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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1 to
Quarterly Report Pursuant to Section 13 or 15(d)of the
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
Commission file Number 0-21379
CUBIST PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3192085
---------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
24 Emily Street, Cambridge, MA 02139
---------------------------------------
(Address of principal executive offices)
(617) 576-1999
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
---- ----
As of October 31, 1997, there were 10,580,689 shares outstanding of the
Company's common stock, $0.001 per value per share.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
+*10.1 Research Collaboration and License Agreement
with Novalon Pharmaceutical Corporation
+**10.2 Addendum to the Research and License
Agreement with Novalon Pharmaceutical
Corporation
+*10.3 Licensing Agreement with Eli Lilly and Company
**11 Statement of Computation of Earnings Per
Share
**27 Financial Data Schedule
+Confidential treatment requested as to certain portions: omitted
portions have been filed separately with the Commission.
*Refiled with this Amendment No. 1 to Quarterly Report on Form 10-Q.
**Previously filed with the Company's 10-Q filed with the Commission on
November 14, 1997.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
endedSeptember 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this amendment to its Quarterly Report on
Form 10-Q to be signed on its behalf by the undersigned, thereunto duly
authorized.
CUBIST PHARMACEUTICALS, INC.
Date: October 21, 1998 By: /s/Thomas A.Shea
-----------------------------
Thomas A. Shea
Senior Director of
Finance & Administration,
Treasurer (Authorized
Officer and Principal
Financial and Accounting
Officer)
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Confidential Treatment
Exhibit 10.1
Research Collaboration and
License Agreement
Cubist Pharmaceuticals, Inc.
Novalon Pharmaceuticals Corporation
Dated as of May 5, 1997
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Confidential Treatment
Research Collaboration and License Agreement
RESEARCH COLLABORATION AND LICENSE AGREEMENT, dated as of May 5, 1997
(the Effective Date), by and between Cubist Pharmaceuticals, Inc., a Delaware
corporation (Cubist) and Novalon Pharmaceutical Corporation, a
Delaware corporation (Novalon).
WHEREAS, Cubist and Novalon have entered into a Series B Convertible
Preferred Stock Purchase Agreement, dated as of May 5, 1997 (the Stock Purchase
Agreement), pursuant to which Cubist purchased shares of the Series B
Convertible Preferred Stock of Novalon and agreed to engage in a collaborative
"BioKeys" research project and the "ElectroScreen" research project with
Novalon.
WHEREAS, pursuant to Section 7.6 of the Stock Purchase Agreement,
Cubist and Novalon agreed to negotiate and enter into this Agreement to set
forth in greater detail the rights and obligations of the parties with
respect to the research projects.
WHEREAS, Novalon has the right to grant licenses with respect to
certain Novalon Patent Rights and Novalon Technology (as each is defined herein)
and desires to grant a license thereto; and
WHEREAS, Cubist desires to obtain a license to use and practice the
Novalon Patent Rights and Novalon Technology to develop products;
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cubist and Novalon hereby agree as
follows:
Section 1. Definitions. Capitalized terms used in this
Agreement shall have the meanings set forth in Schedule I
annexed hereto.
Section 2. Research Collaboration.
2.1 Collaboration.
(a) Cubist and Novalon hereby agree (i) to engage in the
Collaborative "BioKeys" Research Project and the "ElectroScreen"
Research Project, all as described in Exhibit A, (ii) to engage
in the research activities described in Section 2.1(b) and
(c) below and (iii) to engage in such other research activities
as the parties may agree upon from time to time. The terms and
Conditions of the Collaboration
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and of all research activities of the parties pursuant to the
Collaboration shall be governed by, to the extent applicable, the
provisions of this Agreement and such other provisions as the
parties may agree upon in writing from and after the date hereof.
The term of the Collaboration shall commence on the date hereof
and end on February 5, 2001, provided that Cubist shall be
entitled to terminate the Collaboration at any time from and
after the end of the Minimum Research Period by giving Novalon at
least thirty (30) days prior written notice of termination.
(b) During the Minimum Research Period, Cubist and Novalon shall
engage in the research activities described in Exhibit A. The
respective tasks, activities and obligations of the parties
during the Minimum Research Period are set forth in Exhibit A.
(c) In the event that Cubist elects not to exercise the Acquisition
Option, Cubist shall, within [ ]* after the
Acquisition Option Expiration Date, deliver to Novalon a schedule
listing all of the research programs then being conducted by
Cubist (the Specified Research Programs, Exhibit B describes the
current research programs at Cubist). During the Remaining
Research Period, Novalon and Cubist shall (i) continue the
research activities described in Exhibit A, (ii) engage in such
research, screening, target discovery and validation, and drug
discovery and development activities as Cubist shall request,
provided that such research, screening, target discovery and
validation, and drug discovery and development activities are
related to, or involve, biological targets that are within the
scope of the Specified Research Programs and (iii) engage in such
other research activities as the parties may agree upon from time
to time. The respective tasks, activities and obligations of the
parties in connection with any of the matters on which the
parties are collaborating during the Remaining Research Period
shall be mutually agreed upon by the parties.
2.2 Funding.
(a) On the first day of each month during the Minimum Research Period
and on the first day or the first month immediately after the
Minimum Research Period, Cubist shall reimburse Novalon for any
payments made by Novalon during the immediately preceding month
in respect of (i) salary and fringe benefits payable by Novalon
to no more than [ ]*
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
2
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employed by Novalon and engaged solely in activities relating to
the Collaboration, and (ii) laboratory supplies for use solely in
activities relating to the Collaboration; provided, however, that
the amount of any monthly payment that Cubist shall be required
to make to Novalon pursuant to the foregone provisions of this
Section 2.2(a) shall in no event exceed [ ]*
(it being understood that any expenses incurred or payments,
made by Novalon in connection with (the Collaboration in any
month during the Minimum Research Period in excess of
[ ]* shall be Novalon's sole responsibility and
Cubist shall have no obligation to reimburse Novalon with
respect to any such excess).
[
]*
(b) On the first day of each month during the Remaining Research
Period and on the first day of the first month immediately after
the Remaining Research Period, Cubist shall reimburse Novalon for
the direct costs incurred by Novalon in connection with
activities relating to the Collaboration, provided that such
costs shall not exceed [
]* (it being
understood that any costs incurred by Novalon in connection with
the Collaboration activities that are in excess of [
]* shall be Novalon's sole
responsibility and Cubist shall have no obligation to reimburse
Novalon with respect to any such excess).
2.3 Obligations Following Termination of Collaboration. Except
for Cubist's obligation, pursuant to Section 2.2(a) above, to make a payment to
Novalon on the first day of the first month immediately after the Remaining
Research Period and except for any other payment obligations of Cubist in
connection with the Collaboration which are agreed upon by the parties in
writing after the date hereof and which by their own terms survive the
Collaboration Termination Date, Cubist shall have no obligations or liabilities
to Novalon pursuant to this Section 2 (including, without limitation, the
obligation to make payments to Novalon in
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
3
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connection with the Collaboration) from and after the Collaboration Termination
Date.
2.4 Exclusivity.
(a) Until [
]* Novalon shall not engage in
any research collaboration, any drug discovery or drug
development collaboration, partnership or alliance, any
licensing transactions or any other kind of transaction,
involving all or any portion of Novalon's intellectual
property or know-how or the intellectual property or know-how
of any Person; provided, however, that the foregoing
provisions of this Section 2.4(a) shall not preclude Novalon
from engaging in the Collaboration. The restrictions set
forth in this Section 2.4(a) may be waived, in any instant,
by written consent of Cubist.
(b) During the period commencing upon the expiration
of the restrictions set forth in Section 2.4(a) above
and ending on the Collaboration Termination
Date, Novalon shall not engage in any research
or screening activities or programs, any
research collaborations, any drug discovery or
drug development collaborations, partnerships or
alliances, any licensing transactions, or any
other kind of transactions, in the anti-
bacterial and anti-fungal therapeutic area;
provided, however, that the foregoing provisions
of this Section 2.4(b) shall not preclude Novalon from
engaging in (i) the Collaboration, or (ii) any research or
screening activity or program so long as it (A) covers, a
finite number of specific biological targets for drug
discovery and development, none of which have been subject to
research and development activities pursuant to the
Collaboration, (B) provides for Novalon to engage in active
research, discovery and development activities with respect to
all of such biological targets, (C) provides for the payment
to Novalon of commercially reasonable consideration and (D)
does not preclude Novalon from entering into similar
arrangements with other parties (including Cubist) relating to
other targets in the same or any different field of pathogen.
The restrictions set forth in this Section 2.4(b) may be
waived. in any instance, by written consent of Cubist.
(c) Until [
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* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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]* Novalon, subject to any
applicable nondisclosure agreements between Novalon and third
parties, shall discuss and coordinate in advance with Cubist
any contacts, meetings, discussions or negotiations that
Novalon proposes to make or in which Novalon proposes to
participate, to the extent that such proposed contacts,
meetings, discussions or negotiations relate to any research
or screening activities or programs, any research
collaboration, any drug discovery or drug development
collaboration, partnership or alliance, any licensing
transaction, or any other kind of transaction, involving all
or any portion of Novalon's intellectual property or know-how
or the intellectual property or know-how of any Person;
provided, however, that the foregoing provisions of this
Section 2.4(c) shall not apply to the Collaboration.
Section 3. License. Subject to all of the terms of this Agreement,
Novalon hereby grants to Cubist a worldwide right and license to use the
Novalon Patent Rights and the Novalon Technology, for purposes of (i)
researching, screening for, discovering or developing anti-bacterial or
anti-fungal drug candidates or antibacterial or anti-fungal drug discovery
targets or (ii) selling, licensing, marketing or otherwise commercializing
anti-bacterial or anti-fungal drugs discovered or developed using any portion
of the Novalon Patent Rights and the Novalon Technology. The license shall be
perpetual and irrevocable. The license shall be exclusive with respect to any
Novalon Patent Rights and Novalon Technology that were developed in the
course of the research and development activities provided for in Section 2
hereof. Cubist shall have the right to sublicense the license granted to
Cubist pursuant to this Section 3. Except for any payments made or required
to be made by Cubist to Novalon pursuant to Section 2.2 or Section 4.1 in
connection with the Collaboration, Cubist shall not have to pay or otherwise
owe to Novalon any consideration of any kind in connection with the license.
Section 4. Royalties & Payments.
Section 4.1 Royalties. In consideration for the license granted
under this Agreement, Cubist shall pay royalties (collectively, the
Royalties) to Novalon, within [ ]* after the end of each calendar quarter,
in the amount of [ ]* of all revenue actually received by Cubist from
third parties to the extent that such revenue is directly attributable to (a)
Net Sales of Products for such quarter, (b) drug development milestone
payments actually received by Cubist during such quarter on account of any
antibacterial or antifungal drug candidate that was discovered or developed
as a result of the use of the Novalon Patent Rights or the Novalon
Technology, and (c) any
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
5
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licensing fees actually received by Cubist during such quarter with respect
to any Sublicense.
Section 4.2 Payments. All payments due under this Agreement shall be
paid (a) in full without deduction of exchange, collection, taxes or other
fees that may be imposed by any government and (b) in United States dollars
at Novalon's office in Chapel Hill, North Carolina or at such other place as
Novalon may designate consistent with applicable law. Currency conversions
shall be made by reference to the prevailing exchange rate for bank transfers
from the foreign currency to U.S. Dollars, as quoted at BankBoston on the
last business day of the calendar quarter immediately preceding the payment
due date. If by law, regulation or fiscal policy of any country, conversion
from that country's currency into U.S. dollars is restricted or forbidden,
written notice thereof shall be given to Novalon and payment of amounts from
that country shall be made through such lawful means as Novalon shall
designate, including, without limitation, deposit of local currency in such
recognized banking institution as Novalon shall designate. When in any
country the law or regulation prohibits both the transmittal and the deposit
of royalties as sales in that country, royalty payments from that country
will be suspended for as long as the prohibition is in effect and, as soon as
the prohibition ceases, all royalties that Cubist or its Sublicensees would
have been obligated to pay, but for the prohibition, will promptly be
deposited or transmitted, as (be case may be, to the extent then allowed.
Section 5. Intellectual Property.
Section 5.1 Ownership Rights. Novalon shall own all Technology and
inventions made, developed or discovered solely by its employees or agents or
by the employees or agents of any of its Affiliates, and shall own all Patent
Rights relating to such Technology and inventions. Cubist shall own all
Technology and inventions made, developed or discovered solely by its
employees or agents or by the employees or agents of any of its Affiliates,
and shall own all Patent Rights relating to such Technology and inventions.
Cubist and Novalon shall own all Technology and inventions developed jointly
by the employees or agents of Novalon and Cubist or their respective
Affiliates, and shall own all Patent Rights relating to such Technology and
inventions. Subject to the provisions of Section 5.2 below, Novalon retains
all rights to file and prosecute any and all patent applications included
within the Novalon Patent Rights, and Cubist retains all rights to file and
prosecute any and all patent applications included within the Cubist Patent
Rights.
Section 5.2 Patent Filings. Novalon shall, at its expense and using
patent attorneys selected by it, apply for, seek issuance of and maintain the
Novalon Patent Rights and other patents based on the Novalon Technology in
the United States and in such other countries as are identified in the Patent
List hereto or as Cubist may request in writing; provided that Cubist shall
cooperate with
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Novalon in such prosecutions filing and maintenance. Cubist shall be given at
least ten (10) days to advise and comment upon such filings and actions as
are undertaken by Novalon. Novalon may, in its discretion, decline to apply
for, prosecute or maintain any Novalon Patent Rights in any country, but
shall give timely notice to Cubist of any such determination, whereupon
Cubist may undertake such action, in the name and on behalf of Novalon, at
its own expense. Novalon agrees to cooperate with (Cubist as reasonably
necessary to permit Cubist to be able to prosecute or maintain any Novalon
Patent Rights in those countries that Novalon declines to undertake action.
Novalon also agrees to cooperate with Cubist as reasonably necessary to
permit Cubist to be able to prosecute or maintain any Cubist Patent Rights
arising from the Collaboration in those countries selected by Cubist.
Section 6. Indemnification.
Section 6.1 Indemnification. Cubist shall at all times defend and
hold Novalon, and its officers, directors, employees, agents and Affiliates
(together, Novalon Indemnitees) harmless from and against all claims, suits,
demands, liability and expenses, including legal expenses and reasonable
attorneys' fees, arising out of (a) the death of or injury to any person or
persons, (b) damage to property, or (c) any other claim, proceeding, demand,
expense and liability of any kind whatsoever resulting from (i) the
production, manufacture, shipping, handling, use (in commerce or otherwise),
sale, lease, consumption, promotion or advertisement of the Products by
Cubist or any Sublicensee or (ii) any obligation or activity of Cubist under
this Agreement or of any Sublicensee under any Sublicense; provided that
Cubist shall have no obligation to indemnify Novalon to the extent of
liability attributable to the Novalon's gross negligence or willful
misconduct.
Section 6.2 Indemnification. Novalon shall at all times defend and
hold Cubist, its officers, directors, employees, agents and Affiliates
(together, Cubist Indemnitees) harmless from and against all claims, suits,
demands, liability and expenses, including legal expenses and reasonable
attorneys' fees, arising out of any claim, proceeding, demand, expense and
liability of any kind whatsoever resulting from (i) the Novalon Patent Rights
and the Novalon Technology or (ii) any obligation or activity of Novalon
under this Agreement; provided that Novalon shall have no obligation to
indemnify Cubist to the extent of liability attributable to the Cubist's
gross negligence or willful misconduct.
Section 7. Infringement.
Section 7.1 Notice. Cubist shall notify Novalon promptly in writing
of any alleged Infringement of the Novalon Patent Rights by a third party and
shall provide any available evidence thereof.
Section 7.2 Prosecution By Novalon. Novalon shall have the right,
at its sole discretion, to prosecute, at its own expense, any alleged
infringements of the
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Novalon Patent Rights. Cubist agrees to allow Novalon to include Cubist, at
Novalon's expense, as a party plaintiff in any suit brought with respect to
infringement alleged to have occurred during the Collaboration within the
antibacterial and anti-fungal therapeutic area. In the event that Novalon
takes the lead counsel role with respect to the commencement or defense of
any action, the total cost shall be borne by and any recovery or damages
shall be paid solely to Novalon. Cubist shall have the right to participate
in any action, at Cubist's expense, and Novalon agrees to consult with
counsel for Cubist on any significant matters related to the litigation.
Section 7.3 Prosecution By Cubist.
(a) Procedure. If Novalon, within six (6) months after having been
notified of an alleged infringement, shall have been unsuccessful in
negotiating with the alleged infringer to cease and desist such infringement
and shall not have brought an infringement action, or if Novalon shall notify
Cubist at any time prior thereto or its intention not to bring suit against
any alleged infringer, then Cubist shall have the right, but shall not be
obligated, to prosecute at its own expense any such infringement of the
Novalon Patent Rights. Cubist shall be entitled to offset the costs of any
such litigation against any amounts due by Cubist to Novalon under this
Agreement. In such circumstances, Cubist may use the name of Novalon as the
plaintiff if necessary for the prosecution of the infringement suit.
Notwithstanding anything in the foregoing to the contrary, no settlement,
consent judgment or other voluntarily final disposition of any such suit may
be entered into without the consent of Novalon, which consent shall not be
unreasonably withheld.
(b) Damages. In the event that Cubist undertakes litigation pursuant
to Section 7.3(a) for the enforcement of Novalon Patent Rights, any recovery
of damages by Cubist for each suit shall be applied as follows: (a) first, to
Cubist to reimburse Cubist for the expenses of the litigation or suit,
including reasonable attorneys' fees, (b) then, second, to Novalon to
reimburse Novalon for its expenses of the litigation or case, including
reasonable attorneys' fees and any Running Royalty Amounts and licensing Fees
withheld by Cubist pursuant to Section 8.3(a), (c) then, third, an amount
equal to the aggregate dollar amount of sales revenue made by the infringing
person would be allocated [ ]* to Cubist and [ ]*
to Novalon and (d) then, the balance would be allocated [ ]*
between Cubist and Novalon.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
8
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Section 7.4 Actions Against Cubist or Novalon.
(a) In the event that an action alleging invalidity or
noninfringement of any of the Novalon Patent Rights shall be brought against
Cubist or against Novalon (whether as an independent action or as a
counterclaim of a suit filed by Cubist pursuant to Section 7.3(a)), Novalon,
at its sole option, shall have the right, within thirty (30) days after the
commencement of such action, to take or regain control of the action at its
own expense. If Novalon shall determine not to exercise this right, Cubist
may take over or remain as lead counsel for the action at Cubist's sole
expense, with any settlement or recovery subject to the approval provisions
of Section 7.3(a) and allocation provisions of Section 7.3(b).
(b) In the event that an action alleging any of the Novalon Patent
Rights or Novalon Technology infringes, or resulted from the misappropriation
of, any third party shall be brought against Cubist or against Novalon
(whether as an independent action or as a counterclaim of a suit filed by
Novalon pursuant to Section 7.2), Cubist, at its sole option, shall have the
right, within thirty (30) days after the commencement of such action, to take
or regain control of the action at its own expense. If Cubist shall determine
not to exercise this right, Novalon may take over or remain as lead counsel
for the action at Novalon's sole expense.
Section 7.5 Cooperation. In any infringement suit, either party
shall be entitled to request the cooperation and assistance of the other
party, at the requesting party's expense, as may be reasonably necessary for
the suit. Each party agrees to make available relevant records, papers,
information, samples and specimens, as well as to have its employees testify
upon request.
Section 7.6 Third Party Licenses. If Cubist and Novalon mutually
determine that sales of Products or use of the Novalon Patent Rights or
Novalon Technology would be impractical or impossible without obtaining a
royalty-bearing license from a third party, Cubist may enter into a license
with such third party, and Cubist shall be permitted to offset royalties or
any other amounts paid thereunder as a deduction within the calculation of
Royalties, unless the third party is an Affiliate of Cubist; provided,
however, that Cubist shall be entitled to offset no more than [ ]*
of the Royalties otherwise payable to Novalon.
Section 8. Dispute Resolution.
Section 8.1 Scope and Enforcement. Any controversy or claim arising
between the parties in connection with this Agreement shall be resolved by
binding arbitration in accordance with the terms and conditions of this
Section 9; provided,
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
9
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that actions by either party seeking equitable or declaratory relief may be
brought in court pursuant to Section 9. This agreement to arbitrate shall
continue in full force and effect despite the expiration, rescission or
termination of this Agreement. All arbitration shall be undertaken in
accordance with the federal policy favoring arbitration, as set forth in the
Federal Arbitration Act, and the decision of the arbitrator(s) shall be
enforceable in any court of competent jurisdiction. The parties knowingly and
voluntarily waive their rights to have their dispute tried and adjudicated by
a judge and jury except as expressly provided herein. The arbitrator(s) shall
apply the law of the Commonwealth of Massachusetts and the arbitration shall
be held in Boston, Massachusetts or in such other city as the parties may
mutually agree.
Section 8.2 Procedure. Any party may demand arbitration by sending
written notice to the other party. The arbitration and the selection of the
arbitrator(s) shall he conducted in accordance with such rules as may be
agreed upon by the parties, or, failing agreement within thirty (30) days
after arbitration is demanded, under the Commercial Arbitration Rules of the
American Arbitration Association (AAA), as such rules may be modified by this
Agreement. If the parties are unable to agree upon a single arbitrator within
sixty (60) days, three (3) arbitrators shall be used, one selected by each
party within ten (10) days after the conclusion of the sixty (60) day period
and a third selected by the first two within ten (10) days thereafter. The
arbitrator or arbitrators shall be accredited by the AAA and shall be
individuals with relevant business experience in structuring and negotiating
biotechnology research collaborations; provided, however, that the parties
may mutually agree in writing to waive either UT both of the foregoing
requirements. Unless the parties agree otherwise, they shall be limited in
their discovery to directly relevant documents- Responses or objections to a
document request shall be served twenty (20) days after receipt of the
request. The arbitrator(s) shall resolve any discovery disputes.
Section 8.3 Awards. The arbitrator(s) shall have the authority to
award actual money damages (with interest on unpaid amounts from the date
due), specific performance, and temporary injunctive relief, but the
arbitrator(s) shall not have the authority to award exemplary or punitive
damages, and the parties expressly waive any claimed right to such damages.
The arbitration shall be of each party's individual claims only, and no claim
of any other party shall be subject to arbitration in such proceeding. The
parties are unable to agree on the appointment of a single arbitrator, each
party shall bear the cost of the arbitrator appointed by such party and the
cost of the third arbitrator shall be shared equally by both parties. Each
party shall be responsible for all costs incurred by it in preparing for and
participating in the arbitration. Except as otherwise required by law, the
parties and the arbitrator(s) agree to maintain as confidential all
information or documents obtained during the arbitration process, including
the resolution of the dispute.
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Section 9. General Provisions.
Section 9.1 Remedies. The parties acknowledge and agree that, in the
event of a breach or a threatened breach by either party of Section 9.4
hereof, the other party may suffer irreparable damage for which it will have
no adequate remedy at law and, accordingly, shall be entitled to injunctive
and other equitable remedies to prevent or restrain such breach or threatened
breach, without the necessity of posting any bond or surety, in addition to
any other remedy it might have at law or at equity.
Section 9.2 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Delaware,
without regard to its rules concerning conflicts of laws.
Section 9.3 Exclusive Venue; Consent to Jurisdiction. Any action,
suit or other proceeding pursuant to, arising under, or touching or
concerning this Agreement or the transactions contemplated hereby (other than
those for which arbitration pursuant to Section 8 is the sale forum) shall be
brought exclusively in any court of competent jurisdiction in the State of
Delaware. The parties agree to take any and all necessary or appropriate
action to submit to the exclusive jurisdiction of any such court. In any such
action, suit or proceeding, the successful or prevailing party shall be
entitled to recover its reasonable attorneys' fees and other costs incurred
in connection with that action, suit or proceeding, in addition to any other
relief to which such party may be entitled.
Section 9.4 Confidentiality. It is contemplated that in the course
of the performance of this Agreement each party may, from time to time,
disclose Confidential Information to the other. Each party agrees to take all
reasonable steps to prevent disclosure of Confidential Information; provided
that no provision of this Agreement shall be construed to preclude such
disclosure of Confidential Information as may be necessary or appropriate to
obtain from any governmental agency any necessary approval or license or to
obtain patents that are to be included in Novalon Patent Rights.
Section 9.5 Amendment and Waiver. No provision of or right under
this Agreement shall be deemed to have been waived by any act or acquiescence
on the part of either party, its agents or employees, but only by an
instrument in writing signed by an authority officer of each party. No waiver
by either party of any breach of this Agreement by the other party shall be
effective as to any other breach, whether of the same or any other term or
condition and whether occurring before or after the date of such waiver.
Section 9.6 Independent Contractors. Each party represents that
it is acting on its own behalf as an independent contractor and is not acting
as an agent for or on behalf of any third party. This Agreement and the
relations hereby established by and between Cubist and Novalon do not
constitute a partnership, joint venture, agency or contract of employment
between them.
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Section 9.7 Assignment. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld in the case of any
assignment pursuant to a merger, consolidation or sale of substantially all
of the assets or stock of a party, provided that (a) nothing contained in
this Section 9.7 shall prohibit sublicensing, and (b) the proposed assignee
under this Section 9.7 agrees in writing to assume all of the obligations of
such party under this Agreement.
Section 9.8 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 9.9 Use of Names. Neither party shall use the name of the
other party or any officer, employee or consultant of the other party or any
adaptation thereof in any advertising, promotional or sales literature,
publicity or In any document employed to obtain funds or financing without
the prior written approval of the party or individual whose name is to be
used; provided that Cubist may state that it is licensed by Novalon under the
Novalon Patent Rights and the Novalon Technology and may make such disclosure
as is required by the Securities Act of 1933, the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder.
Section 9.10 Notices. All communications hereunder shall be in
writing and shall he deemed to have been duly given upon receipt by the
addressee at the addresses set forth below or such other address as either
party may specify by notice sent in accordance with this Section:
If to Cubist:
Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, MA 02139
Boston, MA 02118
Attention: Scott M. Rocklage, Ph.D.
Telecopier: (617) 576-0232
With a copy to,
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Julio E. Vega, Esquire
Telecopier: (617) 951-8736
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<PAGE>
(i) If to Novalon:
Novalon Pharmaceutical Corporation
214 West Cameron Avenue, Suite B
Chapel Hill, N.C. 27516
Attention: Dana M. Fowlkes, NM, Ph.D.
Telecopier: (919) 968-9255
with a copy to:
Jenner & Block
12th Floor
601 Thirteenth Street, N. W.
Washington, D.C. 20005
Attention: D. Joe Smith, Esquire
Telecopier: (203) 639-6066
Section 9.11 Severability. In the event any provision of this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other term or provision hereof. The parties agree that
they will negotiate in good faith or will permit a court or arbitrator to
replace any provision hereof so held invalid, illegal or unenforceable with a
valid provision which is as similar as possible in substance to the invalid,
illegal or unenforceable provision.
Section 9.12 Conflict or Inconsistency. In the event of any
conflict or inconsistency between the terms and conditions hereof and any
terms or conditions set forth in any purchase order or other document
relating to the transactions contemplated by this Agreement, the terms and
conditions set forth in this Agreement shall prevail.
Section 9.13 Captions. Captions or the sections and subsections of
this Agreement are for reference purposes only and do not constitute terms or
conditions of this Agreement and shall not limit or affect the terms and
conditions hereof.
Section 9.14 Word Meanings. Words such as herein, hereinafter,
hereof and hereunder refer to this Agreement as a whole and not merely to a
section or paragraph in which such words appear, unless the context otherwise
requires. The singular shall include the plural, and each masculine, feminine
and neuter reference shall include and refer also to the others, unless the
context otherwise requires.
Section 9.15 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the transactions and
matters contemplated hereby, supersedes all prior agreements and
understandings relating to the subject matter hereof (including, without
limitation, Section 7 of the
13
<PAGE>
Stock Purchase Agreement), and no representations, inducements, promises or
agreements, whether oral or otherwise, between such parties not contained
herein or incorporated herein by reference shall be of any force or effect.
Section 9.16 Acquisition. This Agreement shall immediately
terminate upon consummation of the Acquisition.
Section 9.17 Rules of Construction. The parties agree that they have
participated equally in the formation of this Agreement and that the language
and terms of this Agreement shall not be presumptively construed against
either of them.
Section 9.18 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In making proof
of this Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers, and have duly
delivered and executed this Agreement under seal as of the date first set
forth above.
CUBIST PHARMACEUTICALS, INC. NOVALON PHARMACEUTICAL
CORPORATION
/s/ Mark Carthy for Scott M. Rocklage /s/ Dana M. Fowlkes
- - ------------------------------------- -------------------------------------
By: Scott M. Rocklage By: Dana M. Fowlkes
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
14
<PAGE>
Schedule I
Definitions
When used as capitalized terms in the Research Collaboration and
License Agreement to which this Schedule I is attached, the following terms
shall have the respective meanings set forth below:
AAA has the meaning specified in Section 10.
Acquisition means the acquisition by Cubist of all of the outstanding
shares of Novalon's capital stock.
Acquisition Option means Cubists option to acquire all of the
outstanding shares of Novalon's capital stock pursuant to that certain
Acquisition Option Agreement, dated May 5, 1997.
Acquisition Option Expiration Date means the earlier of (i) [ ]* or
(ii) such date as the Acquisition Option terminates pursuant to that certain
Acquisition Option Agreement, dated May 5, 1997.
Affiliate means with respect to any person or Entity, any other person
or Entity that controls, is controlled by or is under common control with the
specified person or Entity. As used in this definition, the term control means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an Entity, whether through ownership
of voting securities, by contract or otherwise.
Agreement means the research collaboration and license agreement to
which this Schedule I is attached, together with all Schedules and Exhibits
annexed thereto, as the same shall be modified and in effect from time to time.
Collaboration means the collaboration and other research activities
engaged in by Cubist and Novalon pursuant to Section 2 of this Agreement.
Collaboration Termination Date means the earlier of (i) [ ]* or (ii)
the effective date of termination of the Collaboration pursuant to the
provision, of Section 2.1(a) of this Agreement.
Confidential Information means all information and data provided by the
parties to each other hereunder in written or other tangible medium and
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
1
<PAGE>
marked as confidential, or if disclosed orally, confirmed in writing within
thirty (30) days after disclosure, except any portion thereof which:
(a) is known to the receiving party, as evidenced by the receiving
party's written record, before receipt thereof under this Agreement;
(b) is disclosed to the receiving party by a third person who has a
right to make such disclosure; or
(c) is or becomes generally known in the trade through no fault of the
receiving party.
Cubist Indemnitee has the meaning specified in Section 6.2.
Cubist Patent Rights means Patent Rights which are owned by Cubist or
any of its Affiliates or which Cubist or any of its Affiliates has the right to
license or sublicense to persons or Entities.
Cubist Technology means Technology which is owned by Cubist or any of
its Affiliates or which Cubist Or any of its Affiliates has the right to license
or sublicense to persons or Entities.
Effective Date has the meaning set forth in the preamble to this
Agreement.
Entity means any corporation, association, partnership (general or
limited), joint venture, trust, estate, limited liability company, limited
liability partnership or other legal entity or organization.
Exhibit A means Exhibit A to this Agreement, as said Exhibit A may be
amended and in effect from time to time.
Minimum Research Period means the period commencing
on the Effective Date and ending on the later of [ ] * or [ ]*
after the Acquisition Option Expiration Date.
Net Sales means all gross amounts billed to any person or Entity (other
than an Affiliate of such person or Entity) at the earliest of invoice, shipment
or payment in respect of Products, less the sum of the following amounts:
(a) sales and use taxes, tariffs, duties and the like imposed
directly and with reference to particular sales or leases;
plus
(b) outbound shipping prepaid or actually allowed;
plus
- - --------------------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
2
<PAGE>
(c) amounts allowed on credits or returns; plus
(d) discounts allowed in amounts customary in the trade.
Novalon Indemnitee has the meaning specified in Section 6.1.
Novalon Patent Rights means Patent Rights as they relate to Cubist's
Specified Research Program as described in 2.1 c. which are owned by Novalon or
any of its Affiliates or which Novalon or any of its Affiliates has the right to
license or sublicense to persons or Entities. Without limiting the generality of
the foregoing, the term Novalon Patent Rights shall include all Patent Rights of
Novalon as they relate to Cubist's Specified Research Program as described in
2.1 c. with respect to the patents and patent applications listed in the Patent
List.
Novalon Technology means Technology as it relates to Cubist's Specified
Research Program as described in 2.1 c which is owned by Novalon or any of its
Affiliates or which Novalon or any of its Affiliates has the right to license or
sublicense to persons or Entities.
Patent List means Exhibit C annexed hereto as they may be amended and
in effect from time to time.
Patent Rights means all rights related to any of the following:
(a) all United States and foreign patent
applications and provisional applications;
(b) all patents issued with respect to all United States and
Foreign patent applications and provisional applications and
with respect to divisionals and continuations of these
applications;
(c) claims of United States and foreign continuation-in-part
applications, and of resulting patents, that are directed to
subject matter described in the patent applications described
in clause (a) above;
(d) claims of all foreign patent applications and of the resulting
patents that are directed to the subject matter described in
the United States patents and patent applications described in
clauses (a), (b) or (c) hereof, and
(e) any reissues of United States patents described in (a), (b) or
(c) hereof
3
<PAGE>
Products means any anti-bacterial or anti-fungal drug that was
discovered or developed as a result of the use of the Novalon Patent Rights or
the Novalon Technology.
Remaining Research Period means the period commencing at the end of the
Minimum Research Period and ending on the Collaboration Termination Date.
Royalties has the meaning set forth in Section 4. 1.
Sublicense means any license or right granted by Cubist to any person
or Entity (and any such license or right granted by such person or Entity to any
other person or Entity) to use the Novalon Patent Rights or the Novalon
Technology to the same extent as Cubist is entitled pursuant to this Agreement,
together with all agreements between the parties related thereto.
Sublicensor means any person or Entity (including without limitation,
Cubist) who grants a Sublicense.
Sublicensee Any person or Entity to whom a Sublicense is granted.
Technology means all proprietary developments, ideas, designs,
concepts, techniques, processes, inventions, cell lines, discoveries,
improvements, research results, toxicology data, assays, preclinical data,
mask Works, manufacturing processes, clinical results, regulatory
submissions, approvals and licenses, product licenses, papers, photographs,
computer programs and databases, manuals, prototypes, models, plans,
drawings, formulations, specifications, methods, shop-practices, formulas,
supplier lists, engineering and manufacturing information costing
information, accounting and financial data, and strategic plans (without
regard to whether they are Confidential Information, patentable or
copyrightable) of a person but that are not included within Patent Rights,
including without limitation,
(a) inventions that are the subject of patent applications for
which patents do not issue or are invalidated (from and after
the date a final determination is made from which no further
appeal may be taken);
(b) inventions that directly relate to the Patent Rights but do
not infringe a valid, unexpired or pending claim contained in
the Patent Rights;
(c) from and after the abandonment of a claim of a patent
contained in the Patent Rights or after the removal of a
patent from the list of Patent Rights, inventions formerly
covered thereby; and
4
<PAGE>
(d) in countries where the parties hereto have agreed that
obtaining patent protection is not economically viable or
advisable, all inventions that directly relate to the Patent
Rights.
<PAGE>
Confidential Treatment
Exhibit 10.3
License Agreement
This Agreement is made this 7th day of November, 1997 (the "Effective Date"), by
and between ELI LILLY & COMPANY having its principal place of business at Lilly
Corporate Center, Indianapolis, Indiana 46285 and its Affiliates (collectively,
"ELI LILLY") and Cubist Pharmaceuticals Incorporated, a Delaware corporation
having its principal place of business at 24 Emily Street, Cambridge, MA, 02139
and its Affiliates (collectively "CUBIST") as follows:
Article 1
Definitions
As used throughout this Agreement, the following terms shall have the meanings
indicated in this Article.
"Affiliate" means any corporation or other entity which directly or indirectly
controls, is controlled by or is under common control with a party to this
Agreement. A corporation or other entity shall be regarded as in control of
another corporation or entity if it owns or directly or indirectly controls more
than [ ]* of the outstanding voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to manage, direct or cause the direction of the management and policies of
the corporation or other entity or the power to elect or appoint [ ]* or more of
the members of the governing body of the corporation or other entity. Any such
other relationship as in fact results in actual control over the management,
business and affairs of a corporation or other entity shall also be deemed to
constitute control.
"Average Market Price" shall mean the average closing price for CUBIST common
stock for twenty consecutive trading days, the last day of which is immediately
prior to five days prior to the event that triggered such payment of CUBIST
common stock to ELI LILLY.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE>
"Compound" means [ ]* or a pharmaceutically acceptable salt thereof or a
pharmaceutically acceptable formulation thereof which is in Lilly's possession
on the Effective Date.
"Confidential Information" means any information and data received by a party
from the other party, as well as the terms of this Agreement. Notwithstanding
the foregoing, Confidential Information shall not include any part of such
Confidential Information that: (1) is or becomes part of the public domain other
than by unauthorized acts of the party obligated not to disclose such
Confidential Information; (ii) can be shown by written documents to have been
disclosed to the receiving party by a third party, provided such Confidential
Information was not obtained by such third party directly or indirectly from the
disclosing party with an obligation for such third party to maintain the
confidentiality of such information; (iii) prior to disclosure under this
Agreement, was already in the possession of the receiving party and such
possession can be evidenced by written documents, provided such Confidential
Information was not obtained directly or indirectly from the disclosing party
with an obligation to maintain the confidentiality of such information, (iv) can
be shown by written documents to have been independently developed by the
receiving party without breach of any of the provisions of this Agreement and
such independent development can be evidenced by written documents', or (v) is
disclosed by the receiving party pursuant to interrogatories, requests for
information or documents, subpoena, civil investigative demand issued by a court
or governmental agency or as otherwise required by law, provided, however, that
the receiving party notifies the disclosing party immediately upon receipt
thereof, giving such disclosing party sufficient advance notice to permit it to
seek a protective order or other similar order with respect to such Confidential
Information and provided, further, that the receiving party furnishes only that
portion of the Confidential Information which it is advised by counsel is
legally required whether or not a protective order or other similar order is
obtained by the disclosing party.
"ELI LILLY Program" shall mean a research, development and/or marketing project
that ELI LILLY, its Affiliates, and/or a third party, pursuant to an Agreement
with ELI LILLY, have been committing non-trivial financial and/or human
resources to advance.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
2
<PAGE>
"Field" shall mean the treatment of infectious diseases except, [ ]*
"Know-How" means all information and data reasonably useful for the development,
process development, regulatory approval, manufacture, use, formulation or sale
of Compound in the Field which (i) is in the possession of ELI LILLY as of the
Effective Date or is created by ELI LILY after the Effective Date, (ii) ELI
LILLY can provide using reasonble efforts and (iii) ELI LILLY is free to provide
without obligation to any third party. Such Know-How may include information
that is secret, whether or not patentable, relating to materials, methods,
processes, procedures, protocols, techniques, formulae and data reasonably
useful for the development, regulatory approval, manufacture or use of Compound
in the Field.
"Major Market Country" shall mean the United States, Canada, Japan, the United
Kingdom, Germany, France, Italy, Spain, Switzerland, Netherlands and Belgium.
"Net Sales" means the amounts received by CUBIST and/or its sublicensees on
sales or other transfers for commercial use of Compound, and products
incorporating Compound, to independent third parties in bona fide arms length
transactions, less the following deductions actually allowed and taken by such
independent third parties and not otherwise recovered by or reimbursed by CUBIST
or its sublicensees:
(a) [ ]*;
(b) [ ]*;
(c) [ ]*; and
(d) [ ]*
If CUBIST or its sublicensees sell or transfer Compound, or any products
incorporating Compound for commercial use, other than (i) reasonable quantities
of promotional samples or (ii) to an independent third party in a bona fide
arm's length transaction, Net Sales shall be determined based upon the resale or
other retransfer to an independent third party in an arm's length transaction by
the entity to whom such Compound, or product, was sold or transferred by Cubist
or its sublicensee. If there is no such resale or retransfer, Net Sales shall be
determined based on the
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
3
<PAGE>
average Net Sales price as determined in the immediately preceding royalty
accounting period as set forth in Section 4.02.
In the event Compound is sold as a component of a combination of functional
elements, Net Sales for purposes of determining royalty payments on such
combination shall be calculated by multiplying the Net Sales price of such
combination by the fraction [ ]* In the event no separate sale of either such
above-designated Compound or such above-designated non-Compound portion of the
combination is made during the accounting period in which the sale of the
combination was made, Net Sales shall be calculated by multiplying the Net Sales
price of the combination by the fraction [ ]*
"Patent(s)" means any of ELI LILLY's patents, pending patent applications, and
future. patent applications, including, but not limited to, those set forth on
Exhibit 3 attached hereto, which claim Compound, formulations of Compound,
processes for preparing Compound or use of Compound in the Field, any United
States or foreign counterpart patents and applications, and any continuing,
divisional, reissue, re-examination and substitute patents and applications
based, in whole or in part, on any of the foregoing patents and patent
applications, together with all continuations, continuations-in-part, divisions,
patents of addition, reissues, renewals, extensions, supplementary protection
certificates and complementary protection certificates of any of the foregoing
which are owned by ELI LILLY and under which ELI LILLY has rights to grant a
sublicenses.
"Phase II Clinical Trial" shall mean clinical studies conducted in accordance
with Good Clinical Practices ("GCPs") in a small number of healthy volunteers to
establish efficacy and obtain a preliminary indication of the dosage of
Compound.
"Phase III Clinical Trial" shall mean large scale clinical studies in patients
conducted in accordance with GCPs primarily to establish safety and efficacy of
Compound.
"Valid Claim" shall mean a claim of an issued and unexpired Patent which has not
been withdrawn, canceled, revoked, disclaimed, or held invalid, unenforceable or
unpatentable by a final and unappealed (within the time allowed for appeals) or
unappealable judgment or decision of a court or other governmental agency of
competent jurisdiction
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
4
<PAGE>
Article 2
License Grant
2.00 ELI LILLY grants to CUBIST the following worldwide, exclusive licenses
subject to the conditions set forth herein below in Section 2.01:
(a) Under the Patents, to develop, manufacture, formulate, have manufactured,
import, use, distribute for sale, market and sell Compound in the Field; and
(b) To use the Know-How for the development, manufacture, formulation, use,
distribution for sale, marketing, and sale of Compound consistent with the terms
of this Agreement.
2.01 (i) Subject to Section 2.01(ii) below, CUBIST shall have the right to grant
sub-licenses under the Patents and Know-How, for use in the Field, provided that
the terms and conditions of such sub-licenses are consistent with and no less
restrictive than the terms and conditions of this Agreement, and any such
disclosure or transfer of Compound shall be limited to use solely in the Field.
(ii) In the event that, during the term of this Agreement, CUBIST
actively seeks to grant a sub-license to a third party for the development of
the Compound in the Field which sublicense includes, but is not necessarily
limited to, the right to develop and/or commercialize an oral or intravenous
formulation of the Compound, CUBIST agrees to inform ELI LILLY of such
determination by written notice, which notice shall include (a) a description in
reasonable detail of the subject matter of the proposed sub-license and (b) the
terms on which CUBIST would be willing to grant ELI LILLY such rights (the
"Sublicense Notice"). ELI LILLY shall thereupon have a period of [ ]* (the
"Notice Period") to either accept CUBIST's terms in writing or to make a written
counter-proposal. If ELI LILLY accepts CUBIST's proposal or makes a
counter-proposal, the parties will, for a period of up to [ ]* from receipt by
ELI LILLY of the Sublicense Notice (the "Negotiation Period"), seek in good
faith to enter into a definitive agreement for such rights. If ELI LILLY does
not by the expiration of the Notice Period either accept CUBIST's proposal or
make a counter-proposal, or the parties negotiate in good faith and fail to
reach agreement by the expiration of the Negotiation
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
5
<PAGE>
Period, CUBIST shall be free to enter into a sub-license for such rights with a
third party,[ ]*
2.02 CUBIST shall notify ELI LILLY within [ ]* of the identity of each
sublicensee together with a summary of the principal terms of any sub-license,
and shall take all reasonable steps in the event of a breach of any sub-license
by the sub-licensee to enforce the same.
2.03 CUBIST acknowledges that ELI LILLY has disclosed certain Know-How to CUBIST
prior to the execution of this Agreement and CUBIST shall treat such Know-How in
accordance with the terms of this Agreement. During the term of this Agreement,
ELI LILLY shall disclose to CUBIST such other Know-How as is directly related to
CUBIST's activities under the license granted in Article 2.00 and which ELI
LILLY can provide to CUBIST using reasonable efforts.
2.04 Promptly after the Effective Date, ELI LILLY may provide CUBIST with
reasonable access to consult with pertinent ELI LILLY employees that have had
prior experience working with Compound in the Field at ELI LILLY to enhance the
preclinical or clinical development and manufacturing of the Compound, provided
that such consultation shall occur at a mutually agreeable time and place and
that ELI LILLY will only provide such access to current employees which are
reasonably able to provide CUBIST with ELI LILLY Know-How relating to the
scale-up, manufacture, or formulation of Compound for use in the Field. CUBIST
shall be responsible for all reasonable expenses its own personnel and ELI LILLY
personnel incur in association with any such consultations. Upon CUBIST's
request, ELI LILLY shall provide CUBIST and its sublicensees with all Know-How,
information and data owned by ELI LILLY which ELI LILLY can provide using
reasonable efforts to the extent such Know-How, information and data is
reasonably required to further CUBIST's or its sub-licensees' ability to
develop, scale-up, obtain regulatory approval for, manufacture, distribute, use,
formulate or sell Compound for use in the Field. CUBIST agrees to treat all
Know-How disclosed to it as Confidential Information of ELI LILLY.
2.05 ELI LILLY shall deliver to CUBIST, ELI LILLY's available inventory of
Compound. ELI LILLY shall not be required to perform any manufacturing of
Compound for CUBIST.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
6
<PAGE>
Article 3
Diligence and
Regulatory
3.00 CUBIST shall use commercially reasonable efforts to develop and test the
Compound in the Field, to perform all pre-clinical, clinical and other studies
of such Compound necessary to obtain regulatory approval for the manufacture,
use and sale of Compound, and to market and sell Compound in the Field in all
countries in which it is commercially reasonable to market such Compound. CUBIST
shall fully fund these efforts, as well as any other work that is required for
CUBIST to develop and market Compound in the Field.
CUBIST has prepared and provided to ELI LILLY a preliminary development plan
attached hereto as Exhibit 2, which contains CUBIST's estimate, based upon data
currently available to CUBIST concerning the subject matter of this Agreement,
of the probable course of Compound development hereunder. As Compound
development progresses, CUBIST will revise the plan from time to time to reflect
the development and evolution of its plans regarding development, regulatory
approvals, manufacturing and formulation, and clinical trials, and will provide
ELI LILLY with a copy of any such materially revised plan as soon as reasonably
possible after such revision occurs. [ ]*. The terms under which ELI LILLY shall
acquire back all such rights shall be the subject of a separate agreement to be
negotiated in good faith by the parties.
3.01 CUBIST represents that it intends to conduct clinical testing of Compounds
to the extent that such testing is supported by safety and efficacy data
required by the applicable regulatory agency.
3.02 Within thirty (30) days of the Effective Date, ELI LILLY shall deliver to
CUBIST a copy of the Investigational New Drug Application filed with the United
States Food and Drug Administration and foreign equivalents, if any relating to
the Compound, and as soon thereafter as is commercially practicable, ELI LILLY
shall transfer all other reasonably transferable information used in regulatory
filings, laboratory data, clinical data, toxicology data, and scale-up,
manufacturing and formulation information relating to Compound to CUBIST in a
commercially reasonable time frame.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
7
<PAGE>
3.03 Both ELI LILLY and CUBIST shall submit information and file reports to
various governmental agencies to the extent they are lawfully required on
compounds under clinical investigation, compounds proposed for marketing, or
marketed drugs. Information must be submitted at the time of initial filing for
investigational use in humans and at the time of a request for market approval
of a new drug. In addition, supplemental information must be provided on
compounds at periodic intervals and adverse drug experiences must be reported at
more frequent intervals depending on the severity of the experience.
Consequently, ELI LILLY and CUBIST agree, to the extent required by applicable
law or regulations, to:
1) provide to one another for initial and/or periodic submission to
governmental agencies significant information on Compound from pre-clinical
laboratory, animal toxicology and pharmacology studies, as well as serious or
unexpected adverse experience reports from clinical trials and marketed
commercial experiences with Compound.
2) report to one another in such a manner and time so as to enable each
party to comply with all governmental laws and regulations in territories for
which registration is or will be sought.
Serious adverse experience means any experience that suggests a
significant hazard, contraindication, side effect or precaution, or any
experience that is fatal or life threatening, Is permanently disabling, requires
or prolongs inpatient hospitalization, or is a congenital anomaly, cancer or
overdose.
Unexpected adverse experience is one not identified in nature,
specificity, severity or frequency in a current investigator brochure for
Compound, or in CUBIST's labeling for Product.
3.04 CUBIST also agrees that if it contracts with a third party for research to
be performed by such third party on Compound or if it sublicenses its rights
herein to a third party, it will require such third party to comply with the
reporting obligations (both to ELI LILLY and to regulatory agencies) set forth
in this Section.
3.05 CUBIST shall comply with all applicable laws and regulations regarding the
care and use of experimental animals, in a country where the development is
carried out. All animals used to evaluate Compound shall be provided humane care
and treatment in accordance with the most acceptable veterinary practices.
8
<PAGE>
Article 4
Payments
4.00 Cubist will pay [ ]* to ELI LILLY as a license fee upon the
Effective Date of this Agreement.
4.01 CUBIST will also pay to ELI LILLY the following payments:
(a) [ ]* as a license fee, to be paid upon the earlier of (i)
completion of CUBIST or CUBIST's sub-licensee's first Phase II Clinical Trial in
a Major Market Country or (ii) upon the initiation of CUBIST or CUBIST's
sub-licensees of patient dosing in the first Phase III Clinical Trial in a Major
Market Country; said license fee to be paid in CUBIST common stock based on the
Average Market Price for such CUBIST common stock;
(b) [ ]* as a license fee, to be paid upon the date of CUBIST's
or CUBIST's sub-licensee's first regulatory submission in a Major Market Country
for a license to market Compound, said license fee to be paid in CUBIST common
stock, based on the Average Market Price for such CUBIST Common Stock; and
(c) [ ]* as a license fee, to be paid upon the date of CUBIST's
or CUBIST's sub-licensee's first regulatory approval in a Major Market Country
for their application to market Compound, said license fee to be paid in CUBIST
common stock, based on the Average Market Price for such CUBIST Common Stock.
4.02 During the first [ ]* after the first commercial sale of Compound
in a Major Market Country, CUBIST will pay ELI LILLY royalties of [ ]*
on the first [ ]* of aggregate annual Net Sales of Compounds and
[ ]* on aggregate Net Sales between [ ]* and [ ]* and
[ ]* on aggregate annual Net Sales in excess of $150,000,000 in all
countries ("Protected Countries") for so long as (a) the manufacture, use or
sale of Compound is covered by a Valid Claim, or (b) there is no significant
generic competition which causes a reduction of Net Sales of Compound by
[ ]* or more in any [ ]* period.
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* Confidential Treatment requested: material has been omitted and filed
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After the expiration of the first [ ]* after first commercial sale in a
Major Market Country, CUBIST will pay ELI LILLY royalties of [ ]* on the
first [ ]* of aggregate annual Net Sales of Compound and [ ]* on
aggregate annual Net Sales between [ ]* and [ ]* and [ ]*
on aggregate annual Net Sales in excess of [ ]* in all countries
("Protected Countries") for so long as (a) the manufacture, use or sale of a
Compound is covered by a Valid Claim, or (b) there is no significant generic
competition which causes a reduction of Net Sales of Compound by [ ]* or
more in any [ ]* period.
4.03 For a period of [ ]* following first commercial sale in a Major
Market Country, CUBIST will pay ELI LILLY royalties of [ ]* of
aggregate annual Net Sales in all countries that are not Protected Countries,
but where the manufacture, use, sale or transfer of Compound utilizes Know-How
provided to CUBIST by ELI LILLY. [ ]* of Net Sales in countries that are
not Protected Countries shall be included in aggregate annual Net Sales of
Compound calculated pursuant to Section 4.02 for purposes of determining the
appropriate royalty percentage in Section 4.02.
4.04 In the event that CUBIST can demonstrate that external factors beyond its
control (such as government-imposed price controls) have materially reduced
CUBIST's profitability on sales of Compound in any Country, ELI LILLY agrees to
consider in good faith an equitable reduction in the royalty rate applicable to
such country under Section 4.02 or 4.03, as applicable.
4.05 The first payment under Articles 4.04 and 4.05 shall be due within [ ]*
after December 31 or June 30, whichever such date occurs first after the first
commercial sale or transfer of Compound. Thereafter, payments under Articles
4.04 and 4.05 shall be made within [ ]* of each of December 31 and June 30 of
each year. Payments shall be accompanied by a report showing all facts necessary
to the calculation of amounts due.
4.06 All royalty payments to ELI LILLY shall be in United States dollars.
Royalty payments based on Net Sales in currencies other than United States
dollars shall be converted to US dollars according to the
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* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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average official rate of exchange for that currency as published in the Wall
Street Journal on the first and last days of the six-month period in which that
royalty accrued (or, if not published on that day, the first and last
publication days for the Wall Street Journal during that six month period). If
such exchange rate is not published in the Wall Street Journal, then the rate
shall be determined using average conversion rates that are accepted in the
industry on the first and last days of the six month period in which the royalty
accrued. All payments that are not to be made in CUBIST common stock, as
specified herein. shall be paid in United States dollars.
4.07 If by law, regulation, or fiscal policy of a particular country, conversion
into United States dollars or transfer of funds of a convertible currency to the
United States is restricted or forbidden, CUBIST shall give ELI LILLY prompt
written notice and shall pay the royalty due under this Article 4 through such
means or methods as are lawful in such country as ELI LILLY may reasonably
designate. Failing the designation by ELI LILLY of such lawful means or methods
within thirty (30) days after such written notice is given to ELI LILLY, CUBIST
shall deposit such royalty payment in local currency to the credit of ELI L]ILLY
in a recognized banking institution designated by ELI LILLY, or if none is
designated by ELI LILLY within the thirty (30) day period described above, in a
recognized banking institution selected by CUBIST In and identified in a written
notice to ELI LILLY by CUBIST, and such deposit shall fulfill all obligations of
CUBIST with respect to such royalties.
4.08 CUBIST and its sub-licensees, if any, shall maintain complete and accurate
books and records with respect to sale and use of Compound and all other
information necessary to permit calculation and verification of amounts due
under this Article 4 and Article 5 and Article 6, set forth below. Upon
reasonable prior written notice to CUBIST, ELI LILLY may cause an independent
agent to audit the books and records of CUBIST and its sub-licensees, if any,
pertaining to the payment to ELI LILLY hereunder, for the sole purpose of
confirming the amounts due, and the accuracy of the payments and reports;
provided that no such audit shall be permitted for periods exceeding [ ]*
prior to the date CUBIST receives such written notice. Any such audit shall be
performed at ELI LILLY's expense during normal business hours and shall, if so
required by CUBIST, be performed by a firm of independent public
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* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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accountants reasonably acceptable to CUBIST. The independent agent shall report
only such information as would properly be included in such a report. In the
event of an underpayment, CUBIST shall promptly remit to ELI LILLY all amounts
due. CUBIST shall require any sublicensee to agree to comply with all of the
terms of this paragraph, including but not limited to making such report,
maintaining such records, and permitting such audit.
[ ]*
4.09 Any late payments due to ELI LILLY shall be subject to interest charges
which rate shall be established at [ ]* above the prime interest rate in
effect on the date that such payment was first due to ELI LILLY.
Article 5
Minimum Royalties
5.00 [ ]* after December 31 or June 30, whichever date occurs first,
following the first twelve (12) month period after the first commercial sale of
Compound in a Major Market Country, CUBIST will pay ELI LILLY [ ]* as a
minimum royalty.
5.01 [ ]* after December 31 or June 30, whichever date occurs first,
following the second twelve (12) month period after the first commercial sale of
Compound in a Major Market Country, CUBIST will pay to ELI LILLY [ ]* as
a minimum royalty.
5.02 [ ]* after December 31 or June 30, whichever date occurs first,
following the third twelve (12) month period after the first commercial sale of
Compound in a Major Market Country, CUBIST will pay ELI LILLY [ ]* as a
minimum royalty.
5.03 CUBIST shall deduct any withholding taxes from the payments agreed upon
under this Agreement and pay them to the proper tax authorities as required by
applicable law. CUBIST shall maintain official receipts of any withholding taxes
and forward these receipts to ELI LILLY. The parties will exercise their best
efforts to ensure that any
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* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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withholding taxes imposed are reduced as far as legally possible under the
provisions of any treaties applicable to any payment made hereunder.
Article 6
Indemnification, Insurance and Limitation of Damages
6.00 CUBIST shall indemnify ELI LILLY and its directors, officers, employees and
agents, as set forth in Article 6.02, with respect to (a) any third party claim
or action against ELI LILLY based on CUBIST's or CUBIST's sublicensee's
developing, making, distributing, selling, marketing, using or otherwise
transferring Compound and (b) breach of any representation or warranty contained
in Article 7 by CUBIST, provided, however that CUBIST shall have no duty to
indemnify ELI LILLY to the extent that any such claim or action is subject to
ELI LILLY's duty of indemnification set forth in Article 6.01.
6.01 ELI LILLY shall indemnify CUBIST, as set forth in Article 6.02, with
respect to (a) any third party claim or action against CUBIST based on (i)
activities of ELI LILLY, Its employees, or its agents with respect to Compound
prior to the Effective Date, (ii) the negligence or willful misconduct of ELI
LILLY, its employees and agents, and (b) breach of any representation or
warranty contained in Article 7 by ELI LILLY, provided, however, that ELI LILLY
shall have no duty to indemnify CUBIST to the extent that any such claim or
action Is subject to CUBIST's duty of indemnification set forth in Article 6.00.
6.02 With respect to the claims and actions referenced in Articles 6.00 and 6.01
above, the indemnifying party shall defend any such claim or action against the
indemnified party and shall pay all damages, judgments, costs, expenses
(including attorneys' fees, but only to the extent that the indemnifying party
fails to promptly assume the defense of such claims and actions) and liability
awarded against the indemnified party, or settlements entered into, with respect
to such claim or action, provided that the indemnified party (a) provides prompt
written notice to the indemnifying party of any such claim or action, (b) allows
the indemnifying party to assume the defense and settlement thereof, with
counsel of its choice, and (c) provides reasonable assistance to the
indemnifying party in connection with the defense and settlement thereof.
6.03 Prior to administration of Compound to any human, CUBIST shall provide to
ELI LILLY an endorsement verifying customary levels of insurance for damages,
judgments, costs, expenses (including attorneys' fees) and liability with
respect to any third party claim or action based on CUBIST's or CUBIST's
sublicensee's manufacture, distribution, use,
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marketing or sale of Compound, naming ELI LILLY, its directors, officers and
employees as additional insureds on the policy, and shall have copies of such
insurance policies delivered to ELI LILLY as soon as reasonably practical. In
addition, evidence of insurance in the form of such endorsement shall be
furnished to ELI LILLY at the inception of each subsequent phase of human
clinical trials, as well as upon granting of NDA and PLA, but in no event less
than annually upon the insurance policy renewal date. Such insurance shall
remain in effect at customary levels throughout the term of this Agreement. ELI
LILLY shall be informed thirty (30) days prior to any cancellation of or
material decrease in the amount of coverage of such insurance by CUBIST or any
other action that CUBIST reasonably should believe will result in decrease or
cancellation of such insurance, or immediately upon receipt by CUBIST of a
notice of cancellation of such insurance, on the effective date of which
cancellation or decrease, clinical use of Compound must immediately cease,
subject to CUBIST obtaining adequate replacement insurance. The foregoing shall
not be interpreted to limit the scope or amount of CUBIST's indemnification
obligation under Article 6.00.
Notwithstanding the foregoing, CUBIST shall be entitled to adopt an insurance
program containing self insurance elements, to the extent that CUBIST is able to
demonstrate to the reasonable satisfaction of ELI LILLY that such a program is
not unusual in the industry for companies similarly situated (including
financial condition to support such a program) or with respect to products with
a risk profile similar to products licensed hereunder.
6.04 Other than as set forth elsewhere in this Agreement, in no event shall
either party be liable for any special, consequential, indirect, or incidental
damages, however caused and on any theory of liability, arising out of this
Agreement. These limitations shall apply notwithstanding any failure of
essential purpose of any limited remedy.
Article 7
Representations, Warranties And Disclaimer
7.00 Each party represents and warrants to the other party that (a) it has the
right to enter into this Agreement; (b) this Agreement has been duly authorized
by all necessary action of such party and (c) the execution of this Agreement by
the party will not conflict with or breach any other agreement to which it is a
party or by which it is bound.
7.01 ELI LILLY represents that (a) it is party to an agreement with Ophidian
which Agreement includes a covenant not to compete (b) if
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CUBIST notifies ELI LILLY that it desires to develop Compound for the treatment
of clostridium difficile-induced colitis, ELI LILLY shall notify CUBIST if such
covenant has expired or is terminated, (c) there is no other agreement known to
ELI LILLY to which it is a party and by which it is bound that would conflict
with or be breached by ELI LILLY granting the license in Article 2, (d) except
as previously disclosed in writing to CUBIST, no other person or entity has
claimed, or to ELI LILLY's knowledge has, any rights to or interest in the
Patents and the Know- How in the Field to be licensed hereunder, and that to its
knowledge, the manufacture, use, distribution, marketing or sale of the
Compound(s) can be performed without infringing the patent rights of any third
party, and (e) as of the Effective Date ELI LILLY is conducting no development
program relating to analogs or derivatives of the Compound, provided that ELI
LILLY shall be free to commence and conduct any such program at any time
hereafter.
7.02 ELI LILLY makes no representation or warranty that Compound made, used, or
sold under the licenses granted herein is or will be free of claims of
infringement of the patent rights of any third party (although it represents and
warrants that it has no knowledge of (i) such infringement not heretofore
disclosed to Cubist and (ii) any payment obligations that CUBIST will have to
third parties in connection with CUBIST's development, manufacturing, marketing
or sale of Compound) and makes no warranty or representation that any of the
Patents to be licensed hereunder are valid or enforceable.
7.03 EXCEPT AS SET FORTH IN ARTICLES 7.00 AND 7.01 ABOVE, ELI LILLY EXPRESSLY
DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT.
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7.04 CUBIST acknowledges that the Compound(s) are highly experimental in
nature [ .]*
7.05 CUBIST warrants that all CUBIST common stock to be paid to ELI LILLY
pursuant to this Agreement shall be properly issued and all legal requirements
associated with such issuance to ELI LILLY shall be fulfilled.
The number of shares of CUBIST common stock payable to ELI LILLY shall be
determined by dividing the payment amount by the Average Market Price to
determine the number of shares.
For illustration purposes only, upon completion of CUBIST's first Phase II
Clinical Trial, CUBIST shall pay ELI LILLY [ ]* in CUBIST common stock. The
number of shares to be transferred to ELI LILLY shall be determined by dividing
[ ]* by the Average Market Price.
Article 8
Patents And Know-How
8.00 In the event either of the parties shall learn of the infringement, or a
challenge to the validity, enforceability, or title of any Patent (including any
action for a declaratory Judgment) right licensed hereunder, or an action for
unauthorized use or misappropriation of Know-How licensed hereunder, such party
shall promptly notify the other party thereof in writing and shall provide the
other party with any evidence in its possession of such infringement, challenge
or action.
8.01 Actions Affecting Other ELI LILLY Programs.
(i) During the term of this Agreement, ELI LILLY shall have the sole
right, but no obligation, to bring or defend any suit or action relative to the
patenting or patent enforcement directly relating to Compound, manufacture, use,
distribution, marketing or sale of Compound in the Field which suit or action
also materially affects intellectual property rights of ELI LILLY that relate to
an active ELI LILLY Program, including the fight to recover for past
infringement, or the unauthorized use or misappropriation of Know-How in the
Field. If ELI LILLY finds it
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separately with the Commission.
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necessary or desirable to join CUBIST in such suit or action, CUBIST shall
execute all papers and perform such other acts as may reasonably be required, at
ELI LILLY's expense, to join CUBIST in such suit or action. CUBIST may, at its
option, join as a party to such suit and be, at its expense, represented by
counsel of its choice, provided that ELI LILLY shall continue to control the
prosecution or defense of such suit. Unless CUBIST and ELI LILLY otherwise
agree, any amount recovered in any such action, whether by judgment or
settlement, after deducting ELI LILLY's reasonable expenses (including
attorneys' fees), and payment to CUBIST of damages in respect of CUBIST's lost
profits for which ELI LILLY recovers payment and CUBIST's reasonable expenses
(including attorneys' fees) incurred in connection with an action or suit in
which ELI LILLY requested that CUBIST be Joined or in which CUBIST voluntarily
joined, shall be paid to or retained by ELI LILLY.
(ii) In the event ELI LILLY faIls to take action with respect to such
infringement, or challenge to validity, enforceability or title, or action for
unauthorized use or misappropriation of Know-How in the Field which materially
affect intellectual property rights of ELI LILLY that relate to an active ELI
LILLY program, within a reasonable period, no less than three (3) months,
following receipt by ELI LILLY of reliable evidence of infringement, CUBIST
shall have the right, but no obligation, to bring, or defend any such suit or
action. ELI LILLY may, at its option, join as a party to such suit and be, at
its expense, represented by counsel of its choice, provided that CUBIST shall
continue to control the prosecution or defense of such suit. If CUBIST finds it
necessary to join ELI LILLY in such suit or action, ELI LILLY shall execute all
papers and perform such other acts as may be reasonably required at CUBIST's
expense. Unless CUBIST and ELI LILLY otherwise agree, any amount recovered in
any such action or suit, whether by judgment or settlement, after deducting
CUBIST's reasonable expenses (including attorneys' fees) and payment to ELI
LILLY of damages in respect of ELI LILLY's lost royalties for which CUBIST
recovers payment and after payment to ELI LILLY of its reasonable expenses
(including attorneys' fees) incurred in connection with an action or suit in
which CUBIST requested that ELI LILLY be joined or which ELI LILLY voluntarily
owned, shall be paid to or retained entirely by CUBIST.
8.02 Actions Not Affecting Other Lilly Programs.
(i) During the term of this Agreement, CUBIST shall have the sole
right, but no obligation, to bring or defend any suit or action relative to the
patenting or patent enforcement directly relating to Compound, manufacture, use,
distribution, marketing or sale of Compound in the
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Field which suit or action does not materially affect intellectual property
rights of ELI LILLY that relate to an active ELI LILLY Program, including the
right to recover for past infringement, or the unauthorized use or
misappropriation of Know-How in the Field. If CUBIST finds it necessary or
desirable to join ELI LILLY in such suit or action, CUBIST shall execute all
papers and perform such other acts as may reasonably be required, at CUBIST's
expense, to join ELI LILLY in such suit or action. ELI LILLY may, at its option,
join as a party to such suit and be, at its expense, represented by counsel of
its choice, provided that CUBIST shall continue to control the prosecution or
defense of such suit. Unless CUBIST and ELI LILLY otherwise agree, any amount
recovered in any such action or suit, whether by Judgment or settlement, after
deducting CUBIST's reasonable expenses (including attorneys' fees) and payment
to ELI LILLY of damages in respect of ELI LILLY's lost royalties for which
CUBIST recovers payment and after payment to ELI LILLY of its reasonable
expenses (including attorneys' fees) in connection with an action or suit in
which CUBIST requested that ELI LILLY be joined or which ELI LILLY voluntarily
joined, shall be paid to or retained entirely by CUBIST.
(ii) In the event CUBIST faIls to take action with respect to such
infringement, or challenge to validity, enforceability or title, or action for
unauthorized use or misappropriation of Know-How in the Field which does not
materially affect intellectual property rights of ELI LIILLY that relate to an
active ELI LILLY program, within a reasonable period, no less than three (3)
months, following receipt by CUBIST of reliable evidence of infringement, ELI
LILLY shall have the right, but no obligation, to bring, or defend any such suit
or action. If ELI LILLY finds it necessary to join CUBIST in such suit or
action, CUBIST shall execute all papers and perform such other acts as may be
reasonably required at ELI LILLY's expense. CUBIST may, at its option, join as a
party to such suit and be, at its expense, represented by counsel of its choice,
provided that ELI LILLY shall continue to control the prosecution or defense of
such suit. Unless CUBIST and ELI LILLY otherwise agree, any amount recovered in
any such action, whether by judgment or settlement, after deducting ELI LILLY's
reasonable expenses (including attorneys' fees), and payment to CUBIST of
damages in respect of CUBIST's lost profits for which ELI LILLY recovers payment
and CUBIST's reasonable expenses (including attorneys' fees) incurred in
connection with an action or suit in which ELI LILLY requested that CUBIST be
joined or in which CUBIST voluntarily joined, shall be paid to or retained by
ELI LILLY.
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8.03 If CUBIST determines in good faith in consultation with ELI LILLY that the
manufacture, use or sale of Compound in the Field would infringe the
intellectual property rights of a third party unaffiliated with either CUBIST or
ELI LILLY, and it therefore becomes necessary to pay a royalty, license fee or
other compensation to that party to avoid a claim of infringement, then CUBIST
and ELI LILLY shall each bear [ ]* provided that ELI LILLY's share of such
obligation shall be deducted from CUBIST's royalty payments due to ELI LILLY,
and further provided that CUBIST's payment, pursuant to this Agreement, to ELI
LILLY in any one (1) year would never be reduced by more than [ ]*. If, as a
result of the preceding sentence, CUBIST bears more than [ ]* of the royalty,
license fee or other compensation due to a third party under this Section 8.04,
the amount of the excess may be carried forward and used by CUBIST as a credit
against royalties due ELI LILLY in subsequent royalty periods, provided that in
no event shall CUBIST's royalty payments to ELI LILLY be reduced by more than
[ ]*.
8.04 Each party agrees to cooperate with the other in legal action taken to
enforce, defend or maintain a Patent licensed hereunder or concerning Know-How
licensed hereunder, including litigation proceedings.
8.05 ELI LILLY shall take all steps necessary to maintain the Patents in the
Field, including without limitation the preparation, filing and prosecution of
new patent applications, through an attorney of their choice. CUBIST shall
reimburse ELI LILLY for one half (1/2) of its reasonable out-of-pocket expenses
incurred after the Effective Date paid to third parties for patent preparation,
reasonable attorney fees, patent filing fees, applications for patent term
extensions and SPC's, translation fees for patent purposes, and patent
maintenance fees for Patents licensed hereunder within thirty (30) days of
receipt of an itemized expense report from ELI LILLY for such patent related
expenses.
(a) If CUBIST reasonably believes that ELI LILLY is failing to maintain one or
more of its Patents in the Field, CUBIST shall provide ELI LILLY sixty (60) days
written notice of its intent to assume maintenance of such Patents itself If ELI
LILLY fails to resume maintenance of the Patents in the Field that CUBIST
reasonably believes that ELI LILLY is failing to maintain or to provide
reasonable evidence
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* Confidential Treatment requested: material has been omitted and filed
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demonstrating that ELI LILLY is maintaining these Patents in the Field at the
expiration of such sixty (60) day period, CUBIST may, through an attorney of
their choice, take all necessary actions to maintain the Patents, and shall be
entitled to deduct [ ]* of the costs and expenses incurred from any of
CUBIST's payments pursuant to Article 4.04. In such event, ELI LILLY shall
complete all acts and execute and deliver all instruments and other documents
and render CUBIST assistance as is necessary or desirable for CUBIST to assume
the filing, prosecution and maintenance of such Patents in the Field that ELI
LILLY has not resumed maintenance of or demonstrated that it is maintaining.
(b) ELI LILLY shall keep CUBIST currently advised as to the status of all
patents and patent applications which relate to Patents and to supply CUBIST
promptly with copies of all patents, patent applications, substantive patent
office actions, substantive responses received or filed in connection with such
applications. CUBIST may itself or through its attorney offer comments and
suggestions with respect to the matters that are the subject of this Article
8.06, and ELI LILLY agrees to consider carefully such comments and suggestions;
however, nothing herein shall obligate ELI LILLY to follow such comments or
suggestions.
(c) ELI LILLY shall notify CUBIST of their intention to abandon a patent or
patent application which relates to Patents (either a total series of Patents or
patent applications or on a country by country basis). At CUBIST's option,
CUBIST may maintain such patent or patent application relating to Patent that
ELI LILLY plans to abandon either a total series of Patents or patent
applications or on a country by country basis) at CUBIST's sole expense, and
CUBIST shall receive title to such patent or patent application and such patent
shall no longer then be considered a Patent for purposes of this Agreement.
8.06 CUBIST shall take all steps necessary to maintain its patents and patents
relating to Compound in the Field, including without limitation the preparation,
filing and prosecution of new patent applications through an attorney of its
choice, provided that a copy of any new patent applications relating to Compound
in the Field, to be filed by CUBIST or a sub-licensee of CUBIST, will be
supplied to ELI LILLY at least thirty (30) days prior to the filing date of such
patent application.
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* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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CUBIST shall keep ELI LILLY currently advised as to the status of all
patents and patent applications which relate to patents filed by CUBIST in the
Field and to supply ELI LILLY promptly with copies of all patents, patent
applications, patent office actions, responses and other papers received or
filed in connection with such applications. ELI LILLY may itself or through its
attorney offer the other comments and suggestions with respect to the matters
that are the subject of this Article 8.06, and CUBIST agrees to consider
carefully such comments and suggestions, however, nothing herein shall obligate
CUBIST to follow such comments or suggestions.
Article 9
Assignment
9.00 Neither party may assign or delegate any of its rights or duties under this
Agreement without the prior written consent of the other, except that either
party may assign this Agreement to a person or party that has purchased or
succeeded to all or substantially all of the business and assets of the assignor
to which the Agreement relates, and that has assumed in writing or by operation
of law such party's obligations under this Agreement, provided that CUBIST shall
be permitted to sub-license its rights hereunder as provided under Section 2.01
above. This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors and assigns insofar as this
Agreement is assignable. The assignor of this Agreement shall guarantee the
performance of the obligation of this Agreement by such successor or assigns.
Nothing herein is intended to confer on any person other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
Article 10
Term And Termination
10.00 The term of this Agreement shall be for the period commencing as of the
Effective Date and ending on the later of (a) the expiration of the last of the
Patents to expire or (b) the end of the tenth year from the date of first sale
in the first Major Market Country where Know-How royalties are due, unless and
until earlier terminated as provided in this Article. Upon the expiration of
this Agreement, CUBIST shall retain a fully paid-up, royalty free license under
the Know-How for purposes consistent with this Agreement and limited to use in
the Field.
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10.01 If either party defaults in the performance of its material obligations
hereunder, including but not limited to CUBIST's failure to use commercially
reasonable efforts to develop Compound (provided, however, that this shall not
be construed as a guarantee that any Compound will be successfully developed),
and if any such default is not corrected within [ ]* after it shall have been
called to the attention of the defaulting party, in writing, by the other party,
then the other party, at its option, may, in addition to any other remedies it
may have, thereupon terminate this Agreement by giving written notice of
termination to the defaulting party.
10.02 This Agreement may be terminated by either party, on notice, (i) upon the
institution by the other party of insolvency, receivership or bankruptcy
proceedings, (ii) upon the institution of such proceedings against the other
party, which are not dismissed or otherwise resolved in such party's favor
within sixty (60) days thereafter, and (iii) upon the other party's dissolution
or ceasing to do business in the normal course.
10.03 CUBIST may terminate this Agreement at any time, upon thirty (30) days
prior written notice to ELI LILLY and upon a reasonable determination by CUBIST
that continued development of the Compound hereunder is not commercially
reasonable. [ ]*.
10.04 Termination of this Agreement for any reason shall not result in any
obligation by ELI LILLY to repay any payments made to it by CUBIST prior to such
termination.
10.05 Upon termination of this Agreement for any reason, the sub-licenses shall
be automatically assigned to ELI LILLY, and ELI LILLY shall be bound by the
terms of such sub-licenses provided that the sub-licensees continue to perform
in accordance with their respective sublicense agreements. Notwithstanding the
foregoing, ELI LILLY's obligations to any such sublicensee shall not be
interpreted to extend beyond any obligations to CUBIST hereunder with respect to
the subject matter of the sub-license.
10.06 Upon termination of this Agreement for any reason, except for termination
caused by material breach by ELI LIILLY, all licenses granted to CUBIST pursuant
to Article 2 shall terminate, Cubist furthermore shall transfer to ELI LILLY all
regulatory filings and regulatory correspondence, patent filings and patent
office correspondence, any and all other clinical and non-clinical data, records
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and tabulations related to the Compound; and shall execute any and all documents
of such patent offices and/or patent receiving offices, and/or regulatory
agencies, including the US FDA, so as to allow ELI LILLY to make immediate use
of such data, records, patent applications and/or patents and regulatory
filings. ELI LILLY shall not be obligated to treat such information received
pursuant to this Section 10.06 as Confidential Information and may use such
information, data and know-how for any purpose at ELI LILLY's discretion.
If CUBIST terminates this Agreement due to ELI LILLY's material breach,
CUBIST's licenses pursuant to Article 2 shall continue for so long as CUBIST
continues to fulfill their payment obligations pursuant to Articles 4 and 5.
10.07 Termination of this Agreement for any reason shall not terminate the
provisions set forth in Article 6 with respect to actions arising with respect
to periods prior to termination, as well as Articles 7, 10, 13, 15, and 17
hereof The obligations of those Articles shall continue in full force and effect
following any such termination.
10.08 Upon termination of this Agreement for any reason, neither party shall be
relieved of obligations with respect to periods prior thereto, including any
obligation to make payments, including but not limited to obligations pursuant
to Articles 4, 5, 6 or 10, or reports regarding sale prior to such termination.
10.09 If CUBIST determines that it will not develop or market Compound in one or
more countries, either by itself or through the efforts of a sublicensee, or if
ELI LILLY makes written request to CUBIST to develop or sell Compound in one or
more countries and in which countries CUBIST either by itself or through the
efforts of a sublicensee, has taken no action, all rights including rights to
develop, market and sell Compound in that country(ies) shall revert to ELI LILLY
[ ]* after CUBIST receives written notice of ELI LILLY's intent to pursue
those rights is received by CUBIST if CUBIST either by itself or through the
efforts of a sublicensee, has taken no action toward such development or
marketing prior to the end of that year.
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
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Article 11
Force Majeure
11.00 If the performance of this Agreement or any obligations hereunder, except
the making of payments, is prevented, restricted or interfered with by reason of
fire or other casualty or accident, earthquake, supplier delay, strikes or labor
disputes, war or other violence, any law, order, proclamation, regulations,
ordinance, demand or requirement of any government agency, or any other act or
condition beyond the reasonable control of the parties hereto ("Event of Force
Majeure"), the party so affected upon giving prompt notice to the other party
shall be excused from such performance to the extent of such prevention,
restriction, or interference; provided that the party so affected shall use its
reasonable best efforts to avoid or remove such causes of nonperformance and
shall continue performance hereunder with the utmost dispatch and that such
party exercises due diligence to overcome such circumstances.
11.01 The party suffering an Event of Force Majeure shall notify the other party
within fifteen (15) days of the occurrence of such Events of Force Majeure and
within thirty (30) days shall furnish the other party with a recovery plan of
action. Without limiting the foregoing, a party suffering an Event of Force
Majeure shall use its reasonable best efforts to limit the impact of the Event
of Force Majeure on such party's performance of this Agreement.
Article 12
Notices
12.00 Any notice required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been sufficiently given for all purposes
five (5) days after having been mailed by first class certified or registered
mail, postage prepaid or by fax which is confirmed by certified mail. Unless
otherwise specified in writing, the mailing addresses of the parties shall be as
described below.
For ELI LILLY
ELI LILLY & COMPANY
Attn: Legal Division
Lilly Corporate Center
Indianapolis, Indiana 46285
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For CUBIST:
Mark Carthy
Chief Business Officer
Cubist Pharmaceuticals Incorporated
24 Emily Street
Cambridge, MA 02139
with a copy to:
CUBIST's Legal Counsel:
Michael Lytton
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Article 13
Governing Law
13.00 This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Indiana, United States of America, without reference to
conflict of laws principles.
In the event of any action, controversy or claim arising out of or relating to
any provision of this Agreement or the breach, termination or enforceability
thereof, ELI LILLY and CUBIST shall make all efforts to settle those conflicts
amicably between themselves. Should they fail to agree, the parties may assert
any remedy available at law or in equity to enforce its rights under this
Agreement.
Article 14
Partial Validity
14.00 If any provision of this Agreement shall be found or be held to be invalid
or unenforceable by a court of competent jurisdiction in which this Agreement is
being performed, then the meaning of said provision shall be construed, to the
extent feasible, so as to render the provision enforceable, and if no feasible
interpretation would save such provision, it shall be severed from the remainder
of this Agreement, which shall remain in full force and effect. In such event,
the parties shall negotiate, in good faith, a
25
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substitute, valid and enforceable provision which most nearly effects the
parties' intent in entering into this Agreement.
Article 15
Confidentiality
15.00 Except as otherwise provided in this Article 15, during the term of this
Agreement and for a period of [ ]* the parties shall maintain the Confidential
Information in confidence and use it only for purposes specifically authorized
under this Agreement. To the extent it is reasonably necessary or appropriate to
fulfill its obligations or exercise its rights under this Agreement: (i) a party
may disclose Confidential Information it is otherwise obligated under this
Article 15 not to disclose to third parties, on a need-to- know basis and on
condition that such entities or persons agree to keep the Confidential
Information confidential for the same time periods and to the same extent as
such party is required to keep the Confidential Information confidential
hereunder; and (ii) a party may disclose such Confidential Information to
government or other regulatory authorities as required by law or statute. The
parties hereto understand and agree that remedies at law may be inadequate to
protect against any breach of any of the provisions of this Article 15 by either
party or their employees, agents, officers or directors or any other person
acting in concert with it or on its behalf Accordingly, each party shall be
entitled to, but not limited to, the granting of injunctive relief by a court of
competent Jurisdiction against any action that constitutes any such breach of
this Article 15.
15.01 Notwithstanding the provisions of Section 15.00 above, CUBIST shall be
free to make disclosures to third parties of Confidential Information of ELI
LILLY consisting of data regarding the Compound in the Field under circumstances
where, in CUBIST's reasonable business judgment, such disclosures will (i)
further the development and commercialization of the Compound and (ii) not
adversely affect any patent rights of ELI LILLY of which it is aware, provided,
however, that in the case of (a) technical papers disclosing such Confidential
Information, or (b) other disclosures where LILLY's name is used or would
reasonably be implied from the context, CUBIST will provide a copy of the
proposed paper or disclosure to ELI LILLY at least [ ]* in advance of
publication and will not proceed with such publication or
- - --------------------------
* Confidential Treatment requested: material has been omitted and filed
separately with the Commission.
26
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disclosure without the consent of ELI LILLY, which consent will not be
unreasonably withheld; and further, provided, that in the case of all other
written disclosures of Confidential Information, CUBIST will provide to ELI
LILLY a copy of the material incorporating such disclosure as promptly as is
practicable, and in no event later than one (1) week after the disclosure takes
place.
15.02 ELI LILLY will make no public pronouncements referencing this Agreement or
CUBIST without CUBIST's express written approval. No license or rights are
granted to either party to use the name of the other without express written
approval. CUBIST's first public announcement of this Agreement, attached hereto
as Exhibit 4, may be released by CUBIST upon full execution of this Agreement.
Except as provided by Exhibit 4, CUBIST shall not release any information
regarding the existence or terms of this Agreement that is not required by law.
Article 16
Entire Agreement
16.00 The terms and conditions herein contained, including the Exhibits hereto,
constitute the entire agreement and understanding of the parties relating to the
subject matter of this Agreement and supersedes all previous communications,
proposals, representations, and agreements, whether oral or written, relating to
the subject matter of this Agreement.
No agreement or understanding varying or extending the same shall be binding
upon either party hereto unless in a written document which expressly refers to
this Agreement and which is signed by both parties to be bound thereby.
Article 17
Miscellaneous
17.00 It is understood and agreed that each party shall have the status of an
independent contractor under this Agreement and that nothing in this Agreement
shall be construed as authorization for either ELI LILLY or CUBIST to act as
agent for the other. Nothing contained herein or done in pursuance of this
Agreement shall constitute either party the agent of the other party for any
purpose or in any sense whatsoever, or constitute the parties as partners or
joint venturers.
17.01 The failure of either party to enforce at any time any of the provisions
of this Agreement, or the failure to require at any time
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performance by the other party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the validity of either party to enforce each and every such
provision thereafter.
17.02 The headings set forth at the beginning of the various Articles of this
Agreement are for reference and convenience and shall not affect the meanings of
the provisions of this Agreement.
17.03 During the term of this Agreement, ELI LILLY shall not, directly or
indirectly through or in connection with any third party, conduct research,
develop, make or market Compound for use in the Field.
17.04 This Agreement may not be amended, supplemented, or otherwise modified
except by an instrument in writing signed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in duplicate by duly authorized officers or representatives as of the date first
above written.
ELI LILLY & COMPANY CUBIST PHARMACEUTICALS
INCORPORATED
By:/s/ William R. Ringo By:/s/ Mark Carthy
------------------------------- ---------------------------------
William R. Ringo
President, Infectious Diseases Print name:Mark Carthy
Business Unit -------------------------
Title:Vice President and Chief
------------------------------
Business Officer
----------------
