications

 

[*]

 

 

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

 

 

25

 

Exhibit
D

 

Quality
Requirements

 

[*]

 

 

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

 

 

26EXHIBIT
10.5

 

CONFIDENTIAL TREATMENT

MANUFACTURING AND SUPPLY AGREEMENT

 

 

 

This Manufacturing and
Supply Agreement (AGREEMENT) is entered into as of June 22, 2000 (EFFECTIVE
DATE) by and between:

 

DSM Capua S.p.A., an
Italian company with registered address Strada Statale Appia, 46-48, Capua,
Italy (DSM)

 

and

 

Cubist Pharmaceuticals,
Inc., a Delaware corporation with registered address 24 Emily Street,
Cambridge, MA 02139, USA (CUBIST).

 

BACKGROUND

 

Cubist is a drug company
focused on the discovery, development and commercialization of novel drugs to
treat infections. Cubist has commenced Phase III clinical trials of its lead
product, Daptomycin, an agent with potential bactericidal activity against life
threatening infections. DSM has expertise in the manufacture of drugs on a
contract basis. DSM is willing to manufacture Daptomycin for Cubist and to sell
clinical and commercial quantities of Daptomycin to Cubist. This Agreement sets
forth the terms under which DSM will manufacture and supply Daptomycin exclusively
to Cubist.

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, DSM and Cubist agree as follows:

 

1.             DEFINITIONS.

 

Capitalized terms used
in this Agreement and not otherwise defined herein shall have the meaning set
forth below.

 

                                                AFFILIATE
means with respect to either party, any Person that, directly or indirectly, is
controlled by, controls or is under common control with such party. For
purposes of this Agreement, CONTROL means, with respect to any Person, the
direct or indirect ownership of more than fifty percent (50%) of the voting or
income interest in such Person or the possession otherwise, directly or
indirectly, of the power to direct the management or policies of such Person.

 

 

1

 

                                                FOB means “Free
on Board”, as that expression is defined in LNCOTERMS 2000, LCIA Publishing
S.A.

 

                                                CONFIDENTIAL
INFORMATION means all data, specifications, training and any other know-how
related to the design, development, manufacture, or performance of the Product,
as well as all other information and data provided by either party to the other
party pursuant to this Agreement in written or other tangible medium and marked
as confidential, or if disclosed orally or displayed, confirmed in writing
within thirty (30) days after disclosure and marked as confidential, except any
portion thereof which: (i) is known to the receiving party, as evidenced by the
receiving party’s written records, before receipt thereof under this Agreement;
(ii) is disclosed to the receiving party by a third person who is under no
obligation of confidentiality to the disclosing party hereunder with respect to
such information and who otherwise has a right to make such disclosure; (iii)
is or becomes generally known in the trade through no fault of the receiving
party; or (iv) is independently developed by the receiving party, as evidenced
by the receiving party’s written records, without access to such information.

 

                                                CONTRACT
YEAR means each twelve (12) month period during the term of this Agreement
beginning on the date of the commencement of commercial production of
Daptomycin in the Facility. Preliminary activities related to Facility
development, validation and product registration which occur in the period
prior to the first Contract Year will be referred to as Year Zero.

 

                                                CUBIST
TECHNOLOGY means individually and collectively the intellectual property rights
embodied or disclosed in (a)(i) the patent application(s) and patents listed in
Exhibit A; (ii) any patent application filed as a continuation, division, or
continuation-in-part of the application(s) described in clause (a)(i), patents
issuing therefrom and reissues, reexaminations and extensions of such patents; (iii)
any foreign counterpart to the application(s) described in clauses (a)(i)-(ii)
(including divisions, continuations, confirmations, additions, renewals or
continuations-in-part of such patent applications), patents issuing therefrom
and extensions thereof; and (iv) any additional patent applications and patents
relating to new processes, compositions, formulations or methods of using
Daptomycin which shall be filed by Cubist or to which Cubist shall obtain
rights and which shall be added to Exhibit A from time to time; and (b) all other
Confidential Information, discoveries, inventions, know-how, techniques,

 

* Confidential treatment
requested: Material has been omitted and filed with the Commission.

 

2

 

                                                methodologies,
modifications, improvements, works of authorship, designs and data (whether or
not protectable under patent, copyright, trade secrecy or similar laws) that
are conceived, discovered, developed, created or reduced to practice or
tangible medium of expression by consultants (other than those consultants that
are also affiliated with DSM in connection with this Agreement) or employees of
Cubist at any time prior to the Effective Date, concurrent with or related to
this Agreement.

 

                                                DAPTOMYCIN,
DAPTOMYCIN PRODUCT OR PRODUCT means Daptomycin (the compound [ ]* whose
structure is detailed in Exhibit B) API bulk drug substance manufactured in
accordance with Exhibit C.

 

                                                EMEA means
the European Medicines Evaluation Agency or any successor entity thereto.

 

                                                FDA means
the United States Food and Drug Administration or any successor entity thereto.

 

                                                FACILITY
means the GMP Drug Production facility in Capua, Italy to be equipped by DSM
for the manufacture of Product pursuant to the provisions of Section 2.

 

                                                FORCE
MAJEURE means any event beyond the reasonable control of the parties,
including, without limitation, fire, flood, riots, strikes, epidemics, war
(declared or undeclared and including the continuance, expansion or new
outbreak of any war or conflict now in existence), embargoes and governmental
actions or decrees.

 

                                                NDA means a
new drug application filed with the FDA to obtain marketing approval for
Product in the United States.

 

                                                PERSON means
any individual, corporation, association, partnership (general or limited),
joint venture, trust, estate, limited liability company, limited liability
partnership, unincorporated organization, government (or any agency or
political subdivision thereof) or other legal entity or organization.

 

                                                PROCESS
means the commercial process employing the anionic exchange column steps and
final endotoxin removal step developed by Cubist for the production of Product
attached to this Agreement as Exhibit C.

 

3

 

                                                PRODUCT
APPROVALS means, those regulatory approvals required for manufacture,
importation promotion, pricing, marketing and sale of the Product in any
particular country.

 

                                                SPECIFICATIONS
means the specifications for the Product attached to this Agreement as Exhibit
D. Such specifications may be modified from time to time to reflect
improvements (if any) by mutual agreement of the parties. Copies of such
modified Specifications shall be maintained by both parties, and shall become a
part of this Agreement as if incorporated herein.

 

                                                OTHER
DEFINED TERMS. Each of the following terms have the meanings ascribed to it in
the section set forth opposite such term

 

	
  DSM

  	
   

  	
  Recitals

  
	
  AGREEMENT

  	
   

  	
  Recitals

  
	
  CUBIST

  	
   

  	
  Recitals

  
	
  EFFECTIVE
  DATE

  	
   

  	
  Recitals

  
	
  FDA
  ACT

  	
   

  	
  Section
  6.3

  
	
  GMPS

  	
   

  	
  Section
  4.3

  
	
  IMPLEMENTATION
  DATE

  	
   

  	
  Section
  3.3

  
	
  INDEMNIFYING
  PARTY

  	
   

  	
  Section
  7.2/7.3

  
	
  LNDEMNITEE(S)

  	
   

  	
  Section
  7.2/7.3

  
	
  LCIA

  	
   

  	
  Section
  9.2

  
	
  LOSSES

  	
   

  	
  Section
  7.2

  
	
  REPRESENTATIVE

  	
   

  	
  Section
  9.1

  
	
  RMA

  	
   

  	
  Section
  3.11 sub b

  
	
  SUPPLY
  FORECAST 

  	
   

  	
  Section
  3.3

  
	
  TARGET
  DATE

  	
   

  	
  Section
  2.1

  

 

2.             CONSTRUCTION OF PRODUCTION FACILITY

2.1                                 FACILITY
CONSTRUCTION. By [ ]* (the Target Date), DSM will (i) carry out the
modifications to the Facility and equip the Facility for the manufacture of
Daptomycin and (ii) qualify the Facility in accordance with the qualification
requirements set forth in Exhibit E.

 

2.2                                 DATE
ADJUSTMENTS. If due to any other reason than the late-, non- or misperformance
by DSM of its obligations hereunder except for reasons of force majeure, the
relevant dates shall be adjusted day-for-day.

 

2.3                                 INSPECTION;
CHANGE PROCEDURES. Cubist will have the right to inspect the progress of work
at the Facility at all reasonable times during the equipment and qualification
process and to confer with 

 

4

 

 

                                                DSM to
confirm compliance with DSM’s obligations under this Agreement. In addition,
Cubist will be consulted concerning any matters that could cause a delay in
completion of the Facility. DSM acknowledges that time is of the essence for
this Agreement, and that significant delays in the completion of the Facility
caused by DSM’s non-, late or misperformance of its obligations hereunder may
cause Cubist significant harm. Cubist and DSM will, from time to time during
the construction process, confer regarding the quality standards for materials
and layout of operations within the Facility; every reasonable effort
consistent with prudent business practice will be made to minimize the capital
investment without compromising quality or efficiency of Product production
operations. No changes to the Exhibits D and E or the quality standards for
materials and layout will be made without written consent of both parties.

 

3.             PURCHASE OF PRODUCTS AND TERMS OF
SALE.

3.1                                 EXCLUSIVITY.
DSM agrees to manufacture and supply Daptomycin exclusively for Cubist for the
lifetime of this Agreement and the lifetime of any subsequent extensions,
renewals or amendments to this Agreement.

 

3.2                                 PURCHASE
COMMITMENT. During the five Contract Years following the date of the
commencement of commercial production of Daptomycin in the Facility (2002 until
2006), Cubist will purchase an aggregate minimum quantity of [ ]* of Product
from DSM as follows: (a) Contract Year 1 (2002) [ ]*; (b) Contract Year 2
(2003) [ ]*; (c) Contract Year 3 (2004) [ ]*; (d) Contract Year 4 (2005) [ ]*;
and (e) Contract Year 5 (2006) [ ]*. At the end of Contract Year 4 Cubist [ ]*.
During the period prior to the date of the commencement of commercial
production of Daptomycin in the Facility, Cubist shall purchase [ ]*
consistency batches of Product for a price equal to [ ].* The [ ]* consistency batches
shall be considered part of the aggregate minimum purchase of Contract Year One.

 

3.3                                 PURCHASE
FORECASTS. At least [ ]* prior to the anticipated date of the modification of
the Facility (i.e. [ ]* and thereafter, on a [ ]* basis at least [ ]* prior to
the first day of each calendar quarter, Cubist will provide DSM with a
non-binding rolling forecast of its orders of the Product with respect to the
next [ ]* including expected delivery dates (SUPPLY FORECAST). The forecasts
for the first two quarters of any four quarter period shall represent binding
purchase obligations of Cubist with respect to [ ]* of the Product forecast in
the previous quarter’s Supply Forecast. In no event shall a Supply Forecast
exceed the optimal production capacity of the Facility for the period in question.

 

5

 

3.4                                 PRODUCT
ORDERS. Orders shall be placed by written purchase order and submitted by mail
or facsimile, or by other means agreed upon by the parties. No order shall be
binding upon DSM until the same shall have been accepted in writing by DSM. DSM
shall accept or reject all orders within [ ]* following receipt of same and
shall deliver all orders that are accepted in accordance with clauses 3.2, 3.3
and 3.5. It is agreed by the parties that the standard printed terms of
purchase/sale of Cubist and DSM, shall not be applicable. DSM shall deliver
against each such order in accordance with Section 3.5.

 

3.5                                 OBLIGATION
TO SUPPLY. (a) DSM shall use best efforts to accept and fill each order for
Product submitted by Cubist; including orders that exceed the Supply Forecast
for any quarter by [ ]* of the amount in the Supply Forecast for such quarter
delivered to DSM [ ]* days prior to such quarter. DSM shall not be in breach of
this Section 3.5 if DSM’s failure to supply Product is due to a Force Majeure
event.

 

(b)
If DSM is unable to supply the Product ordered by Cubist in accordance with the
terms of this Agreement, then DSM shall [ ]* to remedy the problem or secure an
alternative source of supply within a reasonable time at no cost to Cubist, and
any such alternative source of supply shall be on terms substantially identical
with the terms of this Agreement. If DSM is unable to remedy the problem or
secure an alternative source of supply within [ ]* days after its initial
failure to supply, then DSM shall consult with Cubist and the parties shall work
together to remedy the problem. In such an event, Cubist may at its option, and
upon notice to DSM: (i) draw down units of Product from the back-up supply
established pursuant to Section 3.6 and (ii) in the event that the parties
agree that Cubist will exhaust such back-up supply before DSM is able to resume
supplying Product in sufficient volume, take measures to obtain the Product
through a third party and such purchases shall be counted against the minimum
purchase obligations specified in Section 3.2. Cubist may continue to purchase Product
committed to DSM from third party suppliers until DSM notifies Cubist that it
is again able to supply Cubist’s needs and substantiates such claim to Cubist’s
reasonable satisfaction. Thereafter, Cubist shall commence purchasing Product
from DSM in accordance with the obligations specified in Section 3.2; provided
that: (i) Cubist shall not be required to cancel binding purchase orders with
any third party and (ii) DSM shall pay all cancellation costs incurred by
Cubist in switching its purchases to DSM. 

 

6

 

3.6                                 BACK-UP
INVENTORY. In order to increase the flexibility and to minimize adverse
consequences from any interruption in DSM’s ability to supply Cubist with
Product, DSM shall at all times maintain a back-up supply of raw material for
production of two (2) batches of Product to support Cubist’s forecasted
production needs following any failure of DSM to timely supply Cubist with
Product that conforms to the Specifications. The back-up inventory of raw
materials will be DSM’s property, and no sale or transfer or ownership of such
raw materials in inventory is contemplated herewith. The parties shall mutually
agree upon the exact size of such back-up supply of raw materials. DSM will
promptly notify Cubist if the back-up inventory of raw material falls below the
agreed level, including the reasons for such depletion, and shall restock the back-up
supply as soon as practicable so that the agreed back-up supply is maintained
at all times. The parties shall adjust the size of the back-up supply from time
to time as mutually agreed and as warranted by commercially prudent risk
management practices.

 

3.7                                 CHANGES. DSM
shall not change the specified raw materials vendors, raw materials or the
process without the consent of Cubist; provided that DSM may implement changes
in the process in accordance with Section 5.3(c).

 

3.8                                 PRODUCT
PRICES. (a) Cubist’s price for the Product shall equal [ ]*.

 

(b)
Except as otherwise agreed by the parties or as provided in this Section 3.8,
DSM may not increase the price charged for the Product 

 

(c)
If Cubist’s aggregate purchases of Product from DSM in Contract Year 1 (2002),
Contract Year 2 (2003), and Contract Year 3 (2004) cumulatively exceed [ ]* and
Cubist’s binding orders for Product for Contract Year 4 (2005) and Contract
Year 5 (2006) exceed an aggregate volume of [ ]*, the parties will negotiate in
good faith a reasonable reduction of the price [ ]* that will apply to
purchases during Contract Year 4 and Contract Year 5. In case the binding
orders for Product during Contract Year 4 and 5 have, for whatever reason, not been
supplied and taken, the price per kilogram will be adjusted accordingly retroactively.

 

3.9                                 PAYMENT.
Cubist shall pay for Product within [ ]* days after the date of DSM’s invoice
with respect to Product. Except for income taxes that may be assessed against
DSM, all taxes and charges that may be imposed by any government taxing authority
on the amounts paid by Cubist to DSM under this Agreement shall be paid by [
]*. [ ]* shall 

 

 

7

 

                                                make
payments by wire transfer to a bank identified by [ ]* using the procedure
specified in Section 10.6. All payments shall be stated and paid in United
States Dollars.

 

3.10                           DELIVERY.
DSM shall arrange for shipment and invoicing to Cubist of the Product ordered
by Cubist via common carrier, FOB Naples, Italy. In case, upon request of
Cubist, a quantity of Product ordered by Cubist is stored by DSM, DSM will be
entitled to prepayment of the invoice value pertaining to the amount of Product
stored. DSM shall be responsible for maintaining the Product under storage
conditions that are mutually agreed by the parties. If DSM maintains the agreed
storage conditions, DSM shall not be liable for any degradation of the Product.
Storing of Product shall not constitute any reason for Cubist to deter or
withhold payment of the relevant invoice(s).

 

3.11                           ACCEPTANCE.
(a) Each shipment of Product from DSM to Cubist shall contain such quality
control certificates as described in Exhibit F to show that the Product is in
conformity with the Product Specifications and Product Approvals. Cubist shall
notify DSM within [ ]* of the receipt of a shipment of the Product of any
nonconformity of the Product to the Product Specifications; provided that with
respect to obvious nonconformities, Cubist will promptly notify DSM. If Cubist fails
to so notify DSM or if Cubist processes the Product (or has it processed by a
third party), it will be deemed to have accepted the Product and to have waived
all claims in this respect.

 

(b)
Cubist shall not be required to pay DSM for any Product which has been property
rejected in accordance with clause 3.11 sub (a). Subject to clause 3.11 sub a,
DSM shall at its expense and at no further cost to Cubist replace any Product
that does not conform to the Product Specifications. Initially samples of any
defective Product shall be returned to DSM using the procedure specified in
this Section 3.11(b). Cubist shall notify DSM in writing of its rejection of
Product under Section 3.11(a), shall provide DSM with a sample of the defective
Product along with a reasonably detailed statement of the claimed defect and
proof of date of purchase and shall request a Return Material Authorization
(RMA) number and shall within thirty (30) days of receipt of such RMA number
return such rejected Product to DSM freight prepaid and properly insured. In
the event DSM determines that the sample of Product is defective and properly
rejected by Cubist, DSM shall issue the RMA and replace such defective Product.
The parties will then in mutual consent decide on how to dispose of the
defective Product in the most favorable manner. DSM shall return to Cubist, freight
prepaid, all replaced Product,

 

 

8

 

along
with reimbursement of the shipment charges for return of the samples of
nonconforming Product. In the event, that DSM determines that the returned
sample of Product is not defective and the parties are unable to resolve such
dispute to their mutual satisfaction within [ ]*, DSM shall submit a sample of
such returned Product to an independent laboratory reasonably acceptable to
Cubist for testing against the Specifications and the test results obtained by
such laboratory shall be final and controlling. The fees and expenses of such
laboratory testing shall be done entirely by the party against whom such
laboratory’s findings are made. In the event the test results indicate that the
Product in question does not conform to the Specifications, DSM shall replace
such Product at no additional cost to Cubist within [ ]* after receipt of such
results if replacement Product stock is available, and in any case as soon as
reasonably possible after receipt of such results.

 

4.             REGULATORY COMPLIANCE SYSTEMS,
CERTIFICATES AND ACCESS

4.1                                 GENERAL. DSM
agrees to manufacture Daptomycin bulk drug substance in accordance with the
Good Manufacturing Practice regulations outlined in USC 21 CFR 211, subparts
A-J, where applicable for the production of active pharmaceutical ingredients.
This will include, at a minimum, the maintenance of a separate, dedicated,
appropriately staffed quality control unit that has the responsibility of
accepting or rejecting incoming components, review of batch records, and
approving or rejecting Daptomycin bulk drug substance; the provision of
adequate laboratory facilities for conducting component testing, in-process and
final bulk drug substance testing; assuring that facility personnel have the
appropriate education, training and experience to perform their designated job
responsibilities; assuring that the manufacturing facilities are appropriately
designed and maintained to ensure that Daptomycin bulk drug substance meets
pre-determined specifications and is free of potential contamination; assuring
that the manufacturing and laboratory equipment is adequate for the production
and testing of Daptomycin bulk drug substance and that the equipment is
appropriately maintained; the preparation and maintenance of batch production
and control records; and having written standard operating procedures (SOP’s)
that are adhered to for the following:

 

                                                a.             Receipt and testing of incoming
components

                                                b.             Operational procedures for
manufacturing including sampling and in-process testing

 

9

 

 

                                                c.             Handling of deviations during the
manufacturing process

                                                d.             Procedures for analytical methods
which are used for component, in-process and final        product testing

                                                e.             Maintenance of manufacturing
facilities as well as equipment used in the               manufacturing
and laboratory facilities

                                                f.              GMP training of manufacturing and
quality control personnel

 

DSM
shall use reasonable best efforts consistent with prudent business practice in
cooperation with Cubist to (a) obtain all necessary approvals required under
Italian law for the production of the Product in the Facility and (b) maintain
such approvals in effect throughout the term of this Agreement.

 

4.2                                 CERTIFICATES
OF ANALYSIS. DSM shall perform, or cause to be performed, sample tests on each
lot of Product purchased pursuant to this Agreement before delivery to Cubist.
Each test report shall set forth the items tested, specifications and test
results in a certificate of analysis, containing the types of information which
shall have been agreed between the parties for each lot delivered. DSM shall
send or cause to be sent such certificates to Cubist prior to delivery of each lot.
The certificate of analysis will be accompanied by a certified batch
manufacturing record signed by DSM’s quality assurance department.

 

4.3                                 CERTIFICATES
OF MANUFACTURING COMPLIANCE. DSM shall provide or cause to be provided, for
each lot of Product purchased pursuant to this Agreement, a certificate of
manufacturing compliance, containing the types of information which shall have
been agreed between the parties, which will certify that the lot of Product was
manufactured in accordance with the Specifications and the current Good
Manufacturing Practices of the FDA, as the same may be amended from time to
time, including without limitation the requirements listed on Exhibit F (collectively,
GMPS). In the event the FDA or other governmental regulatory agency notifies
DSM that it intends to visit or inspect the Facility, DSM shall immediately
provide notice of such visit or inspection to Cubist and Cubist shall have the
right to participate in such visit or inspection. DSM shall advise Cubist
immediately If an authorized agent of the FDA or other governmental regulatory
agency visits the Facility without prior notice, DSM shall furnish to Cubist the
report by such agency of such visit within [ ]* of DSM’s receipt of such
report. In the event DSM fails to meet the GMPs, as a consequence of the non-,
late- or misperformance of its obligations hereunder except for reasons of
Force Majeure DSM will be responsible, at DSM’s expense, for (a) conducting an
investigation to define the probable

 

 

10

 

                                                causes for
the failure, (b) providing an acceptable GMP investigation report to Cubist for
review and written approval and (c) achieving compliance with GMP.

 

4.4                                 ACCESS TO
FACILITY; CUBIST’S RIGHT TO MONITOR. Cubist shall at all times upon reasonable
notice and during normal business hours have the right to inspect the Facility
to ascertain compliance with GMPs. In addition, Cubist shall have the right to
designate a Cubist employee or an independent consultant to monitor the
production process at the Facility, the expenses of which employee or
consultant would be borne by Cubist.

 

4.5                                 PRODUCT
RECALLS. (a) if (i) any regulatory authority withdraws the approval to sell the
Product in such country or issues a directive or request that the Product be
recalled for product safety reasons relating to the Product; or (ii) any
regulatory authority or court of competent jurisdiction issues a request,
directive or order that the Product be recalled; or (iii) Cubist shall
reasonably determine that the Product should be recalled; the parties shall
take all appropriate corrective actions, and shall cooperate in any
governmental investigations surrounding the recall. In the event that such
recall results from the non-, late- or misperformance by DSM of its obligations
hereunder except for reasons of Force Majeure, DSM shall up to an aggregate
maximum amount of [ ]* be responsible for all expenses of the recall (except
that in the event of a contributory fault of Cubist DSM and Cubist shall share
such expenses accordingly) and DSM shall promptly replace such Product at no
additional cost to Cubist consistent with directions received from the
appropriate governmental authority. In all other cases, Cubist shall be
responsible for the expenses of recall, including the cost of replacement
Product. For the purposes of this Agreement, the expenses of recall shall
include, without limitation, the expenses of notification and destruction or return
of the recalled Product and all other costs incurred in connection with such
recall, but shall not include lost profits of either party.

 

(b)
In the event a regulatory authority orders the withdrawal of Product from any
country, Cubist shall not be obligated to purchase the Product or sell the
Product in such country from the date of such withdrawal and until Cubist is
again authorized to sell Product in such country, and DSM shall not be
obligated to supply the Product to Cubist in such country for such period. If
such a withdrawal decision is final and not appealable, the minimum offtake
obligations pursuant to Section 3.2 will be adjusted accordingly.

 

11

 

5.             CONFIDENTIALITY; PROPRIETARY
RIGHTS.

 

                                                5.1.
PUBLICITY. Except as is necessary for governmental notification purposes
relating to the production, importation, marketing or sale of Product or to
enforce their respective rights under this Agreement, or to a party’s legal or
financial advisors, and except as otherwise agreed to by the parties hereto in
writing, the parties shall (a) keep the material terms of this Agreement
confidential, (b) agree upon the text and the exact timing of an initial public
announcement relating to the transactions contemplated by this Agreement as
soon as possible after the Effective Date (such agreement not to be
unreasonably withheld) and (c) agree on the text and the timing of any
subsequent public announcements regarding this Agreement or the transactions contemplated
herein. Neither party shall use the name of the other party or any director,
officer or employee of the other party or any adaptation thereof in any
advertising, promotional or sales literature or publicity without the prior
written approval of the other party. If this Agreement is required to be filed
by either Party with the Securities and Exchange Commission or another
applicable securities regulatory authority, such party shall not file this
Agreement with the Securities and Exchange Commission without seeking
confidential treatment for any provisions of this Agreement that either party believes
would disclose trade secrets, confidential commercial or financial information
that would impair the value of the contractual rights represented by this
Agreement or provide detailed commercial and financial information to
competitors or third parties. Neither party shall use the name of the other
party or any director, officer or employee of the other party or any adaptation
thereof without the prior written approval of the other party.

 

                                                5.2
CONFIDENTIALITY. It is contemplated that in the course of the performance of
this Agreement each party may, from time to time. disclose Confidential
Information to the other. Each party agrees to take all reasonable steps to
prevent disclosure of Confidential Information of the other party and not to
use any Confidential Information of the other party except for the limited
purposes set forth in this Agreement; provided that no provision of this
Agreement shall be construed to preclude such disclosure of Confidential Information
as may be required by valid court or administrative order, or to the extent
necessary and appropriate to divulge such Confidential Information to obtain
governmental approval for marketing the Product; provided notice of such
disclosure is provided to the other party prior to such disclosure. All
Confidential Information made available hereunder, including copies thereof,
shall be returned or destroyed upon the first to occur of (a) termination of
this Agreement or (b) written request by 

 

12

 

                                                the
discloser, except that each party may retain one (1) complete copy of
Confidential Information for archival purposes to assure compliance with this
Agreement. For the purpose of this Article 5, it is agreed that any direct or
indirect Affiliate of DSM shall not be regarded as a third party.

 

                                                5.3
PROPRIETARY RIGHTS. (a) This Agreement does not convey to DSM any ownership
rights in the Cubist Technology or the Process or the Product (or in any
intellectual property rights embodied in such Process or Product) by
implication, estoppel or otherwise except for the rights expressly granted
under this Agreement. Title to the Cubist Technology and the Process and the
Product (and the intellectual property rights embodied in the Process and the
Product) shall at all times remain vested in Cubist or its licensors.

 

                                                (b) This
Agreement does not convey to Cubist any ownership rights in any existing
materials, tools and methodologies that are proprietary to DSM or to third
parties or in any intellectual property rights embodied in such products,
materials, tools and methodologies by implication, estoppel or otherwise. Title
to all such products, materials, tools and methodologies and the intellectual
property rights embodied in such products, materials, tools and methodologies
shall at all times remain vested in DSM or its licensors.

 

                                                (c) DSM will
manufacture the Product according to the Process but will not develop, modify,
enhance or alter the Process; provided, that in the event and to the extent the
parties undertake any development, modification, enhancement or alteration of
the Process they shall enter into a separate agreement containing mutually
acceptable terms covering such activity, including terms that (i) vest
ownership of any improvements to the process that are specific to the Product
in Cubist and (ii) vest ownership of any improvements in the Process that are
not specific to the Product in DSM.

 

                                                (d) Subject
to the terms and conditions of this Agreement, Cubist hereby grants to DSM, and
DSM hereby accepts, a non-exclusive, royalty-free right and license, excluding
the right to grant sublicenses, to practice the Process and Cubist Technology
in order to make, have made, export and sell Product to Cubist.

 

                                                (e) Each
party agrees that any of its employees, affiliates, consultants who are
designated as inventors agree to execute all assignments, powers of attorney or
other patent documents necessary to vest ownership to the other party as
described in Section 5.3 (c) (i).

 

13

 

5.4                                 PROPRIETARY
RIGHTS NOTICES. DSM shall mark or have marked all containers or packages of
Product in accordance with the patent marking laws of the jurisdiction in which
such units of Product are manufactured.

 

6.             REPRESENTATIONS AND WARRANTIES.

 

6.1                                 AUTHORIZATION;
ENFORCEABILITY. Each of DSM and Cubist represents and warrants to the other
that: (a) it is a corporation duly organized, validly existing and in good
standing under the laws of its incorporating jurisdiction; (b) it has all
requisite corporate power and authority to enter into this Agreement; (c) it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby; and
(d) this Agreement is a valid and binding obligation of such party enforceable
in accordance with its terms.

 

6.2                                 CONFORMITY;
GMP’S. DSM represents and warrants to Cubist that all Product supplied to
Cubist hereunder shall, at the time of delivery: (a) conform to the
Specifications; and (b) be manufactured, labeled, packaged and tested (while in
the possession of, stored by or control of DSM) in accordance with the
applicable GMP’s, and the applicable laws and the regulations in the United
States and the EU relating to the manufacture and testing of the Product as
defined in Exhibit F to this Agreement. THE FOREGOING WARRANTY IS THE SOLE AND
EXCLUSIVE WARRANTY GIVEN BY DSM WITH RESPECT TO THE DAPTOMYCIN PRODUCT, AND DSM
GIVES AND MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING UNDER TRADE USAGE OR CUSTOM
OR ANY EXPRESS OR IMPLIED WARRANTIES OF PATENT VALIDITY OR FREEDOM OF OR FROM
PATENT INFRINGEMENT.

 

6.3                                 COMPLIANCE
WITH FDA. DSM represents and warrants to Cubist that (a) all Product supplied
to Cubist hereunder shall at the time of such delivery, not be adulterated
within the meaning of the Federal Food, Drug and Cosmetic Act of 1941, as
amended (FDA ACT), as such FDA Act is effective at the time of delivery, and
will not be an article which may not, under the provisions of the FDA Act, be
introduced into interstate commerce.

 

14

 

6.4                                 FDA
DEBARMENT CERTIFICATION. DSM warrants that it shall not knowingly, after due
inquiry, employ, contract with or retain any person directly or indirectly to
perform services under this Agreement, if such person is debarred by the FDA
under 21 USC 335a(k) (Section 306, Federal Food, Drug and Cosmetic Act). Upon
written request from Cubist (including a request made on it’s behalf by Cubist’s
agent), DSM shall, within [ ]*, provide written confirmation that it has
complied with the foregoing obligation.

 

6.5                                 EXCLUSIVE
REMEDY. EXCEPT AS OTHERWISE PROVIDED IN SECTION 7 (WITH RESPECT TO THIRD PARTY
CLAIMS), IN THE EVENT ANY PRODUCT PURCHASED BY CUBIST FROM DSM FAILS TO CONFORM
TO THE WARRANTY SET FORTH IN SECTION 6.2, DSM’S SOLE AND EXCLUSIVE LIABILITY
AND CUBIST’S SOLE AND EXCLUSIVE REMEDY SHALL BE, [ ]*, PROVIDED THAT CUBIST
NOTIFIES DSM OF SUCH NONCONFORMITY AND RETURNS A SAMPLE OF THE PRODUCT AND THE
PRODUCT IN ACCORDANCE WITH SECTION 3.11 (A) AND (B).

 

7.             RISK ALLOCATION

7.1                                 LIMITATION
OF LIABILITY. EXCEPT FOR INFRINGEMENT OF CUBIST’S INTELLECTUAL PROPERTY RIGHTS
OR BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER SECTION 5.1 AND EXCEPT AS
OTHERWISE PROVIDED IN SECTION 7.2 WITH RESPECT TO THIRD PARTY CLAIMS, DSM SHALL
NOT BE LIABLE TO CUBIST FOR LOST PROFITS OR FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, HOWEVER CAUSED,
UNDER ANY THEORY OF LIABILITY. THE AGGREGATE LIABILITY OF DSM FOR DIRECT
DAMAGES OF CUBIST OUT OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE LIMITED TO THE INVOICE VALUE OF THE PRODUCT WITH RESPECT TO WHICH A
CLAIM PERTAINS.

 

7.2                                 DSM
INDEMNIFICATION. Subject to the provisions of Section 7.4 [ ]*, DSM (as
INDEMNIFYING PARTY) shall solely defend, indemnify and hold harmless Cubist,
its subsidiaries, parent corporations, Affiliates, officers, directors,
independent contractors, partners, shareholders, employees, agents, successors
and assigns (each, as an INDEMNITEE) from and against any claim, suit, demand,
loss, damage, expense (including reasonable attorney’s fees of Indemnitee(s)
and those that 

 

 

15

 

                                                may be
asserted by a third party) or liability (collectively, LOSSES) relating to
personal injuries and/or property damages to the extent arising from Product
Liability legislation. The foregoing Indemnification action shall not apply in
the event and to the extent that such Losses arose as a result of any
Indemnitee’s negligence, intentional misconduct or breach of this Agreement.

 

7.3                                 CUBIST
INDEMNIFICATION. Subject to the provisions of Section 7.4, Cubist (as
INDEMNIFYING PARTY) shall defend, indemnify and hold harmless DSM, its
subsidiaries, parent corporations, Affiliates, officers, directors, independent
contractors, partners, shareholders, employees, agents, successors and assigns
(each, as an INDEMNITEE) from and against any Losses arising from or related to
(a) the negligence or willful misconduct of Cubist, (b) the use, sale or
processing of the Product by Cubist, to the extent not attributable to DSM and
(c) any allegation that the Process or Product infringes any intellectual property
right of any third party, unless caused by DSM’s unauthorized use or
modification of the Process or Product.

 

7.4                                 PROCEDURE.
To receive the benefit of indemnification under Sections 7.2 and 7.3, the
Indemnitee must (a) promptly notify the Indemnifying Party in writing of a
claim or suit (such notice to include a description of such claim or suit and a
copy of such claim or process and all legal pleadings in connection therewith);
(b) provide reasonable cooperation (at the Indemnifying Party’s expense) in the
defense and settlement of the claim or suit; and (c) tender to the Indemnifying
Party (and its insurer) full authority to defend or settle the claim or suit.
The Indemnifying Party shall have no obligation to indemnify Indemnitee in connection
with any settlement made without the Indemnifying Party’s written consent.
Failure to comply with the provisions of Section 7.4(a)-(c) shall relieve the
Indemnifying Party of its indemnification obligations; provided, that failure
to give notice in accordance with Section 7.4(a) shall not relieve the
Indemnifying Party of its indemnification obligations, except where, and solely
to the extent that, such failure actually and materially prejudices the rights
the Indemnifying Party. Notwithstanding the provisions of Section 7.4(b)-(c):
(i) Indemnitee shall have the right to retain its own counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of
Indemnitee by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such Indemnitee
and any other party represented by such counsel in such proceedings; and (a) if
an Indemnitee determines that there is a reasonable probability that a claim
may materially and adversely affect it, other than as a result of  

 

16

 

 

                                                money
payments required to be reimbursed by the Indemnifying Party under this Section
7, the Indemnitee shall have the right to defend, compromise or settle such
claim or suit, provided that such settlement or compromise shall not, unless
consented to in writing by the Indemnifying Party, be relevant as to the
liability of the Indemnifying Party to Indemnitee. 

 

7.5                                 INSURANCE.
(a) DSM shall cause to purchase and maintain in force during the term of this
Agreement, at its expense, premises liability insurance coverage described in
Exhibit G hereto. Certificates of such insurance shall be provided to Cubist
upon the execution of this Agreement.

 

                                                (b) Each
party shall purchase and maintain insurance or self-insurance adequate to cover
its obligations hereunder and which are consistent with normal business
practices of prudent companies similarly situated at all times during which any
Product is being clinically tested with human subjects or commercially
distributed or sold. It is understood that such insurance shall not be
construed to create a limit of either party’s liability.

 

                                                (c) Each
party shall provide the other with written evidence of the insurance required
under Sections 7.5(a) and 7.5(b) (or financial information that describes the
amounts available under any self-insurance facility) upon request. Each party
shall provide the other with written notice at least fifteen (15) days prior to
the cancellation, non-renewal or material change in such insurance or self-insurance
which materially adversely affects the rights of the other party hereunder.

 

8.             TERM AND TERMINATION.

8.1                                 TERM. This
Agreement shall take effect at the Effective Date and shall remain in effect
unto the end of the fifth Contract Year, unless sooner terminated in accordance
with Section 8 or extended in accordance with this Section 8.1. Thereafter,
this Agreement shall automatically renew for consecutive two-year terms, unless
and until terminated by either party by a six month prior written notice of
termination to the other party taking effect at the end of the initial term or
any extension thereof. All applicable terms and conditions of this Agreement
shall remain in effect during such extension term, unless expressly amended by
the parties.

 

8.2                                 TERMINATION.
(a) Either party may terminate this Agreement at any time: (i) upon [ ]* notice
to the other party in the event that the other 

 

17

 

                                                party shall
have breached any of its material obligations hereunder and shall not have
cured such default prior to the expiration of the [ ]* period; (ii) upon notice
to the other party in the event that a Force Majeure condition has prevented
performance by the other party for more than [ ]*; (iii) upon notice to the
other party in the event that any bankruptcy, insolvency or receivership
proceeding or the like (including out-of-court arrangements involving a party
that cannot pay its debts as they mature) is commenced by or against the other
party unless, in the case of an involuntary proceeding, it is dismissed within
[ ]*.

 

                                                (b) Cubist
may terminate this Agreement at any time, upon [ ]* notice to DSM, if Cubist
finally and irrevocably terminates the manufacture and sale of the Product
(both directly and indirectly). Cubist may also terminate this Agreement in the
event that the FDA refuses to approve the Product. In this event the parties
will reasonably agree upon the disposition of any ongoing orders for Product
and Product which is currently work in progress.

 

                                                (c) The parties
may also terminate this Agreement at any time upon mutual written agreement of
the parties.

 

8.3                                 EFFECT OF
TERMINATION. Upon any termination (including expiration) of this Agreement: (i)
each party will return to the other party or certify in writing to the other
party that it has destroyed all documents and other tangible items it or its
employees or agents have received or created pursuant to this Agreement
pertaining, referring or relating to the Confidential Information of the other
party, except that each party may retain one (1) complete copy of Confidential Information
for archival purposes to assure compliance with this Agreement; and

 

                                                (ii) DSM
shall promptly notify Cubist of the quantity of Product in inventory and Cubist
shall have the obligation to purchase such inventory of Product in accordance
with the provisions of Sections 3.4-3.5 and subject to Sections 3.10-3.11;
provided, that Cubist shall not be obligated to purchase any more than the
quantity of Product specified in Cubist’s then most recent quarterly forecast
for the following four quarters unless the parties had agreed to a larger inventory,
in which case such inventory will be purchased and taken in its entirety by
Cubist. DSM shall also promptly notify Cubist of the quantity of raw materials
in inventory and Cubist shall have the obligation to either reimburse DSM for
the purchase price and inventory costs of DSM relating to such raw materials or
to have DSM manufacture Product thereof and pay the applicable purchase price;

 

18

 

                                                provided,
that Cubist shall not be obligated to reimburse or purchase any more than the
quantity of raw materials in inventory agreed upon by the parties.

 

                                                (b)
Termination of this Agreement shall not affect rights and obligations of either
party that may have accrued prior to the effective date of termination or any
obligation specifically stated to survive termination. To that extent, all
outstanding payments due by Cubist to DSM, will become payable at once. In
particular the provisions of Sections 1, 4.5, 5.1-5.4, 6-9 and 10 shall survive
any expiration or termination of this Agreement. Neither party shall be entitled
to damages resulting from the termination of this Agreement in accordance with
this Section 8.

 

9.                                       DISPUTE
RESOLUTION.

9.1                                 DESIGNATED
CONTACTS. (a) Each party will designate an individual (REPRESENTATIVE) who will
have the authority to represent such party in all matters concerning the
transactions contemplated by this Agreement. All communications should be
addressed to the designated Representative. The initial Cubist Representative
will be [ ]*. The initial DSM Representative will be [ ]*. 

 

                                                (b) In the
event that any dispute arises relating to this Agreement, the Representatives
shall promptly meet and attempt to resolve same through good faith discussions.
If the Representatives are unable to resolve any dispute to their mutual
satisfaction within [ ]* after they commence discussions regarding same, and do
not agree to extend the time for resolution of the issue at the end of their
meeting, then either party may initiate alternative dispute resolution in
accordance with Section 9.2.

 

9.2                                 ARBITRATION.
(a) Except in the case of a breach of Section 5, any claim, dispute, or
controversy arising out of or relating to this Agreement that is not resolved
in accordance with the provisions of Section 9.1 will be submitted by the
parties to arbitration by the London Court of International Arbitration (LCIA)
under the rules then in effect for the LCIA, as modified herein or by agreement
of the parties. Any such arbitration shall be conducted in London, England by one
or more arbitrators selected in accordance with this Section 9.2. Each party
irrevocably and unconditionally (i) consents to the jurisdiction of any such
proceeding and waives any objection that it may have to personal jurisdiction
or the laying of venue of any such proceeding; and (ii) knowingly and
voluntarily waives its rights to have disputes tried and adjudicated by a judge
and jury except as otherwise expressly provided 

 

19

 

                                                herein. The
parties will cooperate with each other in causing the arbitration to be held in
as efficient and expeditious a manner as practicable. The parties will attempt
to agree upon a mutually acceptable arbitrator within 30 days of receipt of the
notice of intent to arbitrate. If the parties are unable to agree upon a single
arbitrator within such 30-day period or any extension of time which is mutually
agreed upon, three (3) arbitrators shall be used, one selected by each party
within ten (10) days after the conclusion of the 30-day period and a third
selected by the first two within ten (10) days thereafter. Unless the parties
agree otherwise, they shall be limited in their discovery to directly relevant
documents. Responses or objections to a document request shall be served twenty
(20) days after receipt of the request. The arbitrator(s) shall resolve any
discovery disputes. It is understood that the parties may (but are not required
to) submit disputes concerning any breach of Section 5 to arbitration in
accordance with this Section 9.2. Nothing herein shall prevent the parties from
settling any dispute by mutual agreement at any time.

 

                                                (b) The
arbitrator(s) shall apply the substantive laws of England when construing this
Agreement and attempting to resolve any dispute relating to the transactions
contemplated by this Agreement, without regard for any choice or conflict of
laws rule or principle that would result in the application of the substantive
law of any other jurisdiction. The arbitration shall be of each party’s
individual claims only, and no claim of any other party shall be subject to arbitration
in such proceeding. Except as otherwise required by law, the parties and the
arbitrator(s) shall maintain as confidential all information or documents
obtained during the arbitration process, including the resolution of the
dispute.

 

                                                (c) The
arbitrator(s) shall not have the authority to award exemplary or punitive
damages, and the parties expressly waive any claimed right to such damages. The
arbitrator(s) shall have the authority to award actual money damages (with
interest on unpaid amounts from the date due) and may grant equitable relief as
is just and provided by the LCIA Rules, in each case except as specifically
provided to the contrary herein The costs and expenses of the arbitration, but
not the costs and expenses of the parties, shall be shared equally by the
parties, provided that the non-prevailing party in any arbitration shall pay
the other party’s costs and expenses (including travel expenses) and reimburse
such party for its portion of the arbitration costs. Any award rendered by the
arbitrator(s) shall be final and binding upon the parties. Judgment upon the
award may be entered in any court of competent jurisdiction. If a party fails
to proceed with arbitration, 

 

20

 

                                                unsuccessfully
challenges the arbitration award, or fails to comply with the arbitration
award, the other party is entitled to costs, including reasonable attorneys’
fees, for having to compel arbitration or defend or enforce the award.

 

                                                (d) In the
case of a breach of Section 5, either party may seek legal or equitable relief
in the court(s) having jurisdiction over such matter.

 

10.           GENERAL PROVISIONS.

10.1                           GOVERNING
LAW. This Agreement shall be governed and construed in accordance with the laws
of England, to the exclusion of both its rules on conflicts of laws and the
provisions of the United Nations Convention on Contracts for the International
Sale of Goods.

 

10.2                           AMENDMENT
AND WAIVER. No provision of or right under this Agreement shall be deemed to
have been waived by any act or acquiescence on the part of either party, its
agents or employees, but only by an instrument in writing signed by an
authorized officer of each party. No waiver by either party of any breach of
this Agreement by the other party shall be effective as to any other breach,
whether of the same or any other tern or condition and whether occurring before
or after the date of such waiver.

 

10.3                           INDEPENDENT
CONTRACTORS. Each party represents that it is acting on its own behalf as an
independent contractor and is not acting as an agent for or on behalf of any
third party. This Agreement and the relations hereby established by and between
DSM and Cubist do not constitute a partnership, joint venture, franchise,
agency or contract of employment. Cubist is not granted, and shall not
exercise, the right or authority to assume or create any obligation or
responsibility on behalf of or in the name of DSM or its Affiliates.

 

10.4                           ASSIGNMENT.
Neither party may assign this Agreement or any of such party’s rights and
obligations hereunder to any third party without the prior written consent of
the other party, which consent shall not be unreasonably withheld. Either party
may assign this Agreement, and such party’s rights and obligations hereunder,
to an Affiliate (including a subsidiary) which controls, is controlled by, or
is under common control with a party so long as the assigning party remains
primarily liable for its obligations hereunder. In addition, either party may assign
this Agreement, and its rights and obligations hereunder, to any third party
that purchases substantially all of the assigning party’s stock or assets
relating to that portion of such party’s business that is related to the
subject of this Agreement. Any attempted 

 

21

 

                                                assignment,
delegation or transfer in contravention of this Agreement shall be null and
void.

 

10.5                           SUCCESSORS
AND ASSIGNS. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

 

10.6                           NOTICES.
Unless otherwise provided herein, any notice, report, payment or document to be
given by one party to the other shall be in writing and shall be deemed given
when delivered personally or mailed by certified or registered mail, postage
prepaid (such mailed notice to be effective on the date which is three (3)
business days after the date of mailing), or sent by nationally recognized
overnight courier (such notice sent by courier to be effective one business day
after it is deposited with such courier), or sent by telefax (such notice sent
by telefax to be effective when sent, if confirmed by certified or registered
mail or overnight courier as aforesaid):

 

                                                If to DSM:

                DSM Capua S.p.A.

                Strada
Statale Appla 4fi-48

                Capua, Italy

                Attention:  Eric Lodder

                Phone: 
39.0823.628.325

                Fax:  
39.0823.628.326

 

                If to Cubist:

                Cubist Pharmaceuticals, Inc.

                24 Emily Street

                Cambridge. MA 02139 U.S.A.

                Attention: Alan Watson

                Telefax No.: 
(617) 234-5592

                Telephone No.: 
(617) 576-1999

 

                                                or to such
other place as any party may designate as to itself by written notice to the
other party.

 

10.7                           SEVERABILITY.
In the event any provision of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other term or provision hereof. The
parties agree that they will negotiate in good faith or will permit a court or
arbitrator to replace any provision hereof so held invalid, illegal or
unenforceable with a  

 

22

 

                                                valid
provision which is as similar as possible in substance to the invalid, illegal
or unenforceable provision.

 

10.8                           CONFLICT OR
INCONSISTENCY. In the event of any conflict or inconsistency between the terms
and conditions hereof and any terms or conditions set forth in any purchase
order or other document relating to the transactions contemplated by this
Agreement, the terms and conditions of this Agreement shall prevail.

 

10.9                           CAPTIONS.
Captions of the sections and subsections of this Agreement are for reference
purposes only and do not constitute terms or conditions of this Agreement and
shall not limit or affect the meaning or construction of the terms and
conditions hereof.

 

10.10                     WORD
MEANINGS. Words such as HEREIN, HEREINAFTER, HEREOF AND HEREUNDER refer to this
Agreement as a whole and not merely to a section or paragraph in which such
words appear, unless the context otherwise requires. The singular shall include
the plural, and each masculine, feminine and neuter reference shall include and
refer also to the others, unless the context otherwise requires.

 

10.11                     FURTHER
ASSURANCES. Each party covenants and agrees that, subsequent to the execution
and delivery of this Agreement and without any additional consideration, it
will execute and deliver any further legal instruments and perform any acts
which are or may become reasonably necessary to effectuate the purposes of this
Agreement.

 

10.12                     RULES OF
CONSTRUCTION. The parties agree that they have participated equally in the
formation of this Agreement and that the language and terms of this Agreement
shall not be construed against either party by reason of the extent to which
such party or its professional advisors participated in the preparation of this
Agreement.

 

10.13                     COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.

 

10.14                     FORCE
MAJEURE. Except as otherwise provided in this Agreement, in the event that a
delay or failure of a party to comply with any obligation, other than a payment
obligation, created by this Agreement 

 

23

 

                                                is caused by
a Force Majeure condition, that obligation shall be suspended during the
continuance of the Force Majeure condition.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their respective
duly authorized officers, and have duly delivered and executed this Agreement
under seal as of the date first set forth above.

 

	
  CUBIST
  PHARMACEUTICALS, INC.

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ SCOTT M. ROCKLAGE

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  DSM CAPUA S.p.A

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ E. LODDER

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ C. MANTOVANI

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  

 

LIST OF EXHIBITS

A:            List of Patent and Patent
Applications

B:            Daptomycin Structure

C:            Process

D:            Specifications

E:             Requirements

F:             Qualification Certificates and
cGMPs

G:            Insurance

 

 

24

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