Document:

Exhibit 10.1

LICENSE AGREEMENT

BY AND BETWEEN

CUBIST PHARMACEUTICALS, INC.

AND

CHIRON HEALTHCARE IRELAND LTD.

October 2, 2003

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1. DEFINITIONS

  	
   

  	
  2

  
	
  1.1.   “Additional Daptomycin Product”

  	
   

  	
  2

  
	
  1.2.   “Affiliate”

  	
   

  	
  2

  
	
  1.3.   “Approved New Trademark”

  	
   

  	
  2

  
	
  1.4.   “Chiron Data”

  	
   

  	
  2

  
	
  1.5.   “Chiron Development Plan”

  	
   

  	
  2

  
	
  1.6.   “Chiron Interest”

  	
   

  	
  2

  
	
  1.7.   “Chiron Inventions”

  	
   

  	
  2

  
	
  1.8.   “Chiron Joint Technology Rights”

  	
   

  	
  2

  
	
  1.9.   “Chiron Know-How”

  	
   

  	
  3

  
	
  1.10.   “Chiron Marketing Information”

  	
   

  	
  3

  
	
  1.11.   “Chiron Patent”

  	
   

  	
  3

  
	
  1.12.   “Chiron Related Know-How”

  	
   

  	
  3

  
	
  1.13.   “Chiron Related Patent”

  	
   

  	
  3

  
	
  1.14.   “Chiron Technology”

  	
   

  	
  3

  
	
  1.15.   “Commercial Launch”

  	
   

  	
  3

  
	
  1.16.   “Commercialize”

  	
   

  	
  4

  
	
  1.17.   “Commercially Important Indications”

  	
   

  	
  4

  
	
  1.18.   “Commercially Reasonable Efforts”

  	
   

  	
  4

  
	
  1.19.   “Confidential Information”

  	
   

  	
  4

  
	
  1.20.   “Contract Manufacturing Agreements”

  	
   

  	
  4

  
	
  1.21.   “Control”

  	
   

  	
  5

  
	
  1.22.   “cSSSI”

  	
   

  	
  5

  
	
  1.23.   “Cubist Data”

  	
   

  	
  5

  
	
  1.24.   “Cubist Development Plan”

  	
   

  	
  5

  
	
  1.25.   “Cubist Inventions”

  	
   

  	
  5

  
	
  1.26.   “Cubist Joint Technology Rights”

  	
   

  	
  5

  
	
  1.27.   “Cubist Know-How”

  	
   

  	
  5

  
	
  1.28.   “Cubist Marks”

  	
   

  	
  5

  
	
  1.29.   “Cubist Patent”

  	
   

  	
  5

  
	
  1.30.   “Cubist Technology”

  	
   

  	
  5

  
	
  1.31.   “Daptomycin”

  	
   

  	
  6

  
	
  1.32.   “Daptomycin IV Product”

  	
   

  	
  6

  
	
  1.33.   “Defective Manufactured Product”

  	
   

  	
  6

  
	
  1.34.   “Directly Competitive Product”

  	
   

  	
  6

  
	
  1.35.   “Dollar”

  	
   

  	
  6

  
	
  1.36.   “Drug Approval Application”

  	
   

  	
  6

  
	
  1.37.   “Drug Master File,”

  	
   

  	
  6

  
	
  1.38.   “Effective Date Third Party Licenses”

  	
   

  	
  6

  
	
  1.39.   “EMEA”

  	
   

  	
  6

  
	
  1.40.   “Fair Market Value”

  	
   

  	
  6

  

 

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

 

 i
 

 

	
  1.41.   “FDA”

  	
   

  	
  6

  
	
  1.42.   “Global Harm”

  	
   

  	
  7

  
	
  1.43.   “IND”

  	
   

  	
  7

  
	
  1.44.   “Indemnify”

  	
   

  	
  7

  
	
  1.45.   “Information”

  	
   

  	
  7

  
	
  1.46.   “Infringement”

  	
   

  	
  7

  
	
  1.47.   “Injection”

  	
   

  	
  7

  
	
  1.48.   “Joint Coordination Team”

  	
   

  	
  7

  
	
  1.49.   “Joint Inventions”

  	
   

  	
  7

  
	
  1.50.   “Joint Know-How”

  	
   

  	
  7

  
	
  1.51.   “Joint Patents”

  	
   

  	
  7

  
	
  1.52.   “Joint Technology”

  	
   

  	
  7

  
	
  1.53.   “Key Development Studies”

  	
   

  	
  7

  
	
  1.54.   “Knowable Patent”

  	
   

  	
  7

  
	
  1.55.   “Launch Indication(s)”

  	
   

  	
  7

  
	
  1.56.   “Licensed Products”

  	
   

  	
  7

  
	
  1.57.   “Lilly”

  	
   

  	
  8

  
	
  1.58.   “Lilly License”

  	
   

  	
  8

  
	
  1.59.   “Lilly Patent”

  	
   

  	
  8

  
	
  1.60.   “Losses”

  	
   

  	
  8

  
	
  1.61.   “MAA”

  	
   

  	
  8

  
	
  1.62.   “Major Market Countries”

  	
   

  	
  8

  
	
  1.63.   “Manufacturing Information”

  	
   

  	
  8

  
	
  1.64.   “Manufacturing Plan”

  	
   

  	
  8

  
	
  1.65.   “Marketing Plan”

  	
   

  	
  8

  
	
  1.66.   “Marketing Plan Trigger Event”

  	
   

  	
  8

  
	
  1.67.   “Medical Affairs Studies”

  	
   

  	
  8

  
	
  1.68.   “NDA”

  	
   

  	
  8

  
	
  1.69.   “Net Sales”

  	
   

  	
  8

  
	
  1.70.   “Other Licensee”

  	
   

  	
  9

  
	
  1.71.   “Other Licensee Data”

  	
   

  	
  9

  
	
  1.72.   “Patent”

  	
   

  	
  10

  
	
  1.73.   “Price Approval”

  	
   

  	
  10

  
	
  1.74.   “Primary Endpoint”

  	
   

  	
  10

  
	
  1.75.   “Reasonable Buyer”

  	
   

  	
  10

  
	
  1.76.   “Reciprocating Licensee”

  	
   

  	
  11

  
	
  1.77.   “Regulatory Approval”

  	
   

  	
  11

  
	
  1.78.   “Regulatory Authority”

  	
   

  	
  11

  
	
  1.79.   “Regulatory Plan”

  	
   

  	
  11

  
	
  1.80.   “Replacement Indication”

  	
   

  	
  11

  
	
  1.81.   “Replacement Indication Study”

  	
   

  	
  11

  
	
  1.82.   “Replacement Study”

  	
   

  	
  11

  
	
  1.83.   “Required
  Study”

  	
   

  	
  11

  
	
  1.84.   “Restricted
  Period”

  	
   

  	
  11

  
	
  1.85.   “Royalty Rate”

  	
   

  	
  11

  
	
  1.86.   “Stock Purchase Agreement”

  	
   

  	
  11

  

 

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

 

 ii
 

 

	
  1.87.   “Supply Agreement”

  	
   

  	
  11

  
	
  1.88.   “Term”

  	
   

  	
  11

  
	
  1.89.   “Territory”

  	
   

  	
  12

  
	
  1.90.   “Territory Specific Studies”

  	
   

  	
  12

  
	
  1.91.   “Third Party”

  	
   

  	
  12

  
	
  1.92.   “Third Party Infringement Claim”

  	
   

  	
  12

  
	
  1.93.   “Transfer Price”

  	
   

  	
  12

  
	
  1.94.   “Unlicensed Product”

  	
   

  	
  12

  
	
  1.95.   “Unlicensed Sales Threshold”

  	
   

  	
  12

  
	
  1.96.   “Valid Claim”

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2. PRODUCT RIGHTS AND RIGHTS OF FIRST
  NEGOTIATION

  	
   

  	
  12

  
	
  2.1.   Product Rights

  	
   

  	
  12

  
	
  2.2.   Licenses to Chiron

  	
   

  	
  12

  
	
  2.3.   Licenses to Cubist

  	
   

  	
  13

  
	
  2.4.   Existing Related Intellectual Property of
  Chiron

  	
   

  	
  14

  
	
  2.5.   Field

  	
   

  	
  14

  
	
  2.6.   Use of Patents and Know-How

  	
   

  	
  14

  
	
  2.7.   Exclusivity

  	
   

  	
  14

  
	
  (a)  Chiron

  	
   

  	
  14

  
	
  (b)  Cubist

  	
   

  	
  15

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

  	
   

  	
  15

  
	
  2.9.   Rights
  of First Negotiation

  	
   

  	
  15

  
	
  2.10.   Right
  of Co-Negotiation

  	
   

  	
  15

  
	
  2.11.   Marketing a Directly Competitive Product

  	
   

  	
  16

  
	
  2.12.   Mechanism to Determine Fair Market Value

  	
   

  	
  17

  
	
  2.13.   Subcontracting

  	
   

  	
  17

  
	
  2.14.   Rights of Last of Refusal for Canada

  	
   

  	
  18

  
	
  2.15.   Applicable Supply Agreement Provisions

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. COORDINATION

  	
   

  	
  19

  
	
  3.1.   General

  	
   

  	
  19

  
	
  3.2.   Joint Coordination Team

  	
   

  	
  20

  
	
  (a)  Formation

  	
   

  	
  20

  
	
  (b)  Membership

  	
   

  	
  20

  
	
  (c)  Meetings

  	
   

  	
  20

  
	
  (d)  Specific Activities

  	
   

  	
  20

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

  	
   

  	
  21

  
	
  (f)  Meeting Agendas

  	
   

  	
  22

  
	
  3.3.   JCT Coordinators

  	
   

  	
  22

  
	
  3.4.   Independence

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. DEVELOPMENT

  	
   

  	
  22

  
	
  4.1.   Key Development Studies; Diligence Obligations

  	
   

  	
  22

  
	
  4.2.   Cubist Development Plan

  	
   

  	
  24

  
	
  4.3.   Development by Chiron

  	
   

  	
  25

  

 

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

 

 iii
 

 

	
  (a)  Territory Specific Studies

  	
   

  	
  25

  
	
  (b)  Proposed Indications

  	
   

  	
  25

  
	
  (c)  Medical Affairs Studies

  	
   

  	
  25

  
	
  (d)  Chiron Development Plan

  	
   

  	
  26

  
	
  (e)  Limitation on Chiron’s Development Rights

  	
   

  	
  26

  
	
  4.4.   Access to Chiron Data

  	
   

  	
  27

  
	
  (a)  Information Sharing

  	
   

  	
  27

  
	
  (b)  Reciprocating Licensee

  	
   

  	
  27

  
	
  (c)  License Option

  	
   

  	
  27

  
	
  4.5.   No Debarred Personnel

  	
   

  	
  28

  
	
  4.6.   Chiron Compliance

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5. REGULATORY

  	
   

  	
  28

  
	
  5.1.   Regulatory Plan; Diligence Obligation

  	
   

  	
  28

  
	
  (a)  Cubist’s and Other Licensees’ Activities

  	
   

  	
  28

  
	
  (b)  Regulatory Plan

  	
   

  	
  28

  
	
  (c)  Specific Regulatory Activities

  	
   

  	
  30

  
	
  (d)  Costs and Expenses

  	
   

  	
  32

  
	
  (e)  Limitation on Activities

  	
   

  	
  32

  
	
  5.2.   Ownership of Regulatory Approvals

  	
   

  	
  32

  
	
  5.3.   Chiron Access to Cubist and Other Licensee
  Data

  	
   

  	
  33

  
	
  (a)  Information Sharing

  	
   

  	
  33

  
	
  (b)  Chiron Use of Cubist Data

  	
   

  	
  33

  
	
  (c)  License Option

  	
   

  	
  33

  
	
  (d)  Manufacturing Information

  	
   

  	
  33

  
	
  5.4.   Free Sales Certificates

  	
   

  	
  34

  
	
  5.5.   Safety; Adverse Event Reporting

  	
   

  	
  34

  
	
  (a)
   General

  	
   

  	
  34

  
	
  (b)  Reporting
  Outside the Territory

  	
   

  	
  35

  
	
  (c)
   Reporting in the Territory

  	
   

  	
  35

  
	
  (d)  Global
  Database

  	
   

  	
  35

  
	
  5.6.   Communications

  	
   

  	
  35

  
	
  (a)
   Communications Relating to Regulatory Approval

  	
   

  	
  35

  
	
  (b)
   Communications Relating to Development

  	
   

  	
  35

  
	
  5.7.   Recalls and Voluntary Withdrawals

  	
   

  	
  36

  
	
  5.8.   Label

  	
   

  	
  37

  
	
  5.9.   Governmental Inspections

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. COMMERCIALIZATION; DILIGENCE

  	
   

  	
  37

  
	
  6.1.   Marketing Plan; Diligence Obligation

  	
   

  	
  37

  
	
  (a)
   Marketing Plan

  	
   

  	
  37

  
	
  (b)
   Marketing Activities

  	
   

  	
  38

  
	
  (c)  Costs
  and Expenses

  	
   

  	
  39

  
	
  (d)  Ownership
  of Marketing Information

  	
   

  	
  39

  
	
  6.2.   Prohibited Marketing and Sales Activities

  	
   

  	
  40

  
	
  6.3.   Discounting

  	
   

  	
  40

  

 

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

 

 iv
 

 

	
  6.4.   Marketing and Promotional Literature

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. COMPENSATION

  	
   

  	
  40

  
	
  7.1.   Upfront Consideration

  	
   

  	
  40

  
	
  7.2.   Milestone Payments

  	
   

  	
  41

  
	
  (a)  Development Milestone Payments

  	
   

  	
  41

  
	
  (b)  Sales Milestone Payments

  	
   

  	
  42

  
	
  7.3.   Royalties

  	
   

  	
  42

  
	
  (a)  Royalty

  	
   

  	
  42

  
	
  (b)  Know-How Step-Down

  	
   

  	
  43

  
	
  (c)  Competition Step-Down

  	
   

  	
  43

  
	
  (d)  Competition Step-Down Procedures

  	
   

  	
  44

  
	
  (e)  Holdback of Royalties Upon Certain Cubist
  Enforcement Actions

  	
   

  	
  44

  
	
  (f)  Chiron Enforcement Action

  	
   

  	
  45

  
	
  (g)  Clinical Supplies

  	
   

  	
  45

  
	
  7.4.   Adjustments

  	
   

  	
  46

  
	
  7.5.   Third Party Royalties and Other Payments

  	
   

  	
  46

  
	
  7.6.   Royalty Payments and Reports

  	
   

  	
  46

  
	
  7.7.   No Reductions or Offsets

  	
   

  	
  46

  
	
  7.8.   Tax Matters

  	
   

  	
  47

  
	
  7.9.   Foreign Exchange

  	
   

  	
  47

  
	
  7.10.   Late Payments

  	
   

  	
  47

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

  	
   

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8. INTELLECTUAL PROPERTY

  	
   

  	
  47

  
	
  8.1.   Ownership of Inventions

  	
   

  	
  47

  
	
  8.2.   Prosecution of Patents

  	
   

  	
  48

  
	
  (a)  Cubist
  Patents

  	
   

  	
  48

  
	
  (b)  Chiron
  Patents

  	
   

  	
  48

  
	
  (c)  Joint
  Patents

  	
   

  	
  49

  
	
  8.3.   Patent Term Extensions

  	
   

  	
  49

  
	
  8.4.   Infringement of Patents by Third Parties

  	
   

  	
  50

  
	
  (a)  Notification

  	
   

  	
  50

  
	
  (b)  Infringement of Patents in the Territory

  	
   

  	
  50

  
	
  (c)  Other Infringement of Cubist Patents

  	
   

  	
  50

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

  	
   

  	
  50

  
	
  (e)  Settlement; Allocation of Proceeds

  	
   

  	
  51

  
	
  8.5.   Infringement of Third Party Rights

  	
   

  	
  51

  
	
  (a)  Notice

  	
   

  	
  51

  
	
  (b)  Avoidance of Infringement

  	
   

  	
  52

  
	
  (c)  Licensing to Resolve Infringement by Cubist
  Technology

  	
   

  	
  52

  
	
  (d)  Determination of Relative Financial Benefits

  	
   

  	
  52

  
	
  (e)  Limitation of Obligation to Sublicense

  	
   

  	
  53

  
	
  (f)  Defense

  	
   

  	
  53

  
	
  (g)  Settlement

  	
   

  	
  53

  

 

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

 

 v
 

 

	
  8.6.   Patent Oppositions.

  	
   

  	
  53

  
	
  (a)  Third Party Patent Rights

  	
   

  	
  53

  
	
  (b)  Parties’ Patent Rights

  	
   

  	
  54

  
	
  (c)  Noncontravention

  	
   

  	
  54

  
	
  8.7.   Sublicensed Technology

  	
   

  	
  54

  
	
  (a)  Generally

  	
   

  	
  54

  
	
  (b)  Lilly License

  	
   

  	
  55

  
	
  (c)  Decision to License Third Party Technology

  	
   

  	
  55

  
	
  (d)  Licensing of Third Party Technology

  	
   

  	
  55

  
	
  (e)  Limitation of Obligation to Sublicense

  	
   

  	
  56

  
	
  (f)  Determination of Relative Financial Benefits

  	
   

  	
  56

  
	
  8.8.   Patent Marking

  	
   

  	
  56

  
	
  8.9.   Applicability to Chiron Patents

  	
   

  	
  56

  
	
  8.10.   Trademarks

  	
   

  	
  56

  
	
  (a)  Trademark License

  	
   

  	
  56

  
	
  (b)  Selection and Registration of Product
  Trademarks

  	
   

  	
  57

  
	
  (c)  Infringement of Trademarks by Third Parties

  	
   

  	
  57

  
	
  (d)  Product Trademarks Infringe Third Party
  Rights

  	
   

  	
  58

  
	
  8.11.   Subordination to Lilly Rights

  	
   

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9. REPRESENTATIONS AND WARRANTIES

  	
   

  	
  58

  
	
  9.1.   Mutual Representations and Warranties

  	
   

  	
  58

  
	
  (a)  Corporate Existence and Power

  	
   

  	
  58

  
	
  (b)  Authority and Binding Agreement

  	
   

  	
  59

  
	
  (c)  No Conflict

  	
   

  	
  59

  
	
  (d)  Validity

  	
   

  	
  59

  
	
  (e)  Consents

  	
   

  	
  59

  
	
  9.2.   Cubist Representations and Warranties

  	
   

  	
  59

  
	
  (a)  Ownership of Intellectual Property

  	
   

  	
  59

  
	
  (b)  Claims Related to Use of Intellectual
  Property

  	
   

  	
  59

  
	
  (c)  Notice to Third Persons

  	
   

  	
  60

  
	
  (d)  Effective Date Third Party Licenses

  	
   

  	
  60

  
	
  (e)  No Misappropriation

  	
   

  	
  60

  
	
  (f)  Regulatory Filings

  	
   

  	
  60

  
	
  (g)  Regulatory Data and Affairs

  	
   

  	
  60

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

  	
   

  	
  61

  
	
  (i)  Litigation

  	
   

  	
  61

  
	
  (j)  Restrictive Agreements

  	
   

  	
  61

  
	
  (k)  Patent Prosecution

  	
   

  	
  61

  
	
  9.3.   Chiron Representation and Warranty - No
  Intellectual Property

  	
   

  	
  61

  
	
  9.4.   Disclaimer

  	
   

  	
  61

  
	
  9.5.   No Other Representations

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10. INDEMNIFICATION

  	
   

  	
  62

  
	
  10.1.   Indemnification by Cubist

  	
   

  	
  62

  
	
  10.2.   Indemnification by Chiron

  	
   

  	
  62

  

 

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

 

 vi
 

 

	
  10.3.   Liability for Third Party Products
  Liability Claims

  	
   

  	
  63

  
	
  10.4.   Procedure

  	
   

  	
  66

  
	
  10.5.   Insurance

  	
   

  	
  66

  
	
  10.6.   Limitation of Liability

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11. RECORDS; PUBLICATIONS

  	
   

  	
  68

  
	
  11.1.   Records

  	
   

  	
  68

  
	
  11.2.   Publications

  	
   

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12. CONFIDENTIALITY

  	
   

  	
  69

  
	
  12.1.   Treatment of Confidential Information

  	
   

  	
  69

  
	
  12.2.   Authorized Disclosure

  	
   

  	
  69

  
	
  12.3.   Publicity

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13. TERM AND TERMINATION

  	
   

  	
  70

  
	
  13.1.   Term

  	
   

  	
  70

  
	
  13.2.   Termination For Convenience by Chiron

  	
   

  	
  71

  
	
  13.3.   Termination By Either Party Upon Bankruptcy
  or Insolvency

  	
   

  	
  71

  
	
  13.4.   Termination for Breach

  	
   

  	
  71

  
	
  (a)  Notice

  	
   

  	
  71

  
	
  (b)
   Failure to Cure

  	
   

  	
  71

  
	
  (c)
   Disputes

  	
   

  	
  71

  
	
  (d)  Termination
  as to Certain Licensed Products

  	
   

  	
  72

  
	
  (e)  Right
  to Sell

  	
   

  	
  72

  
	
  13.5.   INTENTIONALLY OMITTED

  	
   

  	
  72

  
	
  13.6.   Consequences of Termination

  	
   

  	
  72

  
	
  13.7.   Survival

  	
   

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14. DISPUTE RESOLUTION

  	
   

  	
  75

  
	
  14.1.   Disputes

  	
   

  	
  75

  
	
  14.2.   Arbitration

  	
   

  	
  75

  
	
  14.3.   Governing Law; Judicial Resolution

  	
   

  	
  76

  
	
  14.4.   Equitable Remedies; Injunctive Relief

  	
   

  	
  77

  
	
  14.5.   [*].

  	
   

  	
  77

  
	
  14.6.   Interest

  	
   

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15. MISCELLANEOUS

  	
   

  	
  77

  
	
  15.1.   Entire Agreement; Amendment

  	
   

  	
  77

  
	
  15.2.   Force Majeure

  	
   

  	
  77

  
	
  15.3.   Notices

  	
   

  	
  78

  
	
  15.4.   Maintenance of Records

  	
   

  	
  79

  
	
  15.5.   No Strict Construction

  	
   

  	
  79

  
	
  15.6.   Assignment

  	
   

  	
  79

  
	
  (a)
   Assignment by Cubist

  	
   

  	
  79

  
	
  (b)  Assignment
  by Chiron

  	
   

  	
  79

  
	
  (c)
   Restrictions on Payments

  	
   

  	
  80

  
	
  (d)
   Injunctive Relief

  	
   

  	
  80

  

 

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 vii
 

 

	
  15.7.   Performance by Affiliates

  	
   

  	
  81

  
	
  15.8.   Guaranty

  	
   

  	
  81

  
	
  15.9.   Counterparts

  	
   

  	
  81

  
	
  15.10.   Further Actions

  	
   

  	
  81

  
	
  15.11.   Severability

  	
   

  	
  81

  
	
  15.12.   Headings

  	
   

  	
  81

  
	
  15.13.   No Waiver

  	
   

  	
  81

  

 

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 viii

LICENSE AGREEMENT

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

Recitals

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

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

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

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

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

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

 

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OMITTED AND FILED WITH THE COMMISSION

 

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

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

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

ARTICLE 1.

DEFINITIONS

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

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

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

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

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

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

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

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

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

 

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 2
 

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

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

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

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

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

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

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

 

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 3
 

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

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

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

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

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

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

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

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

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

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

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

 

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WITH THE COMMISSION

 

 4
 

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

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

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

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

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

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

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

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

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

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

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

 

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 5
 

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

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

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

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

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

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

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

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

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

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

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

 

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 6
 

1.42. 
“Global Harm” shall
mean [*].

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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 7
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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 8
 

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

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

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

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

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

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

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

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

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

 

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 9
 

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

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

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

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

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

	
  (i)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
  [*]:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  [*]*;

  
	
   

  	
   

  	
   

  
	
  (v)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
  [*];

  	
   

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
  [*];

  	
   

  

 

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 10
 

 

	
  (ix)

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  
	
  (x)

  	
  [*.]

  	
   

  

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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 11
 

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

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

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

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

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

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

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

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

ARTICLE 2.

PRODUCT
RIGHTS AND RIGHTS OF FIRST NEGOTIATION

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

2.7.  Exclusivity.

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

 

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

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

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

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

 

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 15
 

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

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

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

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

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

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

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

 

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

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

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

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

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

2.13.  Subcontracting.
 Each Party may
exercise any of the rights or obligations that such Party may have under this
Agreement or the Supply Agreement to engage in research and development
activities, manufacturing activities or testing activities with respect to
Licensed Products by subcontracting all or any portion of such research and
development activities, manufacturing activities or testing activities, and, in
connection with any such subcontracting, to grant such sublicenses as may be
necessary to permit any Third Party subcontractor to perform 

 

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

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

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

 

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ARTICLE 3.

COORDINATION

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

 

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3.2.  Joint
Coordination Team.

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

(i)            Except for its
function as a dispute resolution forum, the role of the JCT shall be
facilitative.  The JCT shall serve as a
forum for the sharing of information.  In
addition, the JCT may serve the purpose of preventing, or informally resolving,
disputes between the Parties.  The rights
and responsibilities of each Party shall be governed by this Agreement,
including the exhibits hereto, and the JCT shall not have any power to amend,
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(ii)           Although
it is not the purpose of the JCT to make decisions that control the Parties’
respective activities under this Agreement, the JCT shall at all appropriate
times endeavor to operate by consensus. 
In the event that one Party elects to deviate from a course of action
for which consensus was achieved in the JCT, as a courtesy to the other Party,
the deviating Party will notify the other Party in writing of the intended
deviation and the reasons therefor.  In
addition, when a Party brings a matter to the JCT for review and comment
(either as required by the provisions of this Agreement or voluntarily), if the
Party seeking comment elects not to incorporate the other Party’s comments,
then, as a courtesy to the other Party, the Party that sought comments will
notify the other Party in writing of the decision not to incorporate the
comments and the reasons therefor.  With
respect to matters to be discussed by the JCT, the representatives of each
Party shall endeavor to present a unified position on behalf of such Party.

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

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

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

ARTICLE 4.

DEVELOPMENT

4.1.  Key
Development Studies; Diligence Obligations. 
Cubist  shall
use Commercially Reasonable Efforts to complete, subject to the provisions of
this Section 4.1, the Key Development Studies. 
Cubist reserves the right to change or modify any of the Key Development
Studies, or to abandon or discontinue any of the Key Development Studies, in
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(a)           Cubist may change or modify any Key
Development Study if such change or modification is designed to improve the
probability of obtaining Regulatory Approval of the indication targeted by such
Key Development Study.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.3.  Development
by Chiron.

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

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

(c)   Medical
Affairs Studies.  Chiron
may conduct Medical Affairs Studies of the Licensed Products at its sole cost
and expense.  Chiron shall provide to
Cubist via the JCT its proposal for any Medical Affairs Study it wishes to
conduct, for review and discussion purposes only.  Cubist shall supply Licensed Products to be
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purchase price equal to the Transfer Price, and (ii)
in an amount not to exceed [*], during the first complete calendar year (and
any part thereof) after Commercial Launch, and for any calendar year
thereafter, [*] by Chiron for the corresponding period as reflected in the
forecasts of purchase quantities delivered by Chiron to Cubist pursuant to the
Supply Agreement.

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

(e)   Limitation
on Chiron’s Development Rights.  Notwithstanding
anything in this Section 4.3 to the contrary, in the event that at any time
Cubist reasonably believes, on the basis of medical, clinical, scientific and
other data, facts and knowledge that have been published or are otherwise
documented and available or are known to subject matter experts, and presented
to Chiron, that any of the development activities being conducted or to be
conducted by Chiron pursuant to this Section 4.3 is substantially likely to
result in Global Harm, Cubist shall promptly convene a meeting of the JCT to
discuss same.  Prior to the meeting,
Cubist will provide to Chiron all relevant documents, materials and information
suggesting the likelihood of Global Harm as well as Cubist’s recommendations to
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study, terminate the study, etc.).  At the JCT, the Parties will discuss and
attempt to reach consensus on the course of action.  Following such discussion, in the absence of
consensus, Cubist shall have the right to require Chiron to modify or
discontinue those development activities that Cubist reasonably and in good
faith believes, based on the totality of the data, facts and knowledge
presented to Chiron and the data, facts and knowledge presented by Chiron in
response, are substantially likely to result in Global Harm.  In the event that there is no person
(including a successor-in-interest to Cubist) to carry out Cubist’s development
obligations under Section 4.1, then (i) the provisions of this Section 4.3(e)
shall not be applicable to the Licensed Product(s) as to which such development
obligations are not being performed, and (ii) Chiron shall be free from its
obligations to consult via the JCT under Sections 4.3(b) and 4.3(c) with
respect to the Licensed Product(s) as to which such development obligations are
not being performed.   In the event that
a successor-in-interest to Cubist shall be in material breach of such development
obligations, then (i) the provisions of this Section 4.3(e) shall not be
applicable to the Licensed Product(s) and the indication(s) as to which such
development obligations are not being performed, and (ii) Chiron shall be free
from its obligations to consult via the JCT under Sections 4.3(b) and 4.3(c)
with respect to the Licensed Product(s) and the indications as to which such
development obligations are not being performed.

4.4.  Access
to Chiron Data.

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

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

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

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

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

ARTICLE 5.

REGULATORY

5.1.  Regulatory
Plan; Diligence Obligation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

 

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

5.3.  Chiron
Access to Cubist and Other Licensee Data.

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

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

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

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

 

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

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

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

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

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

5.5.  Safety;
Adverse Event Reporting.

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

 

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

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

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

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

5.6.  Communications.

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

(b)  Communications Relating to
Development.  Cubist
shall have the right to communicate with Regulatory Authorities in the
Territory regarding Licensed Products for the purpose of advancing its global
development activities in connection with Licensed Products, including, those
development activities as described in the Cubist Development Plan, provided
that Cubist complies with the provisions of this Section 5.6.  Cubist shall notify Chiron in 

 

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advance of any such communications and Chiron shall
have the right to be present and to participate at any face-to-face meetings or
scheduled conference calls between Cubist and such Regulatory Authority
regarding such communications, but Cubist shall lead any such face-to-face
meetings or scheduled conference calls at which Chiron is present and
participating.  Cubist shall consult with
Chiron prior to any such face-to-face meeting or scheduled conference calls at
which Chiron is present and participating to develop a strategy for the
meeting.

5.7.  Recalls
and Voluntary Withdrawals.

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

(b)           In the event that any
recall of Licensed Product in the Territory is required or necessary by virtue
of such Licensed Product being Defective Manufactured Product, then both
Parties shall work together to devise a reasonable and appropriate plan to
implement such recall, it being understood that the objective of such plan
shall be to effect such recall as quickly and as cost-effectively as reasonably
possible under the circumstances.  After
the Parties shall have reached agreement on the terms of such plan (or, in the
event that the Parties cannot reach agreement as to the terms of such plan,
Chiron shall have the right, acting reasonably and in good faith, to adopt
another plan), Chiron shall implement such recall in a manner consistent with
the terms of such plan.  Cubist shall
cooperate with Chiron in any way that Chiron reasonably requests in order to
support the implementation of such recall. 
Subject to the limitation of liability set forth in Section 10.6(a),
Cubist shall reimburse Chiron for all Recall Expenses (as defined below)
provided that [*].  For the avoidance of
doubt, the limitation set forth above in this Section 5.7(b) (and in Section
6.6(b) of the Supply Agreement) on Cubist’s responsibility for Recall Expenses
shall not apply to limit Chiron’s remedies and Cubist’s obligations or
liabilities with respect to matters other than Recall Expenses, including,
without limitation, (i) Cubist’s obligation to indemnify Chiron pursuant to
Sections 10.1 and 10.3 of this Agreement with respect to costs and expenses
other than Recall Expenses, and (ii) Chiron’s remedies under Sections 8.1,
9.1(d) and 11.6 of the Supply Agreement. 
“Recall Expenses” shall mean the costs
and expenses incurred by Chiron in connection with a recall of Licensed Product
that is implemented in accordance with this Section 5.7(b) (and/or Section
6.6(b) of the Supply Agreement), including, without limitation, the costs and
expenses associated with notification and destruction and/or return of such
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5.8.  Label.  To the extent
permitted by applicable law, regulation or the Regulatory Authority having
jurisdiction, Chiron shall identify Cubist as the licensor of the Cubist Marks
applied to Licensed Products on the vial label, package insert, outside of the
packaging and advertising materials for such Licensed Product in each country
of the Territory in a manner approved in advance in writing by Cubist, such
consent not to be unreasonably withheld, conditioned or delayed. Chiron shall
also comply with the patent marking provisions of Section 8.8 hereof.

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

ARTICLE 6.

COMMERCIALIZATION; DILIGENCE

6.1.  Marketing
Plan; Diligence Obligation.

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

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

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

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

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

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

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

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

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

(i)            effect the
Commercial Launch of Licensed Product for the Launch Indication(s) within [*]
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(ii)           market,
sell and distribute Licensed Products for the Launch Indication(s), upon
receipt of Regulatory Approval and acceptable Price Approval.

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

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

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

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

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

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

 

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

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

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

ARTICLE 7.

COMPENSATION

7.1.  Upfront
Consideration.

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

 

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 40
 

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

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

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

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

(a)  Development Milestone Payments.

	
  Milestone Event

  	
   

  	
  Payment

  Amount

  	
   

  
	
   

  	
   

  	
  (in millions)

  	
   

  
	
  1.

  	
  Regulatory Approval of a Licensed Product [*]

  	
   

  	
  [*]

  	
   

  
	
  2.

  	
  Price Approval of a Licensed Product [*]

  	
   

  	
  [*]

  	
   

  
	
  3.

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

  	
   

  	
  [*]

  	
   

  
	
  Total
  Potential Development Milestone Payments

  	
   

  	
  [*]

  	
   

  

 

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(b)  Sales Milestone Payments.

	
  Milestone Event

  	
   

  	
  Payment

  Amount

  	
   

  
	
   

  	
   

  	
  (in millions)

  	
   

  
	
  1.

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

  	
   

  	
  [*]

  	
   

  
	
  2.

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

  	
   

  	
  [*]

  	
   

  
	
  3.

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

  	
   

  	
  [*]

  	
   

  
	
  4.

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

  	
   

  	
  [*]

  	
   

  
	
  5.

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

  	
   

  	
  [*]

  	
   

  
	
   

  	
  Total Potential Sales Milestone
  Payments

  	
   

  	
  [*]

  	
   

  
						

 

7.3.  Royalties.

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

	
  Royalty Year

  	
   

  	
  Royalty Rate for the First [*] of

  Aggregate Annual Net Sales of

  All Licensed Products in All

  Countries of the Territory under

  Patent and Know-How

  Exclusivity

  	
   

  	
  Royalty Rate for Aggregate

  Annual Net Sales of All

  Licensed Products in All

  Countries of the Territory in

  Excess Of [*] under Patent and

  Know-How Exclusivity

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  

 

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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

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

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

 

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

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

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

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

 

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7.8.  Tax
Matters.

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

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

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

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

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

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

ARTICLE 8.

INTELLECTUAL PROPERTY

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

 

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

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

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

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

8.2.  Prosecution
of Patents.

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

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

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

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

8.4.  Infringement
of Patents by Third Parties.

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

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

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

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

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

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

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

8.5.  Infringement
of Third Party Rights.

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

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

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

(d)  Determination of Relative Financial
Benefits.  In
connection with any determination of the relative financial benefits that could
reasonably be expected to be derived by Chiron, Cubist and, if applicable,
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license obtained by Cubist or Chiron pursuant to
Section 8.5(c), such relative financial benefits shall be determined by
considering actual and projected net sales and actual or projected royalties
from sales of the infringing Licensed Product by Chiron, Cubist and, if applicable,
Third Party licensees of Cubist in the territory or territories that is or are
covered by any such license.

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

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

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

8.6.  Patent
Oppositions.

(a)  Third Party Patent Rights.  If either Party
desires to bring an opposition, action for declaratory judgment, nullity
action, interference, reexamination or other attack upon the validity, title or
enforceability of a Patent owned or Controlled by a Third Party that covers or
may cover the manufacture, use, sale, offer for sale or importation of any
Licensed Product, such Party shall so notify the other Party and the Parties
shall promptly confer in good faith to determine whether to bring such action
or the manner in which to settle such action. 
Cubist shall have the first right, but not the obligation, to bring at
its own expense and in its sole control such action outside the Territory. If
Cubist does not bring such action within ninety (90) days of notification
thereof pursuant to this Section 8.6(a) (or earlier, if required by the nature
of the proceeding), Chiron shall have the right, but not the obligation, to
bring at Chiron’s expense and in its sole control, such action.  Chiron shall have the first right, but not
the obligation, to bring at its own expense and in its sole control such action
in the Territory.  If Chiron does not
bring such action within ninety (90) days of notification thereof pursuant to
this Section 8.6(a) (or earlier, if required by the nature of the proceeding),
Cubist shall have the right, but not the obligation, to bring at Cubist’s
expense and in its sole control, such action. 
The Party not bringing an action under this Section 8.6(a) shall be
entitled to separate representation in such proceeding by counsel of its own
choice and at its own expense, and shall cooperate reasonably with the Party
bringing such action. Any awards or amounts received in bringing any such
action shall be first allocated to reimburse the Parties’ reasonable expenses
incurred in such action, and any remaining amounts shall be retained by the
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(b)  Parties’ Patent Rights.  If a Cubist Patent,
a Chiron patent or a Joint Patent becomes the subject of any proceeding
commenced by a Third Party in connection with an opposition, reexamination
request, action for declaratory judgment, nullity action, interference or other
attack upon the validity, title or enforceability thereof, then the Party
responsible for the prosecution of such Cubist Patent, such Chiron Patent or
such Joint Patent pursuant to Section 8.2 hereof shall control such action at
the sole cost or expense of the controlling Party unless the Parties otherwise
agree in writing.  The controlling Party
will permit the non-controlling Party to participate in the proceeding to the
extent permissible under law, and to be represented by its own counsel in such
proceeding, at the non-controlling Party’s expense.  If either Party decides that it does not wish
to defend against such action, then the other Party shall have a backup right
to assume defense of such Third Party action at its own expense.  Any awards or amounts received in defending
any such Third Party action shall be allocated between the Parties as provided
in Section 8.4(e) as if the Party conducting such opposition were the Party
that brought an action against an alleged infringer.

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

8.7.  Sublicensed
Technology.

(a)  Generally.  The licenses granted
under Article 2, to the extent they include sublicenses of Third-Party
technology licensed by Cubist as of the Effective Date, a complete list of
which is set forth in Exhibit E, and
including without limitation the Lilly License (“Effective Date Third Party Licenses”), shall be subject to
the terms and conditions of such Effective Date Third Party Licenses.  Cubist shall faithfully and timely perform
and discharge its obligations under the Effective Date Third Party Licenses (including
without limitation the payment of all royalties and other financial
compensation due to such Third Parties thereunder in connection with the sale
of Licensed Products) and shall not permit any action to be taken or event to
occur, in each case, within Cubist’s reasonable control, which would give such
Third Party the right to terminate such Effective Date Third Party
License.  Further, Cubist shall not amend
any Effective Date Third Party License without Chiron’s consent, such consent
not to be unreasonably withheld. 
Notwithstanding the provisions of the foregoing two sentences, Cubist
shall not be liable to Chiron for breach of the obligations set forth in the
foregoing two sentences unless such breach shall materially adversely affect
Chiron’s ability to develop or Commercialize Licensed Products in accordance
with the provisions of this Agreement. 
If Cubist is notified or otherwise becomes aware of its material breach
of any such Effective Date Third Party License, it shall promptly notify Chiron
in writing, reasonably detailing such breach. 
Cubist shall also notify Chiron of any material breach by such Third
Parties of any of their obligations under the Effective Date Third Party
Licenses.  The Parties shall promptly
confer in good faith regarding an appropriate manner for curing any such breach
within the time allotted by such Effective Date Third Party License, or if the
Third Party is in breach, monitoring the ability and adequacy of the Third
Party’s efforts to cure such breach.  If
Cubist does not perform the agreed-upon remedy of such breach within the
designated time, then Chiron may itself perform the agreed-upon remedy for such
breach for the benefit of Cubist and any amounts that Chiron pays to cure such
breach shall be either promptly reimbursed by Cubist or Chiron may withhold an
equal amount from any payments due to Cubist under this Agreement.  If a good faith dispute between a Third Party
and Cubist arises about the interpretation of any provision within such
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License, Chiron shall use its Commercially Reasonable
Efforts to ensure that its actions, if any, under this Section 8.7(a) do
not detrimentally affect the ability of Cubist to contest the interpretation
advanced by such Third Party.

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

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

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

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

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

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

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

8.10.  Trademarks.

(a)  Trademark License.  Subject to the
provisions set forth in this Section 8.10, Cubist hereby grants Chiron an
exclusive, royalty-free license under its entire right, title and interest in
and to the Cubist Marks to use and display the Cubist Marks in connection with
the Commercialization of Licensed Products within the Territory.  Chiron shall not use Cubist’s trade names
and/or marks in a way which would be confusing or otherwise adversely affect
their value.  Chiron agrees that it will
not reproduce or use the Cubist Marks in any manner whatsoever other than as
authorized by this Agreement, and that its uses of the Cubist Marks will comply
with the current trademark guidelines that Cubist may provide from time to
time.  Chiron shall provide Cubist with
copies of any materials containing any Cubist Marks prior to using or
disseminating such materials, and shall reasonably consider all comments made
by Cubist regarding the use of the Cubist Marks.  Cubist will have the right to monitor Chiron’s
use of the Cubist Marks and to request that Chiron correct any failure to
comply with this Section 8.10 adversely affecting the strength or value of
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(b)  Selection and Registration of
Product Trademarks.  Subject
to the provisions set forth below in this Section 8.10, Chiron shall use in
connection with the Commercialization of any Licensed Product in the Territory
those trademarks used by Cubist in connection with the Commercialization of
such Licensed Product outside the Territory. 
In the event that (i) any trademark or trademarks used by Cubist in
connection with the Commercialization of any Licensed Product outside the
Territory may not be registered for use in the Territory with such Licensed
Product or (ii) Chiron believes that it would be a significant advantage for
the Commercialization of any Licensed Product in the Territory to select and
use a trademark or trademarks in connection therewith that is or are different
from the trademark or trademarks being utilized by Cubist in connection with
the Commercialization of such Licensed Product outside the Territory, then
Chiron shall notify Cubist about the matter and shall submit to Cubist several other
trademarks that Chiron desires to use, and believes can be used, with the
Licensed Product in question in the Territory. 
Cubist and Chiron shall jointly consider, discuss and decide the matter.  Chiron shall not use any trademark in
connection with the Commercialization of any Licensed Product within the
Territory that is different from the trademark or trademarks being utilized by
Cubist in connection with the Commercialization of such Licensed Product
outside the Territory without Cubist’s written consent.  Any trademark used by Chiron in connection
with the Commercialization of any Licensed Product in the Territory that is
different than the trademark or trademarks utilized by Cubist in connection
with the Commercialization of such Licensed Product outside the Territory and
that has been selected and approved in accordance with the provisions of this
Section 8.10(b) is hereinafter referred to as an “Approved New Trademark”. Subject to Chiron’s right to use
each Approved New Trademark in accordance with the provisions of this
Agreement, Cubist shall own all right, title and interest to each Approved New
Trademark, and each Approved New Trademark shall become one of, and be included
among, the Cubist Marks, and, to the extent permitted by applicable law, Cubist
shall be responsible for registering and maintaining such Approved New
Trademark within and outside the Territory, at Cubist’s own expense.  Chiron hereby assigns to Cubist any and all
right, title, interest, and goodwill that Chiron may have in any such Approved
New Trademark (other than the right, if applicable, set forth below in this
Section 8.10 to register and maintain such Approved New Trademark and Chiron’s
license and right to use such Approved New Trademark pursuant to the provisions
of Section 8.10(a) hereof) and hereby agrees to execute such further documents
as Cubist shall reasonably request to further evidence and perfect such
assignment.  In the event that the laws
of any applicable country within the Territory shall not permit Cubist to
register any Cubist Mark, then Chiron shall be responsible for registering and
maintaining such Cubist Mark in such applicable country, notwithstanding the
fact that Cubist shall own such Cubist Mark, and any use or goodwill arising
from use of the mark shall inure to the benefit of Cubist.

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

 

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

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

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

ARTICLE 9.

REPRESENTATIONS AND WARRANTIES

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

(g)  Regulatory Data and Affairs.  Cubist has disclosed
to Chiron all material information and data that is known to Cubist and that is
in the possession of, or otherwise available to, Cubist relating to (i) the
results of pre-clinical and clinical studies of Licensed Products conducted by
or on behalf of Cubist or Lilly, and (ii) Cubist’s pending Drug Approval
Application in the United States for the Licensed Product and its status.  All such material information and data
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(h)  Non-Infringement of Cubist
Technology by Third Parties.  As
of the Effective Date, Cubist is unaware of any activities by Third Parties
that would constitute infringement or misappropriation of any Cubist
Technology.

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

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

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

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

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

9.5.  No
Other Representations.  THE EXPRESS
REPRESENTATIONS AND WARRANTIES STATED IN THIS ARTICLE 9 ARE IN LIEU OF ALL
OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL
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ARTICLE
10.

INDEMNIFICATION

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

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

10.3.  Liability for Third Party
Products Liability Claims.

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

(b)           Subject to all of
the provisions of this Article 10, Chiron hereby agrees to Indemnify the Cubist
Indemnitees from and against any and all Losses suffered or incurred by any of
such Cubist Indemnitees resulting from any Third Party product liability claim
made against any such Cubist Indemnitee for death, bodily injury or property
damage suffered by such Third Party from or in connection with any Licensed
Product sold or used by Chiron or its Affiliates or distributors but only if
and to the extent that such death, bodily injury or property damage arises or
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handling of such Licensed Product by Chiron or any of
its Affiliates, contractors or distributors, or any of their respective agents
or employees, including, without limitation, any such use, transportation,
packaging, storage or handling of such Licensed Products that does not conform
with any of the applicable specifications of such Licensed Product or with the
requirements of any Regulatory Authorities or any applicable laws within the
Territory, (B) the failure of such Licensed Product to have an appropriate
shelf-life at the time such Licensed Product was sold or used by Chiron or any
of its Affiliates, contractors or distributors, or any of their respective
agents or employees, provided that such Licensed Product is not a
Defective Manufactured Product, (C) any defect or deficiency in the label or
package insert of, or the marketing or promotional materials with respect to,
such Licensed Product, including, without limitation, the failure of the label
or package insert of, or the marketing or promotional materials with respect
to, such Licensed Product to meet the requirements of any Regulatory Authority
or any applicable laws within the Territory, except to the extent that such
defect or deficiency resulted from incorrect information received by Chiron
from Cubist or from the failure by Cubist to disclose to Chiron information
that is in the possession of Cubist, (D) the promotion (including the
establishment of any program to provide treatment on a named patient basis or
other similar basis) by Chiron or any of its Affiliates, contractors or
distributors, or any of their respective agents or employees, of such Licensed
Product for use in connection with an indication for which such Licensed
Product has not received Regulatory Approval if data in Chiron’s possession
establishes that it would not be safe or effective to use such License Product
for the treatment of such indication, (E) a defect in such Licensed Product due
to improper manufacture by Chiron or by a Third Party manufacturer, (F) any
failure by Chiron to develop, use, market, promote or sell such License Product
in compliance with all of the applicable requirements of the Regulatory
Authorities in the Territory and all of the applicable laws within the
Territory, (G) any of the activities or responsibilities that Chiron performs
or is required to perform pursuant to the Supply Agreement, or (H) any breach
by Chiron of any of its obligations under this Agreement or the Supply
Agreement; provided, however, that Chiron shall not
be required to indemnify the Cubist Indemnitees for any Losses pursuant to this
Section 10.3(b) to the extent that (1) such Losses arise from matters or
claims for which Cubist is required to indemnify any of the Chiron Indemnities
pursuant to Section 10.3(a) hereof or (2) such Losses arise from Cubist’s
breach or non-compliance with any of the provisions of this Agreement or the
Supply Agreement.

(c)           Subject to the
provisions of Section 10.3(d) and 10.4(b) below, in the event that there is a
Third Party products liability claim for death, bodily injury or property
damage suffered by such Third Party from or in connection with any Licensed
Product sold or used by Chiron or its Affiliates or distributors and neither
Party is required to indemnify the other Party pursuant to Section 10.3(a) or
10.3(b) above in connection with such Third Party products liability claim,
then the Parties agree to [*] amounts that are paid or are required to be paid
to such Third Party in connection with such Third Party products liability
claim (regardless of whether such amounts are determined by a court of competent
jurisdiction, arbitration proceeding or negotiated settlement), with [*] of
this Agreement in connection with [*] in connection with the [*].  The Parties hereby agree that this clause (c)
is not intended to cover Third Party products liability claims arising from
sales of Licensed Product outside of the Territory by Cubist, its Affiliates or
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(d)           Notwithstanding
anything expressed or implied in Section 10.3(c) to the contrary, in no event
shall Cubist have any obligation under Section 10.3(c) with respect to any
Third Party products liability claim if and to the extent that, prior to the
time that such Third Party products liability claim arises,  (i) Cubist has taken steps to eliminate or
mitigate the risk of any such Third Party products liability claim arising
outside the Territory, the adequacy of such steps to be judged in accordance
with the applicable laws and regulatory requirements outside the Territory,
(ii) Cubist has communicated to Chiron the potential risk of any such Third
Party products liability claim could arise in the future and the steps that
Cubist has taken, is taking or will be taking to eliminate or mitigate such
risk outside the Territory and (iii) Chiron has not taken substantially the
same steps in the Territory as Cubist has taken outside the Territory.  Cubist shall also not have any obligation
under Section 10.3(c) with respect to any Third Party products liability claim
if and to the extent that, prior to the time that such Third Party products
liability claim arises, (x) Chiron has knowledge of facts and circumstances
that establish that there is a risk of any such Third Party products liability
claim arising in the Territory and fails to disclose such knowledge to Cubist,
(y) Chiron fails to implement any plan previously discussed and agreed to by
the Parties to eliminate or mitigate the risk of any such Third Party products
liability claim arising in the Territory or (z) if the Parties have not
discussed any such plan or cannot agree on any such plan, and Chiron fails to
take steps to eliminate or mitigate the risk of any such Third Party products
liability claim arising in the Territory, the adequacy of such steps to be
judged in accordance with the applicable laws and regulatory requirements in
the Territory.

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

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10.4.  Procedure

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

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

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

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10.6.  Limitation of Liability 

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

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

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

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

ARTICLE
11.

RECORDS;
PUBLICATIONS

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

11.2.  Publications. Neither
Party shall publish or present the results of studies carried out under this
Agreement without the opportunity for prior review by the other Party in
accordance with the provisions set forth in this Section 11.2.  Subject to Section 12.2, each Party agrees to
provide the other Party the opportunity to review any proposed abstracts,
manuscripts or presentations (including verbal presentations) which relate to
any Licensed Product at least sixty (60) days prior to their intended
submission for publication and agrees, upon request, not to submit any such
abstract or manuscript for publication, or to make such presentation, until the
other Party is given a reasonable period of time to secure patent protection
for any material in such publication or presentation that is owned by the
requesting Party (either individually or jointly with the non-requesting Party)
and which the requesting Party believes to be patentable.  In the event that the nature of the content
of any proposed publication or presentation is such that a Party is entitled to
request that submission of such publication or delivery of such presentation be
delayed pursuant to the foregoing provisions of this Section 11.2, then both
Parties understand that a reasonable commercial strategy may require delay of
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information or
filing of patent applications.  The
Parties agree to review and consider delay of publication or presentation and
filing of patent applications under certain circumstances. Neither Party shall
have the right to publish or present Confidential Information of the other
Party, and each Party shall remove the Confidential Information of the other
Party from any proposed publication or presentation upon request by such other
Party.  Nothing contained in this Section
11.2 shall prohibit the inclusion of information necessary to file a patent
application with a government authority, except for Confidential Information of
the non-filing Party, provided the non-filing Party is given a
reasonable opportunity to review the information to be included prior to
submission of such patent application. 
Notwithstanding the foregoing, the Parties recognize that independent
investigators have been engaged, and will be engaged in the future, to conduct
clinical trials of Licensed Products. 
Independent investigators that have been engaged by a Party or both
Parties prior to or on the Effective Date may release information regarding
such studies in a manner consistent with academic standards within the scope of
such investigator’s agreement with the relevant Party. Independent investigators that are engaged by a Party or both Parties after
the Effective Date are understood to operate in an academic environment and
shall be allowed to release information regarding such studies in a manner
consistent with academic standards and within the scope of such investigator’s
agreement with the relevant Party.  With
respect to any agreement entered by either Party with any independent
investigator after the Effective Date to conduct clinical trials of Licensed
Products, such Party shall use Commercially Reasonable Efforts to include in
such agreements provisions that would give such Party the right to limit the
publication rights of such independent investigator with respect to any results
of such clinical trials to the same extent as such Party would have under this
Section 11.2 if such independent investigator were the other Party to this
Agreement; provided, however, that  in no
event shall such Party be required or obligated to make any payment to such
independent investigator or incur any financial cost or penalty for the benefit
of such independent investigator in order to limit the publication rights of
such independent investigator in the manner contemplated under this Section
11.2.

ARTICLE
12.

CONFIDENTIALITY

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

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

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

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

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

(d)           as required by the
Lilly License;

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

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

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

ARTICLE
13.

TERM AND
TERMINATION

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

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

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

13.4.  Termination for Breach.

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

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

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

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

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

13.5.  INTENTIONALLY OMITTED.

13.6.  Consequences of Termination.

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

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

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

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

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

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

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

13.7.  Survival. 

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

(b)           Notwithstanding
expiration of this Agreement,

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

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

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

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

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

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

ARTICLE
14.

DISPUTE
RESOLUTION

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

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

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

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

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

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

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

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

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

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

ARTICLE
15.

MISCELLANEOUS

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

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

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

	
   

  	
  For Chiron:

  	
  Chiron Healthcare Ireland Ltd.

  
	
   

  	
   

  	
  United Drug
  House,

  
	
   

  	
   

  	
  Belgard Road,

  
	
   

  	
   

  	
  Tallaght,
  Dublin, Ireland

  
	
   

  	
   

  	
  Fax: +353 (1)
  458-5583

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Chiron Corporation

  
	
   

  	
   

  	
  460 Horton
  Street

  
	
   

  	
   

  	
  Emeryville, CA
  94608

  
	
   

  	
   

  	
  Fax: (510)
  923-5360

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  For Chiron Corporation:

  	
  Chiron Corporation

  
	
   

  	
   

  	
  460 Horton
  Street

  
	
   

  	
   

  	
  Emeryville, CA
  94608

  
	
   

  	
   

  	
  Fax: (510)
  923-3823

  
	
   

  	
   

  	
  Attention:
  President, BioPharmaceuticals

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Chiron Corporation

  
	
   

  	
   

  	
  460 Horton
  Street

  
	
   

  	
   

  	
  Emeryville, CA
  94608

  
	
   

  	
   

  	
  Fax: (510)
  923-5360

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  For Cubist:

  	
  Cubist Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  65 Hayden Avenue

  
	
   

  	
   

  	
  Lexington,
  Massachusetts 02421

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
  Fax:
  781-860-1407

  
	
   

  	
   

  	
   

  
	
   

  	
  With a Copy to:

  	
  Bingham McCutchen LLP

  
	
   

  	
   

  	
  150 Federal
  Street

  
	
   

  	
   

  	
  Boston, Massachusetts
  02110

  
	
   

  	
   

  	
  Attention: Julio E. Vega, Esq.

  
	
   

  	
   

  	
  Fax: (617)
  951-8736

  

 

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

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

15.6.  Assignment.

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

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

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

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

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

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

(d)  Injunctive Relief. The
Parties hereby acknowledge that Cubist would suffer irreparable damage and
injury in the event of any sale, assignment, sublicense or other transfer by
Chiron of the Chiron Interest to any Reasonable Buyer or other Third Party if
any such sale, assignment, sublicense or other transfer would not be effected
in compliance with the provisions of Section 15.6(b) and Section 15.6(c).  Accordingly, it is the intent of the Parties
that in the event that Chiron attempts or is attempting to sell, assign,
sublicense or otherwise transfer the Chiron Interest without complying with all
of the provisions of Section 15.6(b) and Section 15.6(c), Cubist may, in
addition to any other remedies that Cubist may have at law, seek injunctive
relief against Chiron (and/or any proposed transferee to the extent Cubist may
be so entitled under applicable law) for the sole purpose of enforcing all of
the provisions of Section 15.6(b) and Section 15.6(c).  In the event that Cubist brings any such
action for injunctive relief 

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to enforce the
provisions of Section 15.6(b) and Section 15.6(c), Chiron hereby agrees to
waive any defenses that Cubist has an adequate remedy at law and that Cubist
will not suffer irreparable harm, and also any requirement that Cubist post any
bond in connection with any such action for injunctive relief.  For the avoidance of doubt, other than the
defenses and the requirement specifically waived in the foregoing two
sentences, nothing in this Section 15.6(d) shall be construed to be a waiver by
Chiron of any of its remaining defenses at law or in equity.

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

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

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

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

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

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

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

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In Witness Whereof, the Parties have executed this
License Agreement in duplicate originals by their proper officers as of the
Effective Date.

	
  Cubist
  Pharmaceuticals, Inc.

  	
  Chiron Healthcare
  Ireland Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Oliver S. Fetzer

  	
   

  	
  By:

  	
    /s/ Craig A. Wheeler

  	
   

  
	
  Title:

  	
   Senior Vice President and Chief Business
  Officer

  	
   

  	
  Title:

  	
    President, Chiron Pharmaceuticals

  	
   

  
	
  Date:

  	
   October 2, 2003

  	
   

  	
  Date:

  	
    October 2, 2003

  	
   

  
								

 

	
  

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

  
	
   

  	
   and Section
  15.8 by:

  
	
   

  	
   

  
	
   

  	
  Chiron Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Craig A. Wheeler

  
	
   

  	
  Title:

  	
    President, Chiron Biopharmaceuticals

  
	
   

  	
  Date:

  	
    October 2, 2003

  
				

 

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EXHIBIT A

CUBIST
MARKS

	
  Mark

  	
   

  	
  Country

  	
   

  	
  Filing Date

  	
   

  	
  Application 

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

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EXHIBIT B

CUBIST PATENTS 

	
  Country

  	
   

  	
  Docket

  	
   

  	
  App Date

  	
   

  	
  App No

  	
   

  	
  Pub Date

  	
   

  	
  Pub No

  	
   

  	
  Sub Stat.

  	
   

  	
  Pat No.

  	
   

  	
  Grant Dt

  	
   

  	
  Exp Dt

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

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EXHIBIT C

PRIMARY DAPTOMYCIN MOLECULE

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EXHIBIT D

REGIONS AND COUNTRIES OF THE TERRITORY

	
  [*]

  

r

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EXHIBIT E

CUBIST TECHNOLOGY LICENSED FROM THIRD PARTIES

[*].

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OMITTED AND FILED WITH THE COMMISSION

EXHIBIT F

LILLY PATENTS

	
  Country

  	
   

  	
  Docket

  	
   

  	
  App Date

  	
   

  	
  App No

  	
   

  	
  Pub Date

  	
   

  	
  Pub No

  	
   

  	
  Sub Stat.

  	
   

  	
  Pat No.

  	
   

  	
  Grant Dt

  	
   

  	
  Exp Dt

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

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EXHIBIT G

INDS, NDAS AND DRUG APPROVAL APPLICATIONS

IND # 57,693

CTX # 20364/0001/A

CTX # 17658/0001/A (Expired)

NDA # 21-572

* CONFIDENTIAL TREATMENT REQUESTED: MATERIAL HAS BEEN
OMITTED AND FILED WITH THE COMMISSIONExhibit
4.1

OPTICAL COMMUNICATION PRODUCTS, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY,

as
Rights Agent

RIGHTS AGREEMENT

Dated as of May 3, 2007

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
   

  	
  CERTAIN DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  APPOINTMENT OF RIGHTS AGENT

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  ISSUE OF RIGHT CERTIFICATES

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  FORM OF RIGHT CERTIFICATES

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  COUNTERSIGNATURE AND REGISTRATION

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
  RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
  OF RIGHTS

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  AVAILABILITY OF PREFERRED SHARES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  PREFERRED SHARES RECORD DATE

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
  NUMBER OF RIGHTS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
   

  	
  CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
  SHARES

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
   

  	
  CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
  OR EARNING POWER

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
   

  	
  FRACTIONAL RIGHTS AND FRACTIONAL SHARES

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
   

  	
  RIGHTS OF ACTION

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
   

  	
  AGREEMENT OF RIGHT HOLDERS

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
   

  	
  RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
   

  	
  CONCERNING THE RIGHTS AGENT

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 19.

  	
   

  	
  MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
  AGENT

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 20.

  	
   

  	
  DUTIES OF RIGHTS AGENT

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 21.

  	
   

  	
  CHANGE OF RIGHTS AGENT

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 22.

  	
   

  	
  ISSUANCE OF NEW RIGHT CERTIFICATES

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 23.

  	
   

  	
  REDEMPTION

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 24.

  	
   

  	
  EXCHANGE

  	
   

  	
  32

  

 

 ii
 

 

	
  SECTION 25.

  	
   

  	
  NOTICE OF CERTAIN EVENTS

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 26.

  	
   

  	
  NOTICES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 27.

  	
   

  	
  SUPPLEMENTS AND AMENDMENTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 28.

  	
   

  	
  DETERMINATION AND ACTIONS BY THE SPECIAL COMMITTEE
  OR THE BOARD OF DIRECTORS, ETC

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 29.

  	
   

  	
  SUCCESSORS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 30.

  	
   

  	
  BENEFITS OF THIS AGREEMENT

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 31.

  	
   

  	
  SEVERABILITY

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 32.

  	
   

  	
  GOVERNING LAW

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 33.

  	
   

  	
  COUNTERPARTS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 34.

  	
   

  	
  DESCRIPTIVE HEADINGS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  

 

	
  A.

  	
   

  	
  Form of Certificate of Designation of Series A
  Junior Participating Preferred Stock

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Form of Right Certificate

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Summary of Rights to Purchase Preferred Shares

  	
   

  	
   

  

 

 iii

RIGHTS AGREEMENT

THIS RIGHTS AGREEMENT
(“Agreement”), dated as of May 3, 2007, between OPTICAL COMMUNICATION PRODUCTS, INC.,  a
Delaware corporation (the “Company”), and AMERICAN STOCK TRANSFER
& TRUST COMPANY  (“Rights Agent”).

WHEREAS, the Board of Directors of the
Company (the “Board of Directors”) has
authorized the special committee of the Board of Directors consisting of Hobart
Birmingham, Stewart Personick and David Warnes (the “Special
Committee”) to, among other actions, authorize and declare dividends
of preferred share purchase rights in connection with the proposed acquisition
by Oplink Communications, Inc. of approximately 58% of the Company’s Class A
Common Shares (as such term is hereinafter defined);

WHEREAS, the Special Committee
has authorized and declared a dividend of one preferred share purchase right (a
“Right”) for
each Common Share (as such term is hereinafter defined) outstanding at the
close of business on May 14, 2007 (the “Record Date”),
with each Right representing the right to purchase one one-thousandth of a
Preferred Share (as such term is hereinafter defined), upon the terms and subject
to the conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest to occur of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued with
respect to Common Shares that shall become outstanding after the Distribution
Date and prior to the earlier of the Redemption Date and the Final Expiration
Date in accordance with the provisions of Section 22 hereof; and

WHEREAS, the Special Committee has approved
and authorized the appointment of the Rights Agent, and the Rights Agent
desires to accept such appointment.

NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereby agree as follows:

SECTION
1.         CERTAIN DEFINITIONS. 
For purposes of this Agreement, the following terms have the meanings
indicated:

(a)           “Acquiring Person”
shall mean any Person (as such term is hereinafter defined) who or which,
together with all Affiliates and Associates (as such terms are hereinafter
defined) of such Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of 15%  or
more of the Common Shares then outstanding. 
Notwithstanding the foregoing, (A) the term Acquiring Person shall not
include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or
compensation plan of the Company or any Subsidiary of the Company,
(iv) any entity holding Common Shares for or pursuant to the terms of any
such employee benefit or compensation plan of the Company or any Subsidiary of
the Company, (B) The Furukawa Electric Co., Ltd. and its Affiliates
(collectively, “Furukawa”) shall not be or become
an “Acquiring Person” solely as a result of Common Shares Beneficially Owned by
Furukawa as of the date of this Agreement, unless and until such time as
Furukawa shall become the Beneficial Owner of one or more additional 

 1
 

Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or
subdivision of Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, Furukawa is not then the Beneficial Owner of 15%
or more of the Common Shares then outstanding, (C) Oplink Communications, Inc.
and its Affiliates (collectively, “Oplink”) shall
not be or become an “Acquiring Person” solely as a result of Class A Common
Shares Beneficially Owned by Oplink as of the date hereof and as a result of
the execution, delivery and announcement of the Stock Purchase Agreement, dated
as of April 22, 2007, by and between Furukawa and Oplink (the “Stock Purchase Agreement”) or the execution, delivery and
announcement of the Proxy delivered by Furukawa to Oplink in connection with
the Stock Purchase Agreement and attached as Exhibit A thereto (the “Proxy”), unless and until such time as Oplink shall become
the Beneficial Owner of one or more additional Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of Common Shares), and (D) no Person shall become an “Acquiring Person” either
(x) as the result of an acquisition of Common Shares by the Company which,
by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15%  or more of the Common Shares then
outstanding; provided,
however,  that if a Person
shall become the Beneficial Owner of 15%  or
more of the Common Shares then outstanding by reason of share purchases by the
Company and shall, following written notice from, or public disclosure by the
Company of such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares without the prior written consent of the Company
and shall then Beneficially Own more than 15%  of
the Common Shares then outstanding, then such Person shall be deemed to be an “Acquiring
Person,” or (y) as the result of the acquisition of Common Shares directly
from the Company as long as, prior to any acquisition of Common Shares directly
from the Company, the Company has been apprised by any such Person of the
number of Common Shares beneficially owned by such Person immediately prior to
any such acquisition; provided, however,  that
if a Person shall become the Beneficial Owner of 15% or more of the Common Shares then
outstanding by reason of share purchases directly from the Company and shall,
after that date, become the Beneficial Owner of any additional Common Shares
without the prior written consent of the Company and shall then Beneficially
Own more than 15% of the Common Shares then outstanding, then such Person shall
be deemed to be an “Acquiring Person” or (z) if the Special Committee, so
long as the Special Committee is in existence and, thereafter, the Board of
Directors, determines in good faith that a Person who would otherwise be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and without any intention of changing or
influencing control of the Company, and such Person promptly enters into an
irrevocable written commitment in favor of the Company to divest, and
thereafter divests (without retaining any power, including voting with respect
to such Common Shares), as promptly as practicable (as determined in good faith
by the Special Committee, so long as the Special Committee is in existence and,
thereafter, the Board of Directors), following receipt of written notice from
the Company of such event, of Beneficial Ownership of a sufficient number of
Common Shares so that such Person would no longer be an Acquiring Person, as
defined pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed to be an “Acquiring Person” for any purposes of this
Agreement; provided, however, that if such Person
shall again become the Beneficial Owner of 15% or more of the Common Shares
then outstanding, such 

 2
 

Person shall be deemed an
“Acquiring Person,” subject to the exceptions set forth in this
Section 1(a).

(b)           “Act”  shall have the meaning set forth in
Section 9(i) hereof.

(c)           “Affiliate” and “Associate”
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), as in effect on
the date of this Agreement; provided, however,  that
the limited partners of a limited partnership shall not be deemed to be
Associates of such limited partnership solely by virtue of their limited
partnership interests.

(d)           “Agreement”  shall have the meaning set forth in the Preamble hereof.

(e)           A Person shall be deemed the “Beneficial
Owner”  or to
have “Beneficial
Ownership” of and shall be deemed to “beneficially own” any
securities:

(i)            which such Person or any of such
Person’s Affiliates or Associates is deemed to beneficially own, within the
meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement;

(ii)           which such Person or any of such
Person’s Affiliates or Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however,  that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made pursuant to,
and in accordance with, the applicable rules and regulations promulgated under
the Exchange Act by or on behalf of such Person or any of such Person’s Affiliates
or Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided,
however,  that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or

(iii)          which are beneficially owned, directly
or indirectly, by any other Person with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by the
proviso to Section 1(e)(ii)(B) hereof) or disposing of any securities of
the Company.

 3
 

Notwithstanding the foregoing, Oplink shall not be
deemed the Beneficial Owner of any Common Shares solely as a result of the
execution, delivery or announcement of the Stock Purchase Agreement or the
execution, delivery and announcement of the Proxy.

Notwithstanding anything in this definition of
Beneficial Ownership to the contrary, the phrase, “then outstanding,” when used
with reference to a Person’s Beneficial Ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding of
which such Person would be deemed the Beneficial Owner hereunder.

(f)            “Board of
Directors”  shall have the
meaning set forth in the Preamble hereof.

(g)           “Business Day” shall
mean any day other than a Saturday, a Sunday, or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.

(h)           “Class A
Common Share” shall mean a share of the Company’s Class A Common
Stock, par value $0.001 per share.

(i)            “Close of Business”
on any given date shall mean 5:00 p.m., Eastern Time, on such date; provided, however,  that if such date is not a
Business Day it shall mean 5:00 p.m., Eastern Time, on the next succeeding
Business Day.

(j)            “Common Shares” shall
mean the Class A Common Shares and the Company’s Class B Common Stock, par
value $0.001 per share; provided, however,  that,
“Common Shares,” when used in this Agreement in connection with a specific
reference to any Person other than the Company, shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person.

(k)           “Company”
shall have the meaning set forth in the Preamble hereof.

(l)            “Distribution Date”
shall have the meaning set forth in Section 3 hereof.

(m)          “Equivalent
Preferred Shares”  shall have the
meaning set forth in Section 11(b) hereof.

(n)           “Exchange
Ratio”  shall have the meaning set forth
in Section 24(a) hereof.

(o)           “Existing
Directors” shall have the meaning set forth in
Section 1(e)(iii) hereof.

(p)           “Final Expiration Date”
shall mean June 2, 2007 unless the Rights are previously redeemed, exchanged or
terminated.

 4
 

(q)            “Interested Stockholder”
shall mean any Acquiring Person or any Affiliate or Associate of an Acquiring
Person or any other Person in which any such Acquiring Person, Affiliate or
Associate has an interest, or any other Person acting directly or indirectly on
behalf of or in concert with any such Acquiring Person, Affiliate or Associate.

(r)            “NASDAQ”
shall have the meaning set forth in Section 11(d)(i) hereof.

(s)           “Person” shall mean
any individual, firm, corporation, partnership, limited liability company,
joint venture, trust, association, unincorporated organization, group or other
entity, and shall include any successor (by merger or otherwise) of such
entity.

(t)            “Preferred Shares”
shall mean shares of Series A Junior Participating Preferred Stock, par value
$0.001 per share, of the Company having the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions
set forth in the Form of Certificate of Designation attached to this Agreement
as Exhibit A.

(u)           “Principal
Party” shall have the meaning set forth in
Section 13(b) hereof.

(v)           “Purchase Price”
shall have the meaning set forth in Section 7(b) hereof.

(w)          “Record Date”
shall have the meaning set forth in the Preamble hereof.

(x)            “Redemption Date” shall
have the meaning set forth in Section 7(a) hereof.

(y)           “Redemption
Price”  shall have the meaning set forth
in Section 23(b) hereof.

(z)            “Right”  shall have the meaning set forth in the Preamble hereof.

(aa)         “Right
Certificate”  shall have the
meaning set forth in Section 3(a) hereof.

(bb)         “Rights Agent”
shall have the meaning set forth in the Preamble hereof.

(cc)         “Shares Acquisition Date”
shall mean the earlier of:  (i) first
date of public announcement by the Company that an Acquiring Person exists, or
by an Acquiring Person that such Person has become an Acquiring Person or (ii)
the first date of public disclosure of facts by the Company or an Acquiring
Person indicating that an Acquiring Person has become such; provided, however,  that, if such Person is determined
not to have become an Acquiring Person pursuant to clause (z) of
Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall be deemed to
have occurred.

 5
 

(dd)         “Special
Committee”  shall have the
meaning set forth in the Preamble hereof.

(ee)         “Subsidiary” of any
Person shall mean any corporation or other entity of which a majority of the
voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by such Person.

(ff)           “Successor
Directors” shall have the meaning set forth in
Section 1(e)(iii) hereof.

(gg)         “Summary of
Rights”  shall have the
meaning set forth in Section 3(b) hereof.

(hh)         “Trading Day”
shall mean a day on which the principal national securities exchange on which
the security is listed or admitted to trading is open for the transaction of
business or, if the security is not listed or admitted to trading on any
national securities exchange, a Business Day.

(ii)           “Transaction” shall
mean any merger, consolidation or sale of assets described in Section 13(a) hereof
or any acquisition of Common Shares which would result in a Person becoming an
Acquiring Person or a Principal Party.

(jj)           “Transaction Person”
with respect to a Transaction shall mean (i) any Person who (x) is or
will become an Acquiring Person or a Principal Party (as such term is
hereinafter defined) if the Transaction were to be consummated and
(y) directly or indirectly proposed or nominated a director of the Company
which director is in office at the time of consideration of the Transaction, or
(ii) an Affiliate or Associate of such a Person.

SECTION
2.         APPOINTMENT OF RIGHTS AGENT.  The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such co-Rights Agents as it may deem necessary or desirable.  The Rights Agent shall have no duty to supervise,
and in no event shall be liable for, the acts or omissions of any such co-Rights
Agent.

SECTION
3.         ISSUE OF RIGHT CERTIFICATES.

(a)           Until the earlier of the Close
of Business on (i) the tenth (10th) day after the Shares Acquisition Date
or (ii) the tenth (10th) Business
Day (or such later date as may be determined by action of the Special
Committee, so long as the Special Committee is in existence and, thereafter,
the Board of Directors, prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement (determined in accordance with Rule
14d-2 under the Exchange Act) by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant
to the terms of any such plan) of, or of the first public announcement of the
intention of any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company or
any entity holding Common Shares for or pursuant to the terms of any such 

 6
 

plan) to commence, a
tender or exchange offer, the consummation of which would result in any Person
becoming an Acquiring Person (including any such date which is after the date
of this Agreement and prior to the issuance of the Rights, the earlier of such
dates being herein referred to as the “Distribution Date”):  (i) the Rights will be evidenced by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (ii) the Rights (and the right to receive
Right Certificates therefor) will be transferable only in connection with the
transfer of Common Shares.  As soon as
practicable after the Distribution Date, the Company shall promptly notify the
Rights Agent of the occurrence thereof and, if the Rights Agent is not then
also the transfer agent and registrar for the Common Shares, provide the Rights
Agent with the names and addresses of all record holders of Common Shares, and
the Company will prepare and execute, the Rights Agent will countersign, and
the Company will send or cause to be sent (and the Rights Agent will, if
requested, and provided with all necessary information, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate, in substantially the form
of Exhibit B hereto (a “Right Certificate”),
evidencing one Right for each Common Share so held, subject to the adjustment
provisions of Section 11 hereof.  As
of the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

(b)           On the Record Date, or as soon
as practicable thereafter, the Company will send (directly or through the
Rights Agent or its transfer agent) a copy of a Summary of Rights to Purchase
Preferred Shares, in substantially the form of Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid mail,
to each record holder of Common Shares as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the
Company.  With respect to certificates
for Common Shares outstanding as of the Record Date, until the Close of
Business on the Distribution Date, the Rights will be evidenced by such
certificates registered in the name of the holders thereof together with a copy
of the Summary of Rights attached thereto. 
Until the Distribution Date (or, if earlier, the Redemption Date or the
Final Expiration Date), the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any certificate for Common Shares outstanding
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby (whether or not such certificates have impressed on,
printed, written on or otherwise affixed to them the legend set forth in
Section 3(c)).

(c)           Certificates for Common Shares
which become outstanding (including, without limitation, reacquired Common
Shares referred to in the second to last sentence of this paragraph (c)) after
the Record Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them a legend in substantially the form
set forth below:

This certificate also evidences
and entitles the holder hereof to certain rights as set forth in an Agreement
between Optical Communication Products, Inc. (the “Company”) and American Stock
Transfer & Trust Company, as Rights Agent (the “Rights Agent”), dated as of
May 3, 2007, as amended from time to time 

 7
 

(the “Agreement”), the terms of
which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company.  Under certain circumstances, as set forth in
the Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. 
The Company will mail to the holder of this certificate a copy of the
Agreement without charge after receipt of a written request therefor.  As described in the Agreement, Rights issued
to any Person who becomes an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Agreement) and certain related Persons, whether
currently held by or on behalf of such Person or by any subsequent holder,
shall become null and void.

With respect to such certificates containing the
foregoing legend, until the Distribution Date (or, if earlier, the earlier of
the Redemption Date or the Final Expiration Date), the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.  In the event
that the Company purchases or acquires any Common Shares after the Record Date
but prior to the Distribution Date, any Rights associated with such Common
Shares shall be deemed canceled and retired so that the Company shall not be
entitled to exercise any Rights associated with the Common Shares which are no longer
outstanding.  Notwithstanding this
Section 3(c) and except as otherwise required by law, the omission of a
legend shall not affect the enforceability of any part of this Agreement or the
rights of any holder of the Rights.

SECTION
4.         FORM OF RIGHT CERTIFICATES.

(a)           The Right Certificates (and
the form of election to purchase Preferred Shares, the form of assignment and
the form of certification to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (provided that such marks,
legends, summaries and endorsements do not affect the rights, duties or
responsibilities of the Rights Agent) and are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or quotation system on which the
Rights may from time to time be listed, or to conform to usage.  Subject to the other provisions of this
Agreement, the Right Certificates shall entitle the holders thereof to purchase
such number of one one-thousandths of a Preferred Share as shall be set forth
therein at the Purchase Price (as defined in Section 7(b)), but the number
of such one one-thousandths of a Preferred Share and the Purchase Price shall
be subject to adjustment as provided herein.

(b)           Any Right Certificate issued pursuant
to Section 3(a) or Section 22 hereof that represents Rights
which are null and void pursuant to Section 11(a)(ii) hereof and any
Right Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Right
Certificate referred to in this sentence, shall 

 8
 

contain (to the extent
the Rights Agent has notice thereof and to the extent feasible) the following
legend:

The Rights represented by this
Right Certificate are or were beneficially owned by a Person who was or became
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Agreement). 
Accordingly, this Right Certificate and the Rights represented hereby
are null and void.

The provisions of Section 11(a)(ii) hereof
shall be operative whether or not the foregoing legend is contained on any such
Right Certificate.

SECTION
5.         COUNTERSIGNATURE AND REGISTRATION.  The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, its Vice Chairman of the Board, its
Chief Financial Officer, its Chief Administrative Officer, or any of its
Executive Vice Presidents, either manually or by facsimile signature, shall
have affixed thereto the Company’s seal or a facsimile thereof if the Company
has a seal, and shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature.  The Right Certificates shall be countersigned,
either manually or by facsimile, by the Rights Agent and shall not be valid for
any purpose unless countersigned.  In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before countersignature
by the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent and issued
and delivered by the Company with the same force and effect as though the
person who signed such Right Certificates had not ceased to be such officer of
the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.

Following the Distribution Date, and receipt by the
Rights Agent of written notice to that effect and all other relevant information
referred to in Section 3(a) hereof, the Rights Agent will keep or
cause to be kept, at its office designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.

SECTION
6.         TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.  Subject to the provisions of
Section 11(a)(ii), Section 14 and Section 24 hereof, at any time
after the Close of Business on the Distribution Date, and prior to the Close of
Business on the earlier of the Redemption Date or the Final Expiration Date,
any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-thousandth
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. 
Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right 

 9
 

Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose.  Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Right Certificate until
the registered holder shall have properly completed and signed the certificate
contained in the form of assignment on the reverse side of such Right
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company or the Rights Agent shall request.  Thereupon the Rights Agent shall, subject to
Section 11(a)(ii), Section 14 and Section 24 hereof, countersign
and deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested.  The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.  The Rights Agent shall
have no duty or obligation under this Section 6 or any other similar
provision of this Agreement unless and until it is reasonably satisfied that
all such taxes and/or governmental charges have been paid in full.

Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company’s
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will issue,
execute and deliver a new Right Certificate of like tenor to the Rights Agent
for countersignature and delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

Notwithstanding any other provisions hereof, the
Company and the Rights Agent may amend this Agreement to provide for
uncertificated Rights in addition to or in place of Rights evidenced by Rights
Certificates.

SECTION
7.         EXERCISE OF RIGHTS; PURCHASE
PRICE; EXPIRATION DATE OF RIGHTS.

(a)           The registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each one one-thousandth of a Preferred
Share (or such other number of shares or other securities) as to which the
Rights are exercised, prior to the earliest of (i) the Final Expiration
Date, (ii) the time at which the right to exercise the Rights terminates
as provided in Section 23 hereof (the “Redemption
Date”), or (iii) the time at which the right to exercise such
Rights terminates as provided in Section 24 hereof.

(b)           The purchase price for each
one one-thousandth of a Preferred Share pursuant to the exercise of a Right
shall initially be $15.00 (the “Purchase Price”)
and shall be subject to adjustment from time to time as provided in Sections 11
and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.

 10

(c)           (i)            Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof by
certified check, cashier’s check, bank draft or money order payable to the
order of the Company, the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent for the Preferred Shares certificates for
the number of Preferred Shares to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company, in its sole discretion, shall have elected to deposit the
Preferred Shares issuable upon exercise of the Rights hereunder into a
depository, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names
as may be designated by such holder, and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of
such Right Certificate.  In the event
that the Company is obligated to issue securities of the Company other than
Preferred Shares (including Class A Common Shares) of the Company pursuant to
Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities are available for distribution by the
Rights Agent, if and when appropriate.

(ii)           In addition, in the case of an
exercise of the Rights by a holder pursuant to
Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by
Section 11(a)(ii) hereof, and, if fewer than all the Rights represented
by such Right Certificate were so exercised, the Rights Agent shall indicate on
the Right Certificate the number of Rights represented thereby which continue
to include the rights provided by Section 11(a)(ii) hereof.  Neither the Company nor the Rights Agent
shall have any liability to any holder of Right Certificates or to any other
Person as a result of the Company’s failure to make any determinations with
respect to an Acquiring Person or such Acquiring Person’s Affiliates,
Associates or transferees hereunder.

(d)           In case the registered holder
of any Right Certificate shall exercise fewer than all the Rights evidenced
thereby (other than a partial exercise of Rights pursuant to
Section 11(a)(ii) as described in Section 7(c) hereof), a
new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.

(e)           The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with this
Section 7.

 11
 

(f)            Notwithstanding anything in
this Agreement to the contrary, neither the Rights Agent nor the Company shall
be obligated to undertake any action with respect to a registered holder upon
the occurrence of any purported exercise as set forth in this Section 7
unless such registered holder shall have (i) properly completed and signed
the certification following the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise,
(ii) tendered the Purchase Price (and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof) to the Company in the manner set forth
in Section 7(c) hereof, and (iii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.

SECTION
8.         CANCELLATION AND DESTRUCTION OF
RIGHT CERTIFICATES.  All Right Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if delivered or surrendered to
the Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Agreement.  The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all canceled
Right Certificates to the Company approximately one and one-half years after
the cancellation date, or shall, at the written request of the Company, destroy
such canceled Right Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.

SECTION
9.         AVAILABILITY OF PREFERRED SHARES.  The Company agrees that
so long as the Preferred Shares (and, after the time a Person becomes an
Acquiring Person, Class A Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities exchange or
quotation system, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange or quotation system upon official notice
of issuance upon such exercise.

The Company agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Class A Common
Shares and other securities, as the case may be) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares or other
securities.

The Company further agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares upon the exercise of Rights.  The Company shall not, however,  be required to pay any transfer
tax which may be payable in respect of any transfer or delivery of Right
Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Shares in a name other
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares upon the exercise of any 

 12
 

Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s reasonable
satisfaction that no such tax is due.

As soon as practicable after the Distribution Date,
the Company shall use its best efforts to:

(i)            prepare and file a registration
statement under the Securities Act of 1933, as amended (the “Act”), with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, will use its
best efforts to cause such registration statement to become effective as soon
as practicable after such filing, and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date; and

(ii)           to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate.

SECTION
10.       PREFERRED SHARES RECORD DATE.  Each Person in whose
name any certificate for Preferred Shares or other securities is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares or other securities represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered with the forms of
election and certification duly executed and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however,  that
if the date of such surrender and payment is a date upon which the Preferred
Shares or other securities transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares or other securities transfer books of the Company are open.  Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate, as such, shall not be entitled to
any rights of a holder of Preferred Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive dividends
or other distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.

SECTION
11.       ADJUSTMENT OF PURCHASE PRICE,
NUMBER OF SHARES OR NUMBER OF RIGHTS.  The Purchase Price, the
number of Preferred Shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.

(a)           (i)            In the event the Company
shall at any time after the date of this Agreement (A) declare a dividend on
the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding
Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller
number of Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the 

 13
 

record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,  that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.  If an event
occurs which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to
any adjustment required pursuant to Section 11(a)(ii) hereof.

(ii)           Subject to Section 24 hereof and
the provisions of the next paragraph of this Section 11(a)(ii), in the
event any Person shall become an Acquiring Person, each holder of a Right shall
have the right to receive, upon exercise thereof at a price equal to the
then-current Purchase Price multiplied by the number of one one-thousandths of
a Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of Class A
Common Shares as shall equal the result obtained by (A) multiplying the
then-current Purchase Price by the number of one one-thousandths of a Preferred
Share for which a Right is then exercisable and dividing that product by (B) 50%  of the then-current per share
market price of the Class A Common Shares (determined pursuant to
Section 11(d) hereof) on the date such Person became an Acquiring
Person.  In the event that any Person
shall become an Acquiring Person and the Rights shall then be outstanding, the
Company shall not take any action which would eliminate or diminish the
benefits intended to be afforded by the Rights.

Notwithstanding anything in this Agreement to the
contrary, from and after the time any Person becomes an Acquiring Person, any
Rights beneficially owned by (i) such Acquiring Person or an Associate or
Affiliate of such Acquiring Person, (ii) a transferee of such Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person became such, or (iii) a transferee of such Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person’s becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Special Committee, so long as the Special Committee is in existence
and, thereafter, the Board of Directors, has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 11(a)(ii), shall become null and void without
any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise.  The Company
shall use all reasonable efforts to insure that the provisions of this
Section 11(a)(ii) and Section 4(b) hereof are complied
with, but neither the Company nor the Rights Agent shall have any liability to
any holder of Right Certificates or other Person as a result of the Company’s
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees 

 14
 

hereunder.  No
Right Certificate shall be issued at any time upon the transfer of any Rights
to an Acquiring Person whose Rights would be null and void pursuant to the
first sentence of this paragraph or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be null and void pursuant to the first sentence of this
paragraph shall be canceled.

(iii)          In lieu of issuing Class A Common
Shares in accordance with Section 11(a)(ii) hereof, if the Special
Committee, so long as the Special Committee is in existence and, thereafter,
the Board of Directors, determines that such action is necessary or appropriate
and not contrary to the interests of holders of Rights, the Company may elect
to (and, in the event that the Special Committee, so long as the Special
Committee is in existence and, thereafter, the Board of Directors, has not
exercised the exchange right contained in Section 24(c) hereof and
there are not sufficient treasury shares and authorized but unissued Class A
Common Shares to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii), the Company shall) take all such action as may
be necessary to authorize, issue or pay, upon the exercise of the Rights, cash
(including by way of a reduction of the Purchase Price), property, Common
Shares, other securities or any combination thereof having an aggregate value
equal to the value of the Class A Common Shares which otherwise would have been
issuable pursuant to Section 11(a)(ii) hereof which aggregate value
shall be determined by a nationally recognized investment banking firm selected
by the Special Committee, so long as the Special Committee is in existence and,
thereafter, the Board of Directors.  For
purposes of the preceding sentence, the value of the Class A Common Shares
shall be determined pursuant to Section 11(d) hereof.  Any such election by the Special Committee or
the Board of Directors must be made within 60 days following the date on which
the event described in Section 11(a)(ii) hereof shall have occurred.  Following the occurrence of the event
described in Section 11(a)(ii) hereof, the Special Committee, so long
as the Special Committee is in existence and, thereafter, the Board of
Directors, may suspend the exercisability of the Rights for a period of up to
60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent that such
directors have not determined whether to exercise their rights of election
under this Section 11(a)(iii).  In
the event of any such suspension, the Company shall promptly notify the Rights
Agent in writing of such suspension and shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.

(b)           In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45  calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions as the Preferred Shares (“Equivalent
Preferred Shares”)) or securities convertible into Preferred Shares
or Equivalent Preferred Shares at a price per Preferred Share or Equivalent
Preferred Share (or having a conversion price per share, if a security
convertible into Preferred Shares or Equivalent Preferred Shares) less than the
then current per share market price of the Preferred Shares (as such term is
hereinafter defined) on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of Preferred Shares outstanding on such record date
plus 

 15
 

the number of Preferred Shares which the aggregate offering price of
the total number of Preferred Shares and/or Equivalent Preferred Shares so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price and
the denominator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of additional Preferred Shares and/or
Equivalent Preferred Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible); provided, however,  that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.  In case such
subscription price may be paid as consideration, part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Special Committee, so long as the Special
Committee is in existence and, thereafter, the Board of Directors, whose
determination shall be described in a reasonably detailed statement filed with
the Rights Agent.  Preferred Shares owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. 
Such adjustment shall be made successively whenever such a record date
is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

(c)           In case the Company shall fix a
record date for the making of a distribution to all holders of the Preferred
Shares (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then current per share
market price of the Preferred Shares on such record date, less the fair market
value (as determined in good faith by the Special Committee, so long as the
Special Committee is in existence and, thereafter, the Board of Directors,
whose determination shall be described in a reasonably detailed statement filed
with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however,  that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right.  Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

(d)           (i)            For
the purpose of any computation hereunder, the “current per share market price”
of any security (a “Security” for
the purpose of this Section 11(d)(i)) on any date shall be deemed to be
the average of the daily closing prices per share of such Security for the 30
consecutive Trading Days immediately prior to such date; provided, however, that in
the event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of
(A) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) 

 16
 

any subdivision, combination or reclassification of such Security or
securities convertible into such shares, or (C) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading
Days after the ex-dividend
date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security.  The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or
as reported on the NASDAQ Global Market, the NASDAQ Capital Market or the
NASDAQ Global Select Market or, if the Security is not listed or admitted to
trading on any national securities exchange or reported on the NASDAQ Global
Market, the NASDAQ Capital Market or the NASDAQ Global Select Market, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc.  Automated
Quotations System (“NASDAQ”) or
such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Security selected by the Special Committee, so long as the Special Committee is
in existence and, thereafter, the Board of Directors, or, if on any such date
no professional market maker is making a market in the Security, the price as
determined in good faith by the Special Committee, so long as the Special
Committee is in existence and, thereafter, the Board of Directors.

(ii)           For the purpose of any computation
hereunder, the “current per share market price” of the Preferred Shares shall
be determined in accordance with the method set forth in
Section 11(d)(i) hereof.  If
the Preferred Shares are not publicly traded, the “current per share market
price” of the Preferred Shares shall be conclusively deemed to be the current
per share market price of the Class A Common Shares as determined pursuant to
Section 11(d)(i) hereof (appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof)
multiplied by one thousand.  If neither
the Class A Common Shares nor the Preferred Shares are publicly held or so
listed or traded, “current per share market price” shall mean the fair value
per share as determined in good faith by the Special Committee, so long as the Special Committee is in
existence and, thereafter, the Board of Directors, whose determination shall be described in a reasonably
detailed statement filed with the Rights Agent.

(e)           No adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price; provided, however,  that
any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
one one-thousandth of a Preferred Share or one ten-thousandth of any other
share or security as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the 

 17
 

transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.

(f)            If as a result of an adjustment made
pursuant to Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Shares contained in Sections 11(a) through
11(c) hereof, inclusive, and the provisions of Sections 7, 9, 10, 13 and
14 hereof with respect to the Preferred Shares shall apply on like terms to any
such other shares.

(g)           All Rights originally issued
by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-thousandths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

(h)           Unless the Company shall have
exercised its election as provided in Section 11(i) hereof, upon each
adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and
Section 11(c) hereof, each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of one one-thousandths of a Preferred
Share (calculated to the nearest one one-millionth of a Preferred Share)
obtained by (i) multiplying (x) the number of one one-thousandths of a Preferred Share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

(i)            The Company may elect on or after
the date of any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of one one-thousandths
of a Preferred Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. 
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price.  The Company shall promptly notify the Rights Agent in writing of such election and
shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made.  This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. 
If Right Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to 

 18
 

which such holders
shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. 
Right Certificates to be so
distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the
holders of record of Right Certificates
on the record date specified in the public announcement.

(j)            Irrespective of any adjustment or
change in the Purchase Price or the number of one one-thousandths of a
Preferred Share issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price
and the number of one one-thousandths of a Preferred Share which were expressed
in the initial Right Certificates issued hereunder.

(k)           Before taking any action that would
cause an adjustment reducing the Purchase Price below one one-thousandth of the
then par value, if any, of the Preferred Shares issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at
such adjusted Purchase Price.

(l)            In any case in which this
Section 11 shall require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the Company may elect to
defer (with prompt written notice thereof to the Rights Agent) until the
occurrence of such event the issuing to the holder of any Right exercised after
such record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional shares upon the
occurrence of the event requiring such adjustment.

(m)          The Company covenants and
agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or
Section 27 hereof, take (or permit any Subsidiary to take) any
action the purpose of which is to, or if at the time such action is taken it is
reasonably foreseeable that the effect of such action is to, materially
diminish or eliminate the benefits intended to be afforded by the Rights.  Any such action taken by the Company during
any period after any Person becomes an
Acquiring Person but prior to the Distribution Date shall be null and
void unless such action could be taken under this Section 11(m) from and
after the Distribution Date.

(n)           Anything in this Section 11 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any combination or
subdivision of the Preferred Shares, issuance wholly for cash of any Preferred
Shares at less than the current market price, issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred
Shares, dividends on Preferred Shares payable in Preferred 

 19
 

Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b),
hereafter made by the Company to
holders of its Preferred Shares shall not be taxable to such stockholders.

(o)           In the event that at any time after the date of this Agreement and
prior to the Distribution Date,
the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or
(ii) effect a subdivision, combination or consolidation of the Common
Shares (by reclassification or otherwise than by payment of dividends in Common
Shares) into a greater or lesser number of Common Shares, then in any such case
(A) the number of one one-thousandths of a Preferred Share purchasable after
such event upon proper exercise of each Right shall be determined by
multiplying the number of one one-thousandths of a Preferred Share so
purchasable immediately prior to such event by a fraction, the numerator of
which is the number of Common Shares outstanding immediately before such event
and the denominator of which is the number of Common Shares outstanding
immediately after such event, and (B) each Common Share outstanding immediately
after such event shall have issued with respect to it that number of Rights
which each Common Share outstanding immediately prior to such event had issued
with respect to it.  The adjustments
provided for in this Section 11(o) shall be made successively whenever
such a dividend is declared or paid or such a subdivision, combination or
consolidation is effected.

(p)           The exercise of Rights under
Section 11(a)(ii) hereof shall only result in the loss of rights
under Section 11(a)(ii) hereof to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Agreement, including the
rights represented by Section 13 hereof.

SECTION
12.       CERTIFICATE OF ADJUSTED PURCHASE
PRICE OR NUMBER OF SHARES.  Whenever an adjustment is made as provided in
Sections 11 and 13 hereof, the
Company shall promptly (a) prepare
a certificate setting forth such adjustment, and a brief, reasonably detailed statement of the facts, computations and methodology accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the
Common Shares or the Preferred Shares a copy of such certificate and
(c) if such adjustment occurs following a Distribution Date, mail a brief
summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof.  The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained, and shall
have no duty or liability with respect to, and shall not be deemed to have knowledge of any adjustment unless
and until it shall have received such certificate.

SECTION
13.       CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER.

(a)           In the event that, at any time after
a Person becomes an Acquiring Person, directly or indirectly (x) the
Company shall consolidate with, or merge with and into, any Interested
Stockholder, or if in any merger or consolidation all holders of Common Shares
are not treated alike, any other Person, (y) any Interested Stockholder, or if in any merger
or consolidation all holders of Common Shares are not treated alike, any other
Person shall, consolidate with the
Company, or merge with and into the
Company, and the Company shall
be the continuing or surviving corporation of such merger (other than, in the
case of either 

 20
 

transaction described in (x) or (y), a merger or consolidation
which would result in all of the voting power represented by the securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into securities of the
surviving entity) all of the voting power represented by the securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation and the holders of such securities not having changed as a result
of such merger or consolidation), or (z) the Company shall sell, mortgage
or otherwise transfer (or one or more of its Subsidiaries shall sell, mortgage
or otherwise transfer), in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Interested Stockholder or Stockholders,
or if in such transaction all holders of Common Shares are not treated alike, any other Person,
(other than the Company or any Subsidiary
of the Company in one or more transactions each of which individually
and the aggregate does not violate Section 13(d) hereof) then, and in
each such case, proper provision shall be made so that (i) each holder of
a Right, subject to Section 11(a)(ii) hereof, shall have the right to receive, upon the exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable in
accordance with the terms of this Agreement
and in lieu of Preferred Shares, such number of freely tradable Common
Shares of the Principal Party (as such term is hereinafter defined), free and clear of liens, rights of call
or first refusal, encumbrances or other adverse claims, as shall be equal to
the result obtained by (A) multiplying the then current Purchase Price by the
number of one one-thousandths of a Preferred Share for which a Right is then
exercisable (without taking into account any adjustment previously made
pursuant to Section 11(a)(ii) hereof) and dividing that product by
(B) 50%  of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term “Company” shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply to such Principal Party; and (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Shares in accordance with Section 9 hereof) in connection with
such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its Common Shares thereafter deliverable upon the exercise of the Rights.

(b)           “Principal Party”
shall mean:

(i)            in the case of any transaction
described in clause (x) or (y) of the first sentence of
Section 13(a) hereof, the Person that is the issuer of any securities
into which Common Shares are converted in such merger or consolidation, and if
no securities are so issued, the Person that is the other party to the merger
or consolidation (or, if applicable, the Company, if it is the surviving
corporation); and

(ii)           in the case of any transaction
described in clause (z) of Section 13(a) hereof, the Person that
is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;

 21

provided,
however,  that in any case, (1) if the Common Shares of such Person are
not at such time and have not
been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary or Affiliate of another Person
the Common Shares of which are and have
been so registered, “Principal
Party” shall refer to such other Person; (2) if such Person is a
Subsidiary, directly or indirectly, or Affiliate of more than one Person, the Common Shares of two or more of which are and have been so registered, “Principal Party”
shall refer to whichever of such
Persons is the issuer of the Common
Shares having the greatest
aggregate market value; and (3) if
such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such
joint venture as if such party were a “Subsidiary”
of both or all of such joint ventures and the Principal Parties in each such chain shall bear the obligations set forth in this
Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of
such interests.

(c)           The Company shall not consummate any
such consolidation, merger, sale or transfer unless the Principal Party shall
have a sufficient number of authorized Common Shares that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and each Principal Party and each other Person who may become a
Principal Party as a result of such consolidation, merger, sale or transfer shall have (i) executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and (ii) prepared,
filed and had declared and remain effective a registration statement under the
Act on the appropriate form with respect to the Rights and the securities exercisable upon exercise of
the Rights and further providing that, as soon as practicable after the
date of any consolidation, merger, sale
or transfer of assets mentioned in paragraph (a) of this Section 13,
the Principal Party at its own expense will:

(i)            cause the registration statement
under the Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the Final Expiration
Date;

(ii)           use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the Rights
under the blue sky laws of such jurisdictions as may be necessary or
appropriate;

(iii)          list the Rights and the securities
purchasable upon exercise of the Rights on each national securities exchange on
which the Common Shares were listed prior to the consummation of such
consolidation, merger, sale or transfer of assets or on the NASDAQ Global
Market if the Common Shares were listed on the NASDAQ Global Market or, if the
Common Shares were not listed on a national securities exchange or the NASDAQ
Global Market prior to the
consummation of such consolidation, merger, sale or transfer of assets, on a
national securities exchange or the NASDAQ Global Market; and

 22
 

(iv)          deliver to holders of the Rights historical financial statements
for the Principal Party and each
of its Affiliates which comply in all material respects with the requirements for registration on Form 10
under the Exchange Act.

The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.

(d)           After the Distribution Date, the Company
covenants and agrees that it shall not (i) consolidate with,
(ii) merge with or into, or (iii) sell or transfer to, in one or more
transactions, assets or earning power aggregating more than 50% of the assets or earning power of
the Company and its Subsidiaries taken as a whole, any other Person (other than
a Subsidiary of the Company in a transaction which does not violate
Section 11(m) hereof), if (x) at the time of or after such
consolidation, merger or sale there are any charter or bylaw provisions or any
rights, warrants or other instruments or securities outstanding, agreements in
effect or any other action taken which would diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the stockholders of the Person who constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.  The Company shall not
consummate any such consolidation, merger, sale or transfer unless prior
thereto the Company and such other Person shall have executed and delivered to
the Rights Agent a supplemental agreement evidencing compliance with this
Section 13(d).

SECTION
14.       FRACTIONAL RIGHTS AND FRACTIONAL
SHARES.

(a)           The Company shall not be required to
issue fractions of Rights or to distribute Right Certificates which evidence
fractional Rights.  In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For the purposes
of this Section 14(a), the current market value of a whole Right shall be
the closing price of the Rights for the Trading Day immediately prior to, but
not including, the date on which such fractional Rights would have been
otherwise issuable.  The closing price
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or as reported on the NASDAQ Global Market, the NASDAQ
Capital Market or the NASDAQ Global Select Market or, if the Rights are not
listed or admitted to trading on any national securities exchange or reported
on the NASDAQ Global Market, the NASDAQ Capital Market or the NASDAQ Global
Select Market, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights selected by the Special
Committee, so long as the 

 23
 

Special Committee is in existence and, thereafter, the Board of
Directors.  If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Special Committee, so long as the Special
Committee is in existence and, thereafter, the Board of Directors, shall be
used.

(b)           The Company shall not be required to
issue fractions of Preferred Shares (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share) upon exercise of the
Rights or to distribute certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one one-thousandth of a
Preferred Share).  Fractions of Preferred
Shares in integral multiples of one one-thousandth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts; provided, however,  that holders of such depositary receipts shall have all of the
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions to which
they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. 
In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share.  For the purposes of this Section 14(b),
the current market value of a Preferred Share shall be the current per share market price of the Preferred Shares (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to, but not including, the date of such exercise (or,
if not publicly traded, in accordance with Section 11(d)(ii) hereof).

(c)           Following the occurrence of one of
the transactions or events specified in Section 11 hereof giving rise to
the right to
receive Class A Common Shares, capital stock equivalents (other than Preferred Shares) or other securities upon the exercise
of a Right, the Company shall not be required to issue fractions of Class A
Common Shares or units of such Class A Common Shares, capital stock equivalents
or other securities upon exercise of the Rights or to distribute certificates
which evidence fractional Class A Common Shares, capital stock equivalents or
other securities.  In lieu of fractional
Class A Common Shares, capital stock equivalents or other securities, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Class A Common Share or unit
of such Class A Common Shares, capital stock equivalents or other
securities.  For purposes of this
Section 14(c), the current market
value shall be the current per
share market price (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to, but not including, the date of such exercise and,
if such capital stock equivalent is not traded, each such capital stock
equivalent shall have the value of one one-thousandth of a Preferred Share.

(d)           The holder of a Right by the
acceptance of the Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right (except as provided
above); and

(e)           Whenever a payment for fractional
Rights or fractional shares is to be made by the Rights Agent, the Company
shall (i) promptly prepare and deliver to the Rights Agent a certificate
setting forth in reasonable detail the facts related to such payment and the
prices and/or formulas utilized in calculating such payments, and
(ii) provide sufficient monies to 

 24
 

the Rights Agent in the form of fully collected funds to make such payments.  The Rights Agent shall be fully protected in relying upon such a
certificate and shall have no duty with respect to, and shall not be deemed to
have knowledge of any payment for fractional Rights or fractional shares under any
Section of this Agreement relating
to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received
such a certificate and sufficient monies.

SECTION
15.       RIGHTS OF ACTION.  All rights of action in
respect of this Agreement, excepting the
rights of action given to the Rights Agent under Sections 18 and 20 hereof, are vested in the respective registered holders
of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares) and
any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common
Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his, her or
its own behalf and for his, her or its own benefit, enforce, and may institute
and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his,
her or its right to exercise the
Rights evidenced by such Right
Certificate in the manner provided
in such Right Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights,
it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach
of this Agreement and will be
entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of any Person subject to, this
Agreement.

SECTION
16.       AGREEMENT OF RIGHT HOLDERS.  Every holder of a Right, by accepting the
same, consents and agrees with the Company and the Rights Agent and with every
other holder of a Right that:

(a)           prior to the Distribution Date, the
Rights will be transferable only in connection with the transfer of the Common
Shares;

(b)           after the Distribution Date, the
Right Certificates are transferable (subject to the provisions of this
Agreement) only on the registry books of the Rights Agent if surrendered at the office of the
Rights Agent designated for such purpose, duly endorsed or accompanied by a
proper instrument of transfer; and

(c)           the Company and the Rights Agent may
deem and treat the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated
Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary; and

(d)           notwithstanding anything in this
Agreement to the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or
permanent injunction or other order, decree, judgment or ruling 

 25
 

(whether interlocutory or final) issued by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or executive
order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided, however,  that the Company must use its reasonable best efforts to have any such order, decree, judgment or ruling lifted
or otherwise overturned as soon as possible.

SECTION 17.       RIGHT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER.  No
holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as
such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in
Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.

SECTION 18.       CONCERNING
THE RIGHTS AGENT.  The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements
incurred in the preparation, delivery, administration, execution and amendment
of this Agreement and the exercise and performance of its duties hereunder. 
The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred
without gross negligence, bad faith or
willful misconduct (each as finally determined by a court of competent
jurisdiction) on the part of the
Rights Agent, for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance,
administration and execution of this Agreement or the exercise and performance of its duties hereunder, including, without
limitation, the costs and expenses of defending against any claim of liability in the
premises.  The provisions of this
Section 18 and Section 20
below (including, but not limited to, the indemnity provided herein)
shall survive the exercise or expiration of the Rights, the termination of this
Agreement and the resignation or removal of the Rights Agent.  The costs and expenses incurred in enforcing this right of indemnification
shall be paid by the Company.

The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, the acceptance and administration of this Agreement in
reliance upon any Right Certificate or certificate for the Preferred Shares or
Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified
or acknowledged, by the proper person or persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof.  The Rights Agent shall not be deemed to have
any duty or notice unless and until the Company has provided the Rights Agent
with actual written notice.  Anything in
this Agreement to the contrary notwithstanding, in no event shall the 

 26
 

Rights Agent be liable for special, punitive, indirect, incidental or
consequential loss or damage of any kind whatsoever (including, but not
limited to, lost profits), even if the
Rights Agent has been advised of the possibility of such loss or
damage.  Any liability of the Rights Agent under this Agreement shall be limited to the
amount of fees paid by the
Company to the Rights Agent.

SECTION 19.       MERGER OR CONSOLIDATION OR CHANGE OF NAME
OF RIGHTS AGENT.  Any Person
into which the Rights Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be
a party, or any Person succeeding to
the shareholder services or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper
or any further act on the part of any
of the parties hereto, provided that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of Section 21
hereof.  In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement and at such time any of the Right
Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and
in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right
Certificates and in this Agreement.

In case at any time the name of the Rights Agent shall be changed and at such
time any of the Right Certificates
shall have been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver Right Certificates
so countersigned; and in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

SECTION 20.       DUTIES OF RIGHTS AGENT.  The Rights Agent undertakes the duties and
obligations expressly imposed by this Agreement (and no implied duties or
obligations shall be read against the Rights Agent) upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:

(a)           The Rights Agent may consult with
legal counsel of its choice (who may be legal counsel for the Company), and the
advice or opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability
for or in respect of any
action taken or omitted by it in accordance with such advice
or opinion.

(b)           Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering (or omitting to take) any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically 

 27
 

prescribed) may be deemed to be conclusively proved and established by
a certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial Officer, the Chief
Administrative Officer, any Executive Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full and
complete authorization and protection to the Rights Agent and the Rights Agent
shall incur no liability for or in respect of any action taken, suffered
omitted in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

(c)           The Rights Agent shall be liable
hereunder to the Company
and any other Person only
for its own gross negligence, bad faith or willful misconduct (each as finally
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction).

(d)           The Rights Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.

(e)           The Rights Agent shall not have any
liability nor be under any responsibility
in respect of the validity
of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms
of the Rights (including the
manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24
hereof, or the ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate pursuant
to Section 12 hereof describing such change or adjustment); nor shall it
by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this
Agreement or any Right Certificate or as to whether any Preferred Shares will,
when issued, be validly authorized and issued, fully paid and
nonassessable.

(f)            The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments
and assurances as may be
required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g)           The Rights Agent is hereby authorized
and directed to accept
advice or instructions with respect to the performance of its duties
hereunder from any one of the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Executive
Vice President, the Secretary or the Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and
such advice or instructions shall be full authorization and protection to the
Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with the advice or instructions of
any such officer or for any delay in acting while 

 28
 

waiting for those instructions. 
Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent with respect to its duties
or obligations under this Agreement and the date on and/or after which such action shall
be taken or omitted and the
Rights Agent shall not be liable for any action taken, suffered or omitted in
accordance with a proposal included in any such application on or after the date specified therein (which date
shall not be less than three Business
Days after the date indicated in such application unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking, suffering or omitting any such action, the Rights Agent has
received written instructions in response to such application specifying the
action to be taken, suffered or omitted.

(h)           The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of
the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and freely as though it were not a Rights Agent
under this Agreement.  Nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Company or for any other Person.

(i)            The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, absent
gross negligence, willful misconduct or bad faith (each as finally determined
by a court of competent jurisdiction) in the selection and continued employment
thereof.

(j)            No provision of this Agreement shall require
the Rights Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it
believes that repayment of such funds or adequate indemnification against such risk or liability is not assured to it.

(k)           If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer,
the certificate attached to the form of assignment or form of election to
purchase, as the case may be, has not been executed, the Rights Agent shall not
take any further action with
respect to such requested exercise of transfer without first consulting with
the Company.

SECTION
21.       CHANGE OF RIGHTS AGENT.  The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days’ notice in writing mailed to the Company and to each
transfer agent for the Common Shares or Preferred Shares by registered or
certified mail.  The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent for the Common Shares or Preferred Shares by registered
or certified mail.  If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or 

 29
 

incapacity by the resigning or incapacitated Rights Agent or by the
holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be either (a) a Person
organized and doing business under the
laws of the United States or of any State
of the United States which is
authorized under such laws to conduct shareholder services business and is
subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $10 million or (b) an Affiliate of
such Person.  After appointment, the successor
Rights Agent shall be vested
with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.  Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights
Agent and each transfer agent for the Common Shares or Preferred Shares.
 Failure to give any notice provided for
in this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the
appointment of the successor
Rights Agent, as the case may be.

SECTION 22.       ISSUANCE OF NEW RIGHT CERTIFICATES.  Notwithstanding any of the provisions of this Agreement or
of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Special Committee, so long as the Special
Committee is in existence and, thereafter, the Board of Directors, to reflect
any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions
of this Agreement.  In addition, in
connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date, the Company
(a) shall with respect to Common Shares so issued or sold pursuant
to the exercise of stock options or under any equity-based compensation plan or
arrangement in existence prior to the
Distribution Date, or upon the
exercise, conversion or exchange of securities, notes or debentures
issued by the Company and in existence prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or appropriate by the
Special Committee, so long as the Special Committee is in existence and,
thereafter, the Board of Directors, issue Right Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however,  that (i) the Company shall not be
obligated to issue any such Right Certificates if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences
to the Company or the Person to whom such Right Certificate would be issued,
and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.

SECTION 23.       REDEMPTION.

(a)           The Rights may be redeemed by action
of the Special Committee, so long as the Special Committee is in existence and,
thereafter, the Board of Directors, pursuant to Section 23(b) hereof
and shall not be redeemed in any other manner.

 30

(b)           The Special Committee, so long as the
Special Committee is in existence and, thereafter, the Board of Directors, may,
at its option, at any time prior to the earlier of (A) such time as any Person
becomes an Acquiring Person, or (B) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter referred to as
the “Redemption Price”), and the Company
may, at its option, pay the Redemption Price in Class A Common Shares (based on the “current per-share market price,” as such term is defined in Section 11(d) hereof, of the Class A Common Shares at the
time of redemption), cash or any other
form of consideration deemed appropriate by the Special Committee, so
long as the Special Committee is in existence and, thereafter, the Board of
Directors.  The redemption of the Rights by the Special Committee, so long as
the Special Committee is in existence and, thereafter, the Board of Directors,
may be made effective at such time, on such basis and subject to such
conditions as the Special Committee, so long as the Special Committee is in existence
and, thereafter, the Board of Directors, in
its sole discretion may establish.

(c)           Immediately upon the action of
the Special Committee or the Board
of Directors, as applicable, ordering the redemption of the Rights
pursuant to Section 23(b) hereof, and without any further action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the Redemption Price.  The Company
shall promptly notify the Rights Agent in writing of such redemption and shall
promptly give public notice of any such redemption; provided, however,  that
the failure to give, or any defect in, any
such notice shall not affect the
validity of such redemption.  Within 10
days after such action of the Special Committee or the Board of Directors, as
applicable, ordering the redemption of the Rights pursuant to Section 23(b) hereof, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common
Shares, provided, however,  that
failure to give, or any defect
in, any such notice shall not
affect the validity of such redemption. 
Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.  Neither the Company nor any
of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.

(d)           The Company may, at its option, discharge all of its obligations with
respect to any redemption of the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares, and upon
such action, all outstanding Right Certificates shall be null and void without
any further action by the Company.  In the event the Company elects to
discharge all of its obligations with respect
to any redemption of Rights by
mailing payment of the Redemption Price to the registered holders of the Rights as set forth in the
preceding sentence, the dollar 

 31
 

amount sent to each such registered holder representing the full Redemption Price to which
such registered holder shall be entitled shall be rounded up to the nearest
whole cent.

SECTION 24.       EXCHANGE.

(a)           The Special Committee, so long as the
Special Committee is in existence and, thereafter, the Board of Directors, may,
at its option, at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant
to the provisions of Section 11(a)(ii) hereof)
for Class A Common Shares at an exchange ratio of one Class A Common Share per
Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such exchange ratio being hereinafter referred to as the
“Exchange Ratio”).

(b)           Immediately upon the action of the
Special Committee or the Board of Directors, as applicable, ordering the
exchange of any Rights pursuant to Section 24(a) hereof and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Class A Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange.  The Company promptly shall mail a notice of
any such exchange to the Rights Agent and to all of the holders of such Rights
at their last addresses as they appear upon the registry books of the Rights
Agent; provided, however,  that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.  Each
such notice of exchange will state the method by which the exchange of the
Class A Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become null
and void pursuant to the provisions of Section 11(a)(ii) hereof) held
by each holder of Rights.

(c)           In lieu of issuing Class A Common
Shares in accordance with Section 24(a) hereof, the Company may, the
Special Committee, so long as the Special Committee is in existence and,
thereafter, the Board of Directors, determines that such action is necessary or
appropriate and not contrary to the interests of the holders of Rights, elect
to (and, in the
event that there are not sufficient treasury
shares and authorized but unissued Class A Common Shares
to permit any exchange of the
Rights in accordance with Section 24(a) hereof, the Company shall)
take all such action as may be necessary to authorize, issue or pay, upon the exchange of the Rights, cash (including by way of a reduction of the
Purchase Price), property, Common
Shares, other securities or any combination thereof having an aggregate value equal to the value of the Class
A Common Shares which otherwise would have been issuable pursuant to
Section 24(a) hereof, which aggregate value shall be determined by a
nationally recognized investment banking firm selected by the Special
Committee, so long as the Special Committee is in existence and, thereafter,
the Board of Directors.  For purposes of the preceding
sentence, the value of the Class
A Common Shares shall be determined pursuant to
Section 11(d) hereof.  Any election pursuant to this
Section 24(c) by the Special Committee or the Board of Directors, as 

 32
 

applicable, must be made by resolution within 60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred.  Following the occurrence of the event
described in Section 11(a)(ii) hereof, the Special Committee, so long
as the Special Committee is in existence and, thereafter, the Board of Directors,
may suspend the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent that such
directors have not determined whether to exercise their rights of exchange
under this Section 24(c).  In the
event of any such suspension, the Company shall promptly notify the Rights Agent in writing of such suspension
and shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.

(d)           The Company shall not be required to
issue fractions of Class A Common Shares or to distribute certificates which
evidence fractional Class A Common Shares. 
In lieu of such fractional Class A Common Shares, the Company shall pay
to the registered holders of the Right Certificates with regard to which such
fractional Class A Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Class A
Common Share.  For the purposes of this
Section 24(d), the current market value of a whole Class A Common Share
shall be the closing price of a Class A Common Share (as determined pursuant to
the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately after the date of the first public announcement
by the Company that an exchange is to be effected
pursuant to this Section 24.

(e)           The Company shall not be required to
issue fractions of Preferred Shares (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share) upon exchange of the
Rights or to distribute certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one one-thousandth of a
Preferred Share).  Fractions of Preferred
Shares in integral multiples of one one-thousandth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts; provided,
however, that holders of such depositary receipts shall have all of the
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts.  In lieu of fractional Preferred Shares that
are not integral multiples of one one-thousandth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Preferred Share.  For the purposes of this Section 24(e),
the current market value of a Preferred Share shall be 1000 times the closing
price of a Class A Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the
date of the first public announcement by the Company that an exchange is to be
effected pursuant to this Section 24.

SECTION 25.       NOTICE OF CERTAIN EVENTS.

(a)           In case the Company shall after the
Distribution Date propose (i) to pay any dividend payable in stock of any class
to the holders of its Preferred Shares or to make any other distribution to the
holders of its Preferred Shares (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of stock
of any class or any other 

 33
 

securities, rights
or options, (iii) to effect any reclassification of its Preferred
Shares (other than a reclassification involving only the subdivision of outstanding
Preferred Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole), to any other Person, (v) to effect
the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on
the Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares), then, in each such case, the Company shall give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purpose of such stock dividend, or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or
winding up is to take place and the
date of participation therein by
the holders of the Common Shares and/or the Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the
record date for determining holders of the Preferred Shares for purposes of
such action, and in the case of any such other action, at least 10 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or the Preferred Shares,
whichever shall be the earlier.

(b)           In case the event set forth in
Section 11(a)(ii) hereof shall occur, then the Company shall as soon
as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11(a)(ii) hereof.

SECTION 26.       NOTICES.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company
shall be sufficiently given or made if
sent by facsimile transmission or by courier, via a nationally
recognized overnight delivery service or by U.S. mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as follows:

	
  

  	
  

  	
   

  	
  Optical Communication Products, Inc.

  
	
   

  	
   

  	
   

  	
  6101 Variel Avenue

  
	
   

  	
   

  	
   

  	
  Woodland Hills, CA 91367

  
	
   

  	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
   

  	
  Facsimile: (818) 251-7111

  
	
   

  	
  with a copy to:

  	
   

  	
  Paul, Hastings,
  Janofsky & Walker LLP

  
	
   

  	
   

  	
   

  	
  515 South Flower Street

  
	
   

  	
   

  	
   

  	
  25th Floor

  
	
   

  	
   

  	
   

  	
  Los Angeles, CA 90071

  
	
   

  	
   

  	
   

  	
  Attn: Kenneth R. Bender, Esq.

  
	
   

  	
   

  	
   

  	
  Facsimile: (213) 996-3060

  

 

 34
 

Subject to the provisions of Section 21 hereof,
any notice or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by facsimile
transmission or by courier, via a nationally recognized overnight
delivery service or by U.S. mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:

American Stock
Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Attn:  Office of the General Counsel

Facsimile:  (718) 921-8116

SECTION 27.       SUPPLEMENTS AND AMENDMENTS.  Prior to the time that any Person becomes an
Acquiring Person, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of the Rights. 
From and after the time that any Person becomes an Acquiring Person, the
Company and the Rights Agent shall, if the Company so directs, from time to
time supplement or amend any provision of this Agreement without the approval
of any holders of Right Certificates in order to (i) cure any ambiguity,
(ii) correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or
(iii) change any other provisions with respect to the Rights which the
Special Committee, so long as the Special Committee is in existence and, thereafter,
the Board of Directors, may deem necessary or desirable; provided, however,  that no such
supplement or amendment shall be made which would adversely affect the
interests of the holders of Rights (other than the interests of an Acquiring
Person or its Affiliates or Associates). 
Any such supplement or amendment shall be evidenced by a writing signed
by the Company and the Rights
Agent.  Upon delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment
unless the Rights Agent shall have determined that such supplement or amendment
would adversely change or increase its rights, duties, obligations or
liabilities under this Agreement.  Prior
to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Class A Common Shares.

SECTION
28.       DETERMINATION AND ACTIONS BY THE SPECIAL
COMMITTEE OR THE BOARD
OF DIRECTORS, ETC.  For all purposes
of this Agreement, any calculation of the number of Common Shares outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares or any other securities of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(l)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement. 
The Special Committee, so long as the Special Committee is in existence
and, thereafter, the Board of Directors, shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Special Committee, the Board of Directors, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend this Agreement).  All 

 35
 

such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect
to the foregoing) which are done
or made by the Special Committee or the Board of Directors in good
faith, shall (x) be final, conclusive and binding on the Rights Agent and the holders of the Rights, and
(y) not subject the Special Committee or the Board of Directors to any liability to the holders of the Rights.  The Rights Agent shall always be entitled to
assume that the Special Committee and the Board of Directors acted in
good faith and shall be fully protected
and incur no liability in
reliance thereon.

SECTION 29.       SUCCESSORS.  All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.

SECTION 30.       BENEFITS
OF THIS AGREEMENT.  Nothing
in this Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement. 
This Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Shares).

SECTION 31.       SEVERABILITY.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired
or invalidated.

SECTION 32.       GOVERNING LAW.  This Agreement and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State; provided,
however, that all provisions regarding
the rights, duties and obligations of the Rights Agent shall be governed and
construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed
entirely within such State.

SECTION 33.       COUNTERPARTS.  This Agreement may be executed in any
number of counterparts (including by facsimile or similar means of electronic
transmissions) and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

SECTION 34.       DESCRIPTIVE
HEADINGS.  Descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.

 36
 

IN WITNESS
WHEREOF, parties whereto
have caused this Agreement to be duly executed, all as of the day and year
first above written.

	
  

  	
  OPTICAL COMMUNICATION PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Philip F. Otto

  
	
   

  	
  Name:

  	
    Philip F. Otto

  
	
   

  	
  Title:

  	
    CEO

  
					

 

	
  

  	
  AMERICAN STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Joseph Wolf

  
	
   

  	
  Title:

  	
    Vice President

  
				

 

 37

(EXHIBIT A TO RIGHTS AGREEMENT)

FORM OF CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

(Pursuant to Section 151 of the

Delaware General Corporation Law)

Optical Communication Products, Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware
(hereinafter called the “Company”), hereby certifies that the following
resolution was adopted by the special committee of the Board of Directors of
the Company (the “Special Committee”) as required by Section 151 of the
General Corporation Law at a meeting duly called and held on May 3, 2007:

RESOLVED FURTHER,
that pursuant to the authority granted to and vested in the Special Committee
in accordance with the provisions of the Company’s Amended and Restated
Certificate of Incorporation and the resolution of the Board of Directors of
the Company dated as of April 25, 2007, the Special Committee hereby creates a
series of Preferred Stock, par value $0.001 per share, of the Company and
hereby states the designation and number of shares, and fixes the designations
and the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof (in addition to the provisions set forth in its
Certificate of Incorporation, as amended and restated, of the Company, which
are applicable to the Preferred Stock of all classes and series), as follows:

Series A Junior Participating
Preferred Stock:

Section
1. Designation and Amount.  Two hundred sixty-six thousand (266,000)
shares of Preferred Stock, $0.001 par value, are designated “Series A Junior
Participating Preferred Stock” with the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions
specified herein (the “Junior Preferred Stock”).  Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares
of Junior Preferred Stock to a number less than the 

 A-1
 

number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Junior Preferred Stock.

Section
2. Dividends and Distributions.

(A)          Subject to the rights of the holders
of any shares of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the holders of
Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”),
and Class B Common Stock, par value $0.001 per share, of the Company, and of
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of April, July,
October and January in each year (each such date being referred to
herein as a “Quarterly Dividend Payment Date”), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of (a) $1.00 per share or (b) subject to the provision for
adjustment hereinafter set forth, 1000 times the aggregate per share amount of
all cash dividends, and 1000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Class A Common Stock or a subdivision of the outstanding
shares of Class A Common Stock (by reclassification or otherwise), declared on
the Class A Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Junior
Preferred Stock.  In the event the
Company shall at any time declare or pay any dividend on the Class A Common
Stock payable in shares of Class A Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Class A Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of
Class A Common Stock) into a greater or lesser number of shares of Class A
Common Stock, then in each such case the amount to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Class A Common Stock that were outstanding immediately
prior to such event.

(B)           The Company shall declare a dividend
or distribution on the Junior Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on
the Class A Common Stock (other than a dividend payable in shares of Class A
Common Stock); provided, that in
the event no dividend or distribution shall have been declared on the Class A
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Junior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

(C)           Dividends shall begin to accrue and
be cumulative on outstanding shares of Junior Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue 

 A-2
 

from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Junior Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the
shares of Junior Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.  The Board of Directors may
fix a record date for the determination of holders of shares of Junior
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.

Section
3. Voting Rights.  The holders of Junior Preferred Stock shall
have the following voting rights:

(A)          Subject to the provisions for
adjustment hereinafter set forth, each share of Junior Preferred Stock shall
entitle the holder thereof to 1000 votes on all matters submitted to a vote of
the stockholders of the Company.  In the
event the Company shall at any time declare or pay any dividend on the Class A
Common Stock payable in shares of Class A Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Class A Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Class A Common Stock) into a greater or lesser number of shares of Class A
Common Stock, then in each such case the number of votes per share to which
holders of shares of Junior Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Class A Common Stock outstanding
immediately after such event and the denominator of which is the number of shares
of Class A Common Stock that were outstanding immediately prior to such event.

(B)           Except as otherwise provided herein,
in any other Certificate of Designation creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Junior Preferred Stock
and the holders of shares of Class A Common Stock and any other capital stock
of the Company having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.

(C)           Except as set forth herein, or as
otherwise provided by law, holders of Junior Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Class A Common Stock as set
forth herein) for taking any corporate action.

Section
4. Certain Restrictions.

(A)          Whatever quarterly dividends or other
dividends or distributions payable on the Junior Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Junior
Preferred Stock outstanding shall have been paid in full, the Company shall
not:

 A-3
 

(a)           declare or pay dividends, or
make any other distributions, on any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock;

(b)           declare or pay dividends, or
make any other distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Junior Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amount to which the holders of all such
shares are then entitled;

(c)           redeem or purchase or
otherwise acquire for consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Company ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Junior Preferred Stock; or

(d)           redeem or purchase or
otherwise acquire for consideration any shares of Junior Preferred Stock, or
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred Stock, except
in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.

(B)           The Company shall not permit any
subsidiary of the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.

Section
5. Reacquired Shares.  Any shares of Junior Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof.  The Company shall take all such actions as
are necessary to cause all such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock subject to the conditions and restrictions
on issuance set forth herein, in the Amended and Restated Certificate of
Incorporation, or in any other Certificate of Designation creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

Section
6. Liquidation, Dissolution or
Winding Up.  Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $1000.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Junior Preferred Stock shall be entitled to receive an aggregate amount per 

 A-4
 

share, subject to the provision for adjustment hereinafter set forth,
equal to 1000 times the aggregate amount to be distributed per share to holders
of shares of Class A Common Stock, or (2) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Junior Preferred Stock, except
distributions made ratably on the Junior Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.  In the event the Company shall at any time
declare or pay any dividend on the Class A Common Stock payable in shares of Class
A Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Class A Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Class A Common Stock) into a greater
or lesser number of shares of Class A Common Stock, then in each such case the
aggregate amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Class A Common Stock that were outstanding immediately
prior to such event.

Section
7. Consolidation, Merger, Etc. 
In case the Company shall enter into any consolidation, merger,
combination or other transaction in which the shares of Class A Common Stock
are exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case each share of Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1000 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Class A Common Stock is changed or exchanged.  In the event the Company shall at any time
declare or pay any dividend on the Class A Common Stock payable in shares of
Class A Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Class A Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Class A Common Stock) into
a greater or lesser number of shares of Class A Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Junior Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Class A Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common Stock that were
outstanding immediately prior to such event.

Section
8. No Redemption.  The shares of Junior Preferred Stock shall
not be redeemable.

Section
9. Rank.  The Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Company’s Preferred Stock.

Section
10. Amendment.  The Amended and Restated Certificate of
Incorporation of the Company shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights in the
Junior Preferred Stock so as to affect them adversely 

 A-5
 

without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Junior Preferred Stock, voting together as a single
class.

 A-6
 

IN WITNESS WHEREOF, the
undersigned has executed this Certificate as of May 3, 2007.

	
  

  	
  OPTICAL COMMUNICATION PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 A-7

(EXHIBIT B TO RIGHTS AGREEMENT)

FORM OF RIGHT CERTIFICATE

	
  Certificate No. R-

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Rights

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Certificate No. R-

  	
   

  	
  Rights

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

NOT EXERCISABLE AFTER JUNE 2, 2007 OR EARLIER IF

REDEMPTION OR EXCHANGE OCCURS.  THE
RIGHTS ARE SUBJECT TO

REDEMPTION AT $0.00l PER RIGHT AND TO EXCHANGE ON THE

TERMS SET FORTH IN THE RIGHTS AGREEMENT.

RIGHT CERTIFICATE

OPTICAL COMMUNICATION PRODUCTS, INC.

This certifies that                                        
or registered assigns, is the registered owner of the number of Rights
set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions
of the Rights Agreement, dated
as of May 3, 2007 (the “Agreement”),
between Optical Communication Products, Inc., a Delaware corporation (the “Company”),
and American Stock Transfer & Trust Company (the “Rights Agent”), to
purchase from the Company at any time after the Distribution Date (as such term is defined in the Agreement) and
prior to 5:00 p.m., Eastern Time, on June 2, 2007 at the office of the Rights
Agent designated for such purpose, or at the office of its successor as Rights
Agent, one one-thousandth of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock, par value
$0.001 per share (the “Preferred Shares”), of the Company, at a purchase
price of $15.00, subject to adjustment, per one
one-thousandth of a Preferred Share (the “Purchase Price”), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
duly executed.  The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
                                ,
           , based
on the Preferred Shares as constituted at such date.

From and after the time any Person becomes an
Acquiring Person, (as such terms are defined in the Agreement), if the Rights
evidenced by this Right Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Agreement), (ii) a transferee of any such
Acquiring Person, Associate or Affiliate who becomes a transferee after the
Acquiring Person becomes such, or (iii) under certain circumstances
specified in the Agreement, a transferee of any such Acquiring Person,
Associate or Affiliate who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such, such Rights shall become null and void
without any further action and no holder hereof shall have any right with
respect to such Rights from
and after the time any Person becomes an Acquiring Person.

 B-1
 

As provided in the Agreement, the Purchase Price and
the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.

This Right Certificate is subject to all of the terms,
provisions and conditions of
the Agreement, as amended from time to time, which terms, provisions and
conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of
the Right Certificates.  Copies of the
Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.

This Right Certificate, with or without other Right
Certificates, upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Right Certificate or Right Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred
Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase.  If this Right Certificate
shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Right Certificate or Right Certificates for the number
of whole Rights not exercised.

Subject to the provisions of the Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a
redemption price of $0.001 per Right or (ii) may be exchanged in whole or
in part for shares of the Company’s Class A Common Stock, par value $0.001 per
share, or, upon circumstances set forth in the Agreement, cash, property or other securities of the
Company, including fractions of a share of Preferred Stock.

No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of
one one-thousandth of a Preferred Share, which may, at the election of
the Company, be evidenced by depositary receipts) but in lieu thereof a cash
payment will be made, as provided in the Agreement.

No holder of this Right Certificate shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other
securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the Agreement.

This Right Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned by the Rights
Agent.

 B-2
 

WITNESS the facsimile signature of the proper
officers of the Company and its corporate seal. 
Dated as of                   .

	
  ATTEST:

  	
   

  	
  OPTICAL COMMUNICATION PRODUCTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COUNTERSIGNED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AMERICAN STOCK TRANSFER & 

  TRUST COMPANY

  	
   

  	
   

  
	
  as Rights Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  	
   

  	
   

  

 

 B-3
 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED                                                                                              hereby
sells, assigns and transfers unto

(Please print name and address of transferee)

               

this Right Certificate,
together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
                                           as
Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power
of substitution.

Dated:                                   

	
  

  	
   

  	
   

  
	
  

  	
  Signature

  	
   

  

 

 B-4
 

SIGNATURE GUARANTEED:

Signatures must be guaranteed by an “eligible
guarantor institution” as defined in Rule 1 7Ad-15 promulgated under the
Securities Exchange Act of 1934, as amended.

The undersigned hereby certifies that (1) the Rights evidenced by
this Right Certificate are not being sold, assigned or transferred by or on
behalf of a Person who is or was an Acquiring Person, an Interested Stockholder
or an Affiliate or Associate thereof (as such terms are defined in the Agreement); and (2) after due inquiry and to
the best of the knowledge of the
undersigned, the undersigned did not acquire the Rights evidenced by
this Right Certificate from any Person who is or was an Acquiring Person, an
Interested Stockholder, or an Affiliate or Associate thereof.

	
  

  	
   

  	
   

  
	
  

  	
  Signature

  	
   

  

 

 B-5
 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Right Certificate.)

To American Stock Transfer & Trust Company:

The undersigned hereby irrevocably elects to exercise                                               
Rights represented by this Right Certificate to purchase the Preferred
Shares issuable upon the exercise of such Rights and requests that certificates
for such Preferred Shares be issued in the name of:

Please insert social security or other identifying number:                                                               

 

(Please print name and address)

 

If such number of Rights shall not be all the Rights
evidenced by this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and delivered to:

Please insert social security or other identifying number:                                                                

 

(Please print name and address)

 

Dated:                                   

	
   

  	
   

  	
   

  
	
  

  	
  Signature

  	
   

  

 

 B-6
 

SIGNATURE GUARANTEED:

Signatures must be
guaranteed by an “eligible guarantor institution” as defined in Rule l7Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended.

The undersigned hereby certifies that (1) the
Rights evidenced by this Right Certificate are not beneficially owned by nor
are they being exercised on behalf of an Acquiring Person, an Interested
Stockholder or an Affiliate or Associate thereof (as such terms are defined in
the Agreement); and (2) after due inquiry and to the best of the knowledge
of the undersigned, the undersigned did not acquire the Rights evidenced by
this Right Certificate from any Person who is or was an Acquiring Person, an
Interested Stockholder, or an Affiliate or Associate thereof.

	
  

  	
   

  	
   

  
	
  

  	
  Signature

  	
   

  

 

NOTICE

The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the name as written
upon the face of this Right Certificate in every particular, without alteration
or enlargement or any change whatsoever.

In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is
not completed, the Company and the Rights Agent will deem the beneficial owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Agreement) and such
Assignment or Election to Purchase will not be honored.

 

 B-7

 

(EXHIBIT C TO RIGHTS PLAN)

OPTICAL COMMUNICATION PRODUCTS, INC.

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

On  May 3, 2007, the special committee (the
“Special Committee”) of the Board of Directors of OPTICAL COMMUNICATION
PRODUCTS, INC. (the “Company”) declared a dividend of one preferred share
purchase right (a “Right”) for each outstanding share of the Company’s Common
Stock, par value $0.001 per share (the “Common Shares”).  The dividend is effective as of May 14, 2007 (the “Record Date”) with respect
to the stockholders of record on that date. 
The Rights will also attach to new Common Shares issued after the Record
Date.  Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $0.001 per share (the “Preferred
Shares”), of the Company at a price of $15.00 per one one-thousandth of a Preferred Share (the “Purchase Price”), subject to
adjustment.  Each Preferred Share
is designed to be the economic equivalent of 1000 shares of the Company’s Class
A Common Stock, par value $0.001 per share (the “Class A Common Shares”).  The description and terms of the Rights are set forth in a Rights Agreement dated as of
May 3, 2007 (the “Agreement”), between the Company and American Stock
Transfer & Trust Company (the “Rights
Agent”).

DETACHMENT AND TRANSFER OF RIGHTS

Initially, the Rights will be evidenced by the stock
certificates representing Common Shares then outstanding, and no separate Right
Certificates will be distributed.  Until
the earlier to occur of (i) the 10th day after the earlier of the first
date of a public announcement that a person or group of affiliated or
associated persons, has become an “Acquiring Person” (as such term is defined
in the Agreement) or the first date of public disclosure of facts by the
Company or an Acquiring Person that an Acquiring Person has become such, or
(ii) 10 business days (or such later date as the Special Committee, so
long as the Special Committee is in existence and, thereafter, the Board of
Directors, may determine) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer which would result in the
beneficial ownership by an Acquiring Person of 15% or more of the outstanding
Company common stock (the earlier of such dates being called the “Distribution
Date”), the Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share certificate.  In general, an “Acquiring Person” is a
person, the affiliates or associates of such person, or a group, which has
acquired beneficial ownership of 15% or more of the outstanding Company common stock, other than (i) The Furukawa Electric
Co., Ltd. (“Furukawa”), which currently owns more than 15% of the outstanding
Common Shares so long as it does not acquire additional Common Shares and (ii)
Oplink Communications, Inc. (“Oplink”), solely as a result of Class A Common
Shares beneficially owned as of May 3, 2007 and as a result of the execution,
delivery and announcement of a stock purchase agreement between Furukawa and
Oplink or the execution, delivery and announcement of a proxy delivered by
Furukawa to Oplink in connection with the stock purchase agreement, so long as
it does not acquire additional Common Shares.

 C-1
 

The Agreement provides that,
until the Distribution Date (or earlier redemption or expiration of the
Rights), the Rights will be transferable with and only with the Common
Shares.  Until the Distribution Date (or
earlier redemption or expiration of the Rights), new Common Share certificates
issued after the Record Date upon transfer or new issuance of Common Shares
will contain a notation incorporating the Agreement by reference.  Until the Distribution Date (or earlier
redemption or expiration of the Rights) the surrender or transfer of any
certificates for Common Shares outstanding as of the Record Date, even without
such notation or a copy of this Summary of Rights being attached thereto, will
also constitute the transfer of the Rights associated with the Common Shares
represented by such certificate.  As soon
as practicable following the Distribution Date, separate certificates
evidencing the Rights (“Right Certificates”) will be mailed to holders of record
of the Common Shares as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.

EXERCISABILITY OF RIGHTS

The Rights are not exercisable until the Distribution Date.  The
Rights expire on June 2, 2007 unless the Rights are previously redeemed,
exchanged or terminated as described below. 
Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.

The Purchase Price payable,
and the number of Preferred Shares or other securities or property
issuable or payable, upon exercise of the Rights are subject to adjustment from time to time to prevent
dilution.  The number of outstanding
Rights and the number of one one- thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to adjustment in the
event of a stock split of the Common Shares or a stock dividend on the Common
Shares payable in Common Shares, or subdivisions, consolidations or
combinations of the Common Shares occurring,
in any such case, prior to the Distribution Date.  With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments require an adjustment
of at least 1% in such Purchase Price. 
No fractional Preferred Shares will be issued (other than fractions
which are integral multiples of one one-thousandth of a Preferred Share, which
may, at the election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.

TERMS OF PREFERRED SHARES

Preferred Shares purchasable
upon exercise of the Rights will not be redeemable.  Each Preferred Share will be entitled
to a minimum preferential quarterly dividend payment of $1 per share but will be entitled to an
aggregate dividend of 1000 times the dividend
declared per Class A Common Share. 
In the event of liquidation, the
holders of the Preferred Shares will be entitled to a minimum preferential
liquidation payment of $1000 per share but will be entitled to an aggregate
payment of 1000 times the payment made
per Class A Common Share.  Each Preferred
Share will have 1000 votes, voting together with the Class A Common
Shares.  Finally, in the event of any merger, consolidation
or other transaction in which Class A Common Shares are exchanged, each
Preferred Share will be entitled
to receive 1000 times the amount
received per Class A Common Share.  These
rights are protected by customary anti-dilution provisions.  Because of the nature of the Preferred Shares’
dividend, liquidation and voting rights,
the value 

 C-2
 

of the one one-thousandth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of one Class A Common
Share.  The Preferred Shares would rank
junior to any other series of the Company’s preferred stock.

TRIGGER OF FLIP-IN AND FLIP-OVER
RIGHTS

In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be made
so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person or any Affiliate
or Associate thereof (which will thereafter be void), will thereafter
have the right to receive upon exercise
that number of Class A Common Shares having a market value of two times the exercise price of the Right. 
This right will commence on the date of public announcement that a person has become an Acquiring Person (or the effective
date of a registration statement relating to distribution of the Rights, if  later) and terminate 60 days later (subject to
adjustment in the event exercise of the
Rights is enjoined).

In the event that, at any time after a person becomes
an Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50%  or more of its consolidated assets
or earning power are sold to an Acquiring Person, its Affiliates or Associates or
certain other persons in which such persons have an interest, proper provision
will be made so that each such holder of a Right will thereafter have the right
to receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.

REDEMPTION

At any time prior to the earlier of (i) the time
that a person has become an Acquiring Person, or (ii) the Final Expiration
Date, the Special Committee, so long as the Special Committee is in existence
and, thereafter, the Board of Directors of the Company, may redeem the Rights
in whole, but not in part, at a price of  $0.00l
per Right (the “Redemption Price”). 
Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

EXCHANGE
OF RIGHTS

At any time after any Person becomes an Acquiring
Person, the Special Committee, so long as the Special Committee is in existence
and, thereafter, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Class A Common Share, or,
under circumstances set forth in the Agreement, cash, property or other
securities of the Company, including fractions of a Preferred Share (or of a
share of a class or series of the Company’s preferred stock having equivalent
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions), per Right (with value equal to such Class A
Common Shares).

 C-3
 

AMENDMENT OF RIGHTS

The terms of the Rights generally may be amended by the Special
Committee, so long as the Special Committee is in existence and, thereafter,
the Board of Directors of the Company without the consent of the holders of the
Rights, except that from and after such
time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights (excluding the
interest of any Acquiring Person).

ADDITIONAL INFORMATION

A copy of the Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Current Report on Form
8-K dated  May 4, 2007.  A copy of the Agreement is available from the
Company by writing to:  Attn:  Investor
Relations, 6101 Variel Avenue Woodland
Hills, CA 91367.  This summary
description of the  Rights is not intended to be complete and
is qualified in its entirety by reference to the Agreement, which is hereby incorporated herein by reference.

 C-4

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