<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the period ended March 31, 1999
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 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
incorporation or organization) Identification No.)
24 Emily Street
Cambridge, Massachusetts 02139
(Address of principal executive offices)
(617) 576-1999
(Registrant's telephone number, including area code)
None
(Former name, former address and former
fiscal year, if changed since last report)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of May 12, 1999, there were 17,535,429 shares outstanding of Cubist's
common stock, $0.001 per value per share.
- --------------------------------------------------------------------------------
<PAGE>
CUBIST PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
Item Page
Number Number
<S> <C> <C>
PART I. Financial Information
Item 1. Condensed Unaudited Financial Statements
Condensed Balance Sheets as of March 31, 1999
and December 31, 1998 .............................................................. 3
Condensed Statements of Operations for the three months ended
March 31, 1999 and 1998 ............................................................ 4
Condensed Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 ............................................................ 5
Notes to the Unaudited Condensed Financial Statements .............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................................. 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................. 10
PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds .............................................. 10
Item 6. Exhibits and Reports on Form 8-K........................................................ 11
Signature............................................................................... 12
</TABLE>
2
<PAGE>
PART I -- Financial Information
Item 1. Condensed Financial Statements
CUBIST PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $8,776,803 $6,463,688
Short-term investments ........................................... 6,389,978 8,692,514
Accounts receivable .............................................. 354,375 --
Prepaid expenses and other current assets ........................ 246,937 231,409
----------------- ----------------
Total current assets ............................................. 15,768,093 15,387,611
Property and equipment ................................................ 7,841,191 7,727,821
Less: Accumulated depreciation and amortization .................. (4,205,410) (3,908,054)
----------------- ----------------
Property and equipment, net ...................................... 3,635,781 3,819,767
Long-term investments ................................................. 3,899,333 3,855,336
Other assets .......................................................... 58,750 74,238
----------------- ----------------
Total assets............................................. $23,361,957 $23,136,952
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................................. $1,032,585 $460,939
Accrued expenses ................................................. 639,180 572,562
Current portion of long-term debt ................................ 79,680 83,957
Current portion of capital lease obligations ..................... 526,294 625,450
----------------- ----------------
Total current liabilities ............................... 2,277,739 1,742,908
Long-term debt, net of current portion................................. 194 16,109
Long-term capital lease obligation, net of current portion............. 1,226,230 1,292,165
----------------- ----------------
Total liabilities........................................ 3,504,163 3,051,182
----------------- ----------------
Commitments
Stockholders' Equity:
Common Stock - $.001 par value; authorized: 25,000,000 shares;
issued and outstanding 1998 16,642,968 shares;
issued and outstanding 1999 17,502,152 shares .................... 17,516 16,643
Additional paid-in capital ............................................ 59,099,568 54,890,014
Accumulated deficit ................................................... (39,259,290) (34,820,887)
----------------- ----------------
Total stockholders' equity............................... 19,857,794 20,085,770
----------------- ----------------
Total liabilities and stockholders' equity............... $23,361,957 $23,136,952
================= ================
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
financial statements.
3
<PAGE>
CUBIST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Sponsored research revenues ....................... $604,375 $513,550
Operating expenses:
Research and development ....................... 4,226,732 2,563,518
General and administrative ..................... 979,703 858,077
----------------- ----------------
Total operating expenses ..................... 5,206,435 3,421,595
Interest income ................................... 234,587 184,168
Interest expense .................................. (70,930) (93,013)
----------------- ----------------
Net loss .......................................... ($4,438,403) ($2,816,890)
================= ================
Basic and diluted net loss per common share ....... ($0.26) ($0.27)
================= ================
Weighted average number of common shares for basic
and diluted net loss per common share .......... 17,175,161 10,581,054
================= ================
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
financial statements.
4
<PAGE>
CUBIST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows used for operating activities:
Net loss ..................................................... $(4,438,403) $(2,816,890)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .............................. 314,183 308,358
Common stock issued for technology milestone ............... 250,000 --
Changes in assets and liabilities:
Accounts receivable ................................... (354,375) 53,333
Prepaid expenses and other current assets ............. (59,525) (38,211)
Other assets .......................................... 15,488 38,305
Accounts payable and accrued expenses ................. 638,264 359,356
----------------- -----------------
Total adjustments ................................... 804,035 721,141
----------------- -----------------
Net cash used for operating activities .......................... (3,634,368) (2,095,749)
Cash flows from (for) investing activities:
Purchase of equipment ........................................ (85,115) (307,639)
Leasehold improvements ....................................... (28,255) (18,875)
Purchase of short-term investments ........................... (251,438) --
Maturities of short-term investments ......................... 2,553,974 2,049,280
Purchase of long-term investments ............................ -- --
Maturities of long-term investments .......................... -- 2,524,812
----------------- -----------------
Net cash provided by investing activities ....................... 2,189,166 4,247,578
----------------- -----------------
Cash flows for (from) financing activities:
Issuance of stock ............................................ 3,933,600 (5,370)
Proceeds from notes receivable ............................... 10,000 --
Repayments of debt ........................................... (20,192) (51,137)
Proceeds from capital lease financing ........................ -- 92,984
Principal payments of capital lease obligations .............. (165,091) (139,399)
----------------- -----------------
Net cash provided by (used for) financing activities ............ 3,758,317 (102,922)
----------------- -----------------
Net increase in cash and cash equivalents ....................... 2,313,115 2,048,907
Cash and cash equivalents, beginning of period .................. 6,463,688 2,837,600
----------------- -----------------
Cash and cash equivalents, end of period ........................ $8,776,803 $4,886,507
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ....................... $70,930 $93,013
Non cash activity:
Reclassification of amount due under note issued in connection
with preferred stock offering from additional paid in
capital to notes receivable ................................ -- $10,000
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
financial statements.
5
<PAGE>
CUBIST PHARMACEUTICALS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
A. Nature of Business
Cubist Pharmaceuticals, Inc. is a biopharmaceutical company founded in
May 1992 and is engaged in the research, development and commercialization of
novel classes of antiinfective drugs to combat serious life threatening bacteria
and fungi infections. Cubist has established multiple technology licenses and
collaborations and has established a network of advisors and collaborators.
Cubist is located in Cambridge, Massachusetts.
B. Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are necessary, in
the opinion of management, for a fair presentation of the results of the interim
periods presented. Interim results are not necessarily indicative of results for
a full year. These unaudited condensed financial statements do not include all
information and footnote disclosures required by generally accepted accounting
principles and therefore should be read in conjunction with Cubist's audited
financial statements and related footnotes for the year ended December 31, 1998
which are included in Cubist's Annual Report on Form 10-K. Such Annual Report on
Form 10-K was filed with the Securities and Exchange Commission on March 17,
1999.
Net Loss per Common Share
The net loss per common share is computed based upon the weighted
average number of common shares and common shares and common equivalent shares
(using the treasury stock method) outstanding after certain adjustments
described below. Common equivalent shares are not included in the per share
calculations where the effect of their inclusion would be anti-dilutive.
C. License Agreement
On February 3, 1999, Cubist entered into a research and license
agreement with Novartis Pharma AG to use Cubist's proprietary VITA(TM)
technology to validate and develop assays for antiinfective targets and to
identify new compounds for development as antiinfective agents. In exchange for
the license, Novartis will pay research payments and, if certain scientific and
development milestones are achieved, Novartis will make milestone payments. In
addition, Novartis will be required to pay royalties to Cubist on worldwide
sales of any drug developed and commercialized from any products derived from
this collaboration. Upon the signing of the research and license agreement,
Novartis purchased, and Cubist issued to Novartis, 797,488 shares of Common
Stock for a total purchase price of $4.0 million in cash. The proceeds from the
sale of these shares will be primarily used to fund the clinical development of
daptomycin and development of it's VITA(TM) technology.
6
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Except for the historical information contained herein, this Quarterly
Report on Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, but not limited to, (i) statements about the
adequacy of Cubist's cash, cash equivalents, other capital resources, interest
income, other income and future revenues due under Cubist's collaborative
agreements to fund its operating expenses and capital requirements as currently
planned through 1999, (ii) statements about the amount of capital expenditures
that Cubist expects to incur in 1999, and (iii) certain statements identified or
qualified by words such as "likely", "will", "suggests", "may", "would",
"could", "should", "expects", "anticipates", "estimates", "plans", "projects",
"believes", or similar expressions (and variants of such words or expressions).
You are cautioned that forward-looking statements are inherently uncertain.
Actual performance and results of operations may differ materially from those
projected or suggested in the forward-looking statements due to certain risks
and uncertainties, including, but not limited to, the risks and uncertainties
described or discussed in the section "Risk Factors" in Cubist's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998. The forward-looking
statements contained herein represent Cubist's judgment as of the date of this
Quarterly Report on Form 10-Q, and Cubist cautions readers not to place undue
reliance on such statements.
Overview
Since its incorporation on May 1, 1992 and commencement of operations
in February 1993, Cubist has been engaged in the research, development and
commercialization of novel antiinfective drugs combat serious life threatening
bacteria and fungi infections. Cubist has a limited history of operations and
has experienced significant operating losses since inception. The Company
expects to incur significant additional operating losses over the next several
years and expects cumulative losses to increase substantially due to expanded
research and development efforts, pre-clinical and clinical trials and
development of manufacturing, marketing and sales capabilities.
A key element of Cubist's strategy is to enhance certain of its drug
discovery and development programs and to fund its capital requirements, in
part, by entering into collaborative agreements with major pharmaceutical
companies. Cubist is a party to collaborative agreements based specifically on
its aminoacyl-tRNA synthetase program with Bristol-Myers Squibb and Merck. Under
these collaborative agreements, Cubist is entitled to receive research support
payments and, if certain drug development milestones are achieved, milestone
payments. In addition, Cubist will be entitled to receive royalties on worldwide
sales of any drug developed and commercialized from these collaborations.
On February 3, 1999, Cubist entered into a research and license
agreement with Novartis Pharma AG to use Cubist's proprietary VITA(TM)
technology to validate and develop assays for antiinfective targets and to
identify new compounds for development as antiinfective agents. In exchange for
the license, Novartis will pay Cubist research payments and if certain
scientific and development milestones are achieved, Novartis will make milestone
payments. In addition, Novartis will be required to pay royalties to Cubist on
worldwide sales of any drug developed and commercialized from any products
derived from this collaboration. Upon the signing of the research and license
agreement, Novartis purchased, and Cubist issued to Novartis, 797,488 shares of
Common Stock for a total purchase price of $4.0 million in cash. The proceeds
from the sale of these shares will be primarily used to fund the clinical
development of daptomycin and development of it's VITA(TM) technology. These
additional funds together with existing cash resources are expected to be used
to fund the Company's operations and capital requirements through 1999.
On November 7, 1997, Cubist entered into a license agreement with Eli
Lilly and Company pursuant to which Cubist acquired exclusive worldwide rights
to develop, manufacture and market daptomycin. In exchange for such license,
Cubist has paid to Eli Lilly an upfront license fee in cash, and if certain drug
development milestones are achieved, has agreed to pay milestone payments in
cash or by issuing shares of Common Stock to Eli Lilly. In addition, Cubist will
be required to pay royalties to Eli Lilly on worldwide sales of daptomycin.
Daptomycin is a novel, natural product being developed for the treatment of
Staphylococcus aureus and enterococcus infections in humans. Cubist began
clinical trials of daptomycin in February of 1999.
7
<PAGE>
On February 19, 1999 Cubist issued to Eli Lilly and Co. 56,948 shares
of Cubist Common Stock as consideration for the licensing of daptomycin to
Cubist and pursuant to, and in accordance with, the terms of the agreements with
Eli Lilly dated November 7, 1997 with respect to. The issuance of shares was
incident to the initiation of Phase III clinical testing of daptomycin. The
shares issued to Eli Lilly were not registered under the Securities Act of 1933.
Year 2000 Readiness
The "Year 2000" issue generally describes the various problems which
may result from the improper processing of dates and date-sensitive
calculations. Computers and other equipment containing computer-related
components (such as programmable logic controllers and other embedded systems)
using two digits to identify the year in a date may not be able to distinguish
between dates in the 20th century versus the 21st century. Because computer and
microprocessor use is so widespread, the issue has become a societal concern,
the impact of which is not yet known.
Cubist has completed the assessment of its critical computer systems
and embedded systems and believes them to be Year 2000 compliant. Although
Cubist believes its critical systems are Year 2000 compliant, there can be no
assurances that other defects will not be discovered in the future. Cubist
believes that any failure of it's non-critical systems to be Year 2000 compliant
will not have a material adverse effect on it.
In addition to Cubist's critical systems, Cubist relies on third party
service providers and suppliers (i.e., payroll services company,
telecommunications companies, banks and utility companies and contract
manufacturers) in the conduct of its business, and it recognizes that there may
be potential exposure to Year 2000-related business disruptions as a result.
Cubist has contacted its significant service providers and contract
manufacturers and has obtained assurances from some that they are addressing
Year 2000 issues in a prudent fashion. Others have not replied in any fashion,
but none have informed Cubist of material Year 2000 issues. Cubist is unable to
control whether the firms and suppliers it does business with currently, and in
the future, will have systems which are Year 2000 compliant. Cubist's operations
could be adversely affected to the extent that firms and suppliers would be
unable to provide services, materials or products.
To the extent that Year 2000 compliance assurances are not given by
it's third party service providers and suppliers, Cubist intends to devise
contingency plans to address any potential negative effects in the event of the
unavailability of services, materials or products. If necessary, Cubist may
increase inventory levels of materials and products prior to December 1999 as a
contingency against possible disruption of supply. Nevertheless, a failure of
any contingency plan devised by Cubist may not prevent a business interruption
caused by one or more of its third party service providers or suppliers, and
such a failure may have a material adverse effect on Cubist.
Expenditures to date have not been material and have consisted solely
of the time of certain company personnel. Cubist does not currently expect that
future costs of completing the assessment will be material.
Results of Operations
Three Months Ended March 31, 1999 and 1998
Revenues. Total revenues in the three months ended March 31, 1999 were
$604,000 compared to $514,000 in the three months ended March 31, 1998, an
increase of $90,000 or 17.7%. The revenue earned in the three months ended March
31, 1999 consisted of $354,000 in research support funding from the Novartis
collaboration and $250,000 in research support funding from the Bristol-Myers
Squibb collaboration. In the three months ended March 31, 1998, total revenues
consisted of research support funding from the Bristol-Myers Squibb and Merck
8
<PAGE>
collaborations; and funding from SBIR grants. The increase was due to revenues
associated with the Novartis collaboration.
Research and Development Expenses. Total research and development
expenses in the three months ended March 31, 1999 were $4,227,000 compared to
$2,564,000 in the three months ended March 31, 1998, an increase of
$1,663,000 or 64.9%. The increase was largely due to increased consulting and
manufacturing costs related to daptomycin development, and the additional
personnel and purchases required by such development; and milestone expenses
related to the initiation of Phase III clinical trials.
General and Administrative Expenses. General and administrative
expenses in the three months ended March 31, 1999 were $980,000 compared to
$858,000 in the three months ended March 31, 1998, an increase of $122,000 or
14.2%. The increase was largely due to increased costs related to personnel and
increased marketing and public relations expenses.
Interest Income and Expense. Interest income in the three months ended
March 31, 1999 was $235,000 compared to $184,000 in three months ended March 31,
1998, an increase of $51,000 or 27.7%. The increase in interest income was due
primarily to a higher average cash, cash equivalent and investment balances
during the three months ended March 31, 1999 as compared to the three months
ended March 31, 1998 due to the private placement in September 1998 and the
Novartis collaboration. Interest expense in the three months ended March 31,
1999 was $71,000 as compared to $93,000 during the three months ended March 31,
1998.
Net Loss. The net loss during the three months ended March 31, 1999 was
$4,438,000 compared to $2,817,000 during the three months ended March 31, 1998,
an increase of $1,621,000 or 57.5%. The increase was primarily due to additional
expenses incurred associated with the development of daptomycin.
Liquidity and Capital Resources
Since inception, Cubist has financed its operations through the sale of
equity securities, equipment financing, sponsored research revenues, license
revenues and interest earned on invested capital. The total cash, cash
equivalent and investments balance at March 31, 1999 was $19,066,000 compared to
$19,012,000 at December 31, 1998.
Since inception through March 31, 1999, Cubist had invested an
aggregate of $7,841,000 (of which $113,000 was invested during the three months
then ended) in property and equipment, primarily in laboratory equipment under
capital leases. The obligations under capital leases at March 31, 1999 were
$1,753,000. Minimum annual principal payments due under capital leases total
$843,000 in 1999. Principal payments are scheduled to decline each year
thereafter until expiration in 2002. Cubist made principal payments under its
capital lease obligations of $165,000 in the three months ended on March 31,
1999. Cubist expects its capital expenditures in 1999 to be approximately
$800,000 consisting of laboratory and other equipment purchases.
On February 3, 1999, Cubist entered into a research and license
agreement with Novartis Pharma AG to use Cubist's proprietary VITA(TM)
technology to validate and develop assays for antiinfective targets and to
identify new compounds for development as antiinfective agents. In exchange for
the license, Novartis will pay Cubist research payments and if certain
scientific and development milestones are achieved, Novartis will make milestone
payments. In addition, Novartis will be required to pay royalties to Cubist on
worldwide sales of any drug developed and commercialized from any products
derived from this collaboration. Upon the signing of the research and license
agreement, Novartis purchased, and Cubist issued to Novartis, 797,488 shares of
Common Stock for a total purchase price of $4.0 million in cash. The proceeds
from the sale of these shares will be primarily used to fund the clinical
development of daptomycin and development of it's VITA(TM) technology.
The additional funds from the sale of shares to Novartis, together with
existing cash resources and its existing capital resources, interest income and
future revenues due under the Novartis, Bristol-Myers Squibb and Merck
collaborative
9
<PAGE>
agreements will be sufficient to fund its operating expenses and capital
requirements as currently planned through 1999. The actual cash requirements of
Cubist may vary materially from those now planned and will depend on numerous
factors. There can be no assurance that it's existing cash, cash equivalents,
other capital resources, interest income and future revenues due under the
Novartis, Bristol-Myers Squibb and Merck collaborative agreements will be
sufficient to fund Cubist's operating expenses and capital requirements during
that period. Thereafter, Cubist will need to raise substantial additional
capital to fund its operations and intends to seek such additional funding
through public or private financing or collaborative or other arrangements with
corporate partners.
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" which is effective for fiscal years beginning after June
15, 1999. The statement establishes accounting and reporting standards requiring
that every derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133 also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Adoption of this standard is
not expected to have a material impact on the financial position or results of
operations of Cubist.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Cubist owns financial instruments that are sensitive to market risks as
part of its investment portfolio. The investment portfolio is used to preserve
Cubist's capital until it is required to fund operations, including it's
research and development activities. None of these market-risk sensitive
instruments are held for trading purposes. Cubist does not own derivative
financial instruments in its investment portfolio. The investment portfolio
contains instruments that are subject to the risk of a decline in interest
rates.
Interest Rate Risk - Cubist's investment portfolio includes investment
grade debt instruments. These bonds are subject to interest rate risk, and could
decline in value if interest rates fluctuate. Due to the short duration and
conservative nature of these instruments, Cubist does not believe that it has a
material exposure to interest rate risk.
PART II -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Cubist's Registration Statement on Form S-1 (Reg. No. 333-6795) in
connection with it's initial public offering of Common Stock was declared
effective by the Securities and Exchange Commission on October 25, 1996. On
October 25, 1996, Cubist also filed another Registration Statement on Form S-1
(Reg. No. 333-5880) with the SEC pursuant to Rule 462 (b) promulgated under the
Securities Act of 1933, as amended. For ease of reference and clarity, the two
registration statements referred to in this paragraph and referred to in the
following paragraphs collectively as the "IPO Registration Statement" registered
2,875,000 shares of Cubist's Common Stock under the Securities Act.
The aggregate initial public offering proceeds for all 2,875,000 shares
of Common Stock registered by the IPO Registration Statement was $17,250,000.
The net proceeds to Cubist from such issuance and distribution, after deducting
the aggregate amount of related expenses (including underwriting discounts and
commissions) paid by Cubist were $15,153,000.
10
<PAGE>
Through March 31, 1999 Cubist spent $9,640,000 of the $15,153,000 net
proceeds received for the following uses and in the following amounts per use:
$370,000 in construction of plant, building and facilities; $1,988,000 for
repayment of indebtedness; $7,282,000 for working capital. All amounts spent by
Cubist for such uses, other than payment of salaries to directors and officers
of Cubist, consisted of direct payments to persons or entities, none of which
was a director or officer of Cubist, holder of 10 percent or more of any class
of equity securities of Cubist or other affiliate of Cubist. Cubist holds the
remaining $5,513,000 of the net proceeds in cash, cash equivalents, and
investments.
On February 19, 1999 Cubist issued to Eli Lilly and Co. 56,948 shares
of Cubist Common Stock as consideration for the licensing of daptomycin to
Cubist and pursuant to, and in accordance with, the terms of the agreements with
Eli Lilly dated November 7, 1997 with respect to. The issuance of shares was
incident to the initiation of Phase III clinical testing of daptomycin. The
shares issued to Eli Lilly were not registered under the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*10.1 -- Collaborative Research and License Agreement between
Cubist and Novartis Pharma AG, dated as of February 3, 1999
10.2 -- Stock Purchase Agreement between Cubist and Novartis
Pharma AG, dated as of February 3, 1999
27 -- Financial Data Schedule
-------------
*Confidential Treatment Requested
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Cubist during the quarter
ended March 31, 1999.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CUBIST PHARMACEUTICALS, INC.
May 14, 1999 By:
---------------------------------
Thomas A. Shea,
Chief Financial Officer
(Authorized Officer and Principal
Finance and Accounting Officer)
12
<PAGE>
CONFIDENTIAL TREATMENT REQUEST
Exhibit 10.1
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
between
CUBIST PHARMACEUTICALS, INC.
and
NOVARTIS PHARMA AG
dated as of February 3, 1999
<PAGE>
CONFIDENTIAL TREATMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS ............................................ 1
1.1 "Active Cubist Compound" ................................... 1
1.2 "Active Cubist Compound Derivative" ........................ 1
1.3 "Affiliate" ................................................ 1
1.4 "Back-Up Compound" ......................................... 2
1.5 "Candidate Target" ......................................... 2
1.6 "Collaboration Target List" ................................ 2
1.7 "Committed Compound" ....................................... 2
1.8 "Cubist Compound" .......................................... 2
1.9 "Cubist Invention" ......................................... 2
1.10 "Cubist Patent Rights" ..................................... 2
1.11 "Cubist Product" ........................................... 2
1.12 "Cubist Technology" ........................................ 2
1.13 "Discontinued Novartis Compound" ........................... 3
1.14 "Discontinued Target" ...................................... 3
1.15 "Discontinued Validated Assay" ............................. 3
1.16 "EDC Status" ............................................... 3
1.17 "Effective Date" ........................................... 3
1.18 "Exclusivity Period" ....................................... 3
1.19 "FDA" ...................................................... 3
1.20 "Final Proposal" ........................................... 3
1.21 "First Commercial Sale" .................................... 3
1.22 "First Refusal Right" ...................................... 3
1.23 "Invention" ................................................ 3
1.24 "Joint Invention" .......................................... 3
1.25 "Joint Patent Rights" ...................................... 4
1.26 "Joint Research Steering Committee" ........................ 4
1.27 "Joint Research Steering Committee Term" ................... 4
1.28 "Joint Technology" ......................................... 4
1.29 "Major Market Country" ..................................... 4
1.30 "Milestone Revenue Income" ................................. 4
1.31 "NDA" ...................................................... 4
1.32 "Net Sales" ................................................ 4
1.33 "Novartis Compound" ........................................ 5
1.34 "Novartis Improvement" ..................................... 5
1.35 "Novartis Invention" ....................................... 5
1.36 "Novartis Patent Rights" ................................... 5
1.37 "Novartis Product" ......................................... 5
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1.38 "Novartis Technology"......................................................5
1.39 "Party"....................................................................6
1.40 "Primary Contact Person"...................................................6
1.41 "Product"..................................................................6
1.42 "Research Funding Payment".................................................6
1.43 "Research Plan"............................................................6
1.44 "Research Program".........................................................6
1.45 "Research Year"............................................................6
1.46 "Selected Target"..........................................................6
1.47 "Seller"...................................................................6
1.48 "Stock Purchase Agreement..................................................6
1.49 "Third Party"..............................................................6
1.50 "Valid Claim"..............................................................6
1.51 "Validated Assay"..........................................................6
1.52 "VITA(TM)".................................................................7
ARTICLE 2 SCOPE AND MANAGEMENT OF THE RESEARCH PROGRAM.......................7
2.1 General...................................................................7
2.2 Primary Contact Persons...................................................7
2.3 Joint Research Steering Committee.........................................7
2.3.1 Formation, Composition and Term..................................7
2.3.2 Joint Research Steering Committee Functions and Powers...........7
2.3.3 Decisions of the Joint Research Steering Committee...............8
2.3.4 Deadlock.........................................................8
2.3.5 Co-Chairs........................................................9
2.3.6 Minutes and Reports..............................................9
2.3.7 Information and Results..........................................9
2.4 Availability of Employees.................................................9
2.5 Visit of Facilities.......................................................9
Article 3 THE RESEARCH PROGRAM...............................................9
3.1 Performance of Research Program...........................................9
3.2 Research Plan............................................................10
3.3 Subcontracts.............................................................10
3.4 Results and Records......................................................10
Article 4 TARGET SELECTION AND VALIDATION; VALIDATED ASSAY DEVELOPMENT......10
4.1 Collaboration Target List................................................10
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4.2 Candidate Targets....................................................11
4.2.1 Selection...................................................11
4.2.2 Exclusivity Period..........................................11
4.3 Selected Targets.....................................................11
4.3.1 Selection...................................................11
4.3.2 Validated Assay Development.................................11
4.3.3 Validated Assay Transfer and Implementation.................11
ARTICLE 5 COMPOUND SCREENING; ACTIVE CUBIST COMPOUNDS......................12
5.1 Screening of Compounds...............................................12
5.1.1 Third Party Compounds.......................................12
5.2 Identification of Active Cubist Compounds............................12
5.2.1 Active Cubist Compound......................................12
5.2.2 Novartis Compound/Active Cubist Compound Derivative.........13
ARTICLE 6 INTELLECTUAL PROPERTY RIGHTS.....................................13
6.1 Ownership of Inventions..............................................13
6.1.1 Disclosure of Inventions....................................13
6.1.2 Cubist Inventions...........................................13
6.1.3 Novartis Inventions.........................................13
6.1.4 Joint Inventions............................................13
6.1.5 Cooperation of Employees....................................13
6.2 Filing, Prosecution and Maintenance of Patent Rights.................13
6.2.1 Cubist Inventions...........................................13
6.2.2 Novartis Inventions.........................................14
6.2.3 Joint Inventions............................................14
6.2.4 Patent Term Extension.......................................14
6.3 No Other Technology Rights...........................................14
6.4 Infringement Claims..................................................15
6.5 Enforcement of Joint Patent Rights...................................15
ARTICLE 7 OPTION AND LICENSE RIGHTS........................................16
7.1 VITA(TM).............................................................16
7.2 Candidate Targets....................................................16
7.2.1 Exclusive License During Exclusivity Period.................16
7.2.2 Co-Exclusive License After Exclusivity Period...............16
7.2.3 Effect of Termination of Research Program...................16
7.3 Selected Targets and Discontinued Targets............................16
7.3.1 Exclusive License to Selected Targets.......................16
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7.3.2 Due Diligence Obligation for Selected Targets and
Corresponding Validated Assays..............................17
7.3.3 Co-Exclusive License to Discontinued Targets..................17
7.4 Validated Assays and Discontinued Validated Assays.....................18
7.4.1 Exclusive License to Validated Assays.........................18
7.4.2 Co-exclusive License to Discontinued Validated Assays.........18
7.5 Active Cubist Compounds and Back-Up Compounds..........................18
7.5.1 Active Cubist Compounds.......................................18
7.5.2 Due Diligence Obligation for Active Cubist Compounds..........18
7.5.3 Cubist First Refusal Right....................................19
7.5.4 Back-Up Compounds.............................................20
7.6 Sublicenses and Licenses...............................................21
7.7 Reservation of Rights..................................................21
7.8 Manufacturing Rights...................................................21
7.9 Trademarks.............................................................22
ARTICLE 8 PAYMENTS...........................................................22
8.1 Funding of the Research Program by Novartis............................22
8.2 Equity Investment by Novartis..........................................22
8.3 Milestone Payments by Novartis.........................................22
8.3.1 Technology Transfer Milestone Payments........................22
8.3.2 Development Milestone Payments................................23
8.3.3 Payment by Novartis of Milestone Payments.....................24
8.4 Royalties on Net Sales by Novartis.....................................24
8.5 Percentage of Milestone Revenue Income and Royalties by Cubist.........25
8.6 Method of Payment/Reports/Audits.......................................26
8.6.1 Royalty Reports, Exchange Rates...............................26
8.6.2 Audits........................................................26
8.6.3 Royalty Payment Terms.........................................27
8.7 Withholding of Taxes...................................................27
8.8 Exchange Controls......................................................27
8.9 Interest on Late Payments..............................................28
ARTICLE 9 CONFIDENTIALITY....................................................28
9.1 Nondisclosure Obligations..............................................28
9.2 Samples................................................................28
9.3 Terms of this Agreement/Use of Name....................................28
9.4 Publications...........................................................29
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ARTICLE 10 REPRESENTATIONS AND WARRANTIES............................................................29
10.1 Authorization.................................................................................29
10.2 Warranty Disclaimer...........................................................................29
ARTICLE 11 INDEMNITY.................................................................................30
11.1 Novartis Indemnity Obligations................................................................30
11.2 Cubist Indemnity Obligations..................................................................30
11.3 Procedure.....................................................................................30
11.4 Novartis Insurance............................................................................31
11.5 Cubist Insurance..............................................................................31
ARTICLE 12 TERM AND TERMINATION......................................................................31
12.1 The Research Program..........................................................................31
12.1.1 Expiration of the Research Program...................................................31
12.1.2 Termination of the Research Program..................................................31
12.1.3 Existing Obligations.................................................................31
12.1.4 Effect of Expiration and Termination of Research Program.............................31
12.2 Expiration of This Agreement..................................................................32
12.3 Termination of This Agreement.................................................................32
12.3.1 Material Breach......................................................................32
12.3.2 Failure of Novartis to Pay...........................................................32
12.3.3 Failure of Cubist to Pay.............................................................32
12.3.4 Bankruptcy...........................................................................32
12.3.5 By Novartis..........................................................................32
12.4 Failure of Novartis to Diligently Develop and Sell Novartis
Product Based on Active Cubist Compound ...................................................32
12.5 Effect of Expiration or Termination of This Agreement.........................................33
12.5.1 Existing Obligations.................................................................33
12.5.2 Survival of Sublicenses..............................................................33
12.5.3 Survival.............................................................................33
12.5.4 Effect of Termination by Novartis....................................................33
12.5.5 Effect of Termination by Cubist......................................................33
12.5.6 Disposition of Inventory of Products.................................................33
ARTICLE 13 MISCELLANEOUS.............................................................................34
13.1 Force Majeure.................................................................................34
13.2 Assignment....................................................................................34
13.3 Severability..................................................................................34
13.4 Notices.......................................................................................34
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13.5 Applicable Law.............................................35
13.6 Dispute Resolution.........................................35
13.6.1 Joint Research Steering Committee.................35
13.6.2 Chief Executive Officers..........................35
13.6.3 Mediation.........................................35
13.6.4 Arbitration.......................................36
13.7 Entire Agreement...........................................36
13.8 Headings...................................................36
13.9 Independent Contractors....................................36
13.10 Agreement Not to Solicit Employees.........................36
13.11 Waiver.....................................................36
13.12 Counterparts...............................................37
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COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT dated as of the 3rd
day of February, 1999 (the "Agreement") is made between CUBIST PHARMACEUTICALS,
INC., a Delaware corporation having its principal place of business at 24 Emily
Street, Cambridge, Massachusetts 02139 U.S.A. ("Cubist"), and NOVARTIS PHARMA
AG, a Swiss corporation having its principal place of business at Lichtstrasse
35, CH-4002 Basel, Switzerland ("Novartis").
RECITALS
A. Cubist has research facilities and experienced scientists, research
associates and other personnel at its facilities in Cambridge, Massachusetts
which enable it to conduct research activities.
B. Cubist possesses know-how, expertise and intellectual property
rights pertaining to antiinfective drug discovery and to a proprietary drug
discovery technology known as VITA(TM) which couples the validation of the
inhibition of a target in an animal model during an established infection with
assay development and screening for the discovery of novel drug leads.
C. Novartis is engaged in the research, development, marketing,
manufacturing and distribution of pharmaceutical products.
D. Novartis desires to sponsor research by Cubist using its VITA(TM)
technology to identify candidate targets and compounds.
NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms defined in this Article shall
have the meanings specified below, whether used in their singular or plural
form:
1.1 "Active Cubist Compound" shall mean any Cubist Compound, other than
a Committed Compound, screened in a Validated Assay during the Research Program
that is shown to meet the criteria for antibacterial activity against a Selected
Target as determined by the Joint Research Steering Committee, and any
derivative, isomer, analog or homolog thereof which is made or synthesized by
Cubist.
1.2 "Active Cubist Compound Derivative" shall mean, subject without
limitation to the provisions of Sections 5.2.2 and 7.5.1, any derivative,
isomer, analog or homolog of an Active Cubist Compound which is made or
synthesized by Novartis.
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1.3 "Affiliate" shall mean any corporation or other entity which
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 fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or other entity or the power to elect or appoint fifty percent (50%)
or more of the members of the governing body of the corporation or other entity.
1.4 "Back-Up Compound" shall have the meaning set forth in Section
7.5.4.
1.5 "Candidate Target" shall mean a target from the Collaboration
Target List selected by the Joint Research Steering Committee to undergo
research for target validation and/or assay development in accordance with
Section 4.2 and for which benchwork and experimental investigation has been
initiated.
1.6 "Collaboration Target List" shall mean potential bacterial targets
identified by Cubist or Novartis and selected by the Joint Research Steering
Committee in accordance with Section 4.1 for further research, evaluation and
development in the Research Program.
1.7 "Committed Compound" shall mean a compound owned or controlled by
Cubist that has been licensed, reserved or otherwise committed to a Third Party
or an internal program of Cubist or an Affiliate of Cubist.
1.8 "Cubist Compound" shall mean any compound owned or controlled by
Cubist or obtained by Cubist from a Third Party (to the extent that transfer or
sublicensing is permitted by such Third Party) and any derivative, isomer,
analog or homolog thereof made or synthesized by Cubist.
1.9 "Cubist Invention" shall mean any Invention that (a) is conceived
during and as a result of the Research Program solely by employees of Cubist or
others acting on behalf of Cubist or (b) is related to VITA(TM) and is conceived
during and as a result of the Research Program either solely by employees of
Cubist or solely by employees of Novartis or jointly by employees of Cubist and
Novartis or others working on behalf of Cubist and Novartis.
1.10 "Cubist Patent Rights" shall mean any United States or foreign
patent applications, provisional patent applications, patents, patent
extensions, certificates of invention and applications for certificates of
invention, together with any divisions, continuations or continuations-in-part,
reissues, renewals, or additions thereof owned or controlled by Cubist as of the
Effective Date or during the term or as a result of the Research Program.
1.11 "Cubist Product" shall mean any product which is discovered,
identified or developed by Cubist or its Affiliates or licensees through the use
of a Candidate Target, Discontinued Target or Discontinued Validated Assay and
for which product, pursuant without limitation to the provisions of Sections
7.2.2, 7.2.3, 7.3.3 and 7.4.2, Cubist has obtained the right to make, have made,
use, sell and import.
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1.12 "Cubist Technology" shall mean all proprietary data, information,
know-how, inventions, trade secrets, copyrights, regulatory submissions or other
intellectual property of any kind, other than Cubist Patent Rights, owned or
controlled by Cubist as of the Effective Date and during the term of the
Research Program.
1.13 "Discontinued Novartis Compound" shall mean both a "Globally
Discontinued Compound" and a "Locally Discontinued Compound" as their meaning is
set forth in Section 7.5.3(b).
1.14 "Discontinued Target" shall mean a Selected Target which Novartis
is no longer interested in or for which Novartis fails to meet its due diligence
obligations in accordance with Section 7.3.
1.15 "Discontinued Validated Assay" shall mean a Validated Assay which
Novartis is no longer interested in or for which Novartis fails to meet its due
diligence obligations in accordance with Section 7.3, as more fully described in
Section 7.4.2.
1.16 "EDC Status" or "Early Development Compound Status" shall mean the
point at which a development compound is declared, following Novartis' standard
compound development procedures, an Early Development Compound (EDC) by
Novartis' Innovation Management Board or some other similar body, which
declaration authorizes the completion of the preclinical development program
thereby allowing progression of the compound to Phase I clinical trials.
1.17 "Effective Date" shall mean the date first set forth above.
1.18 "Exclusivity Period" shall mean the period during which a
Candidate Target is available for selection by the Joint Research Steering
Committee as a Selected Target as described in Section 4.2.
1.19 "FDA" shall mean the United States Food and Drug Administration.
1.20 "Final Proposal" shall have the meaning set forth in Section
7.5.3.
1.21 "First Commercial Sale" of any Product shall mean the first sale
for use or consumption by the general public of such Product in a country after
required regulatory marketing and pricing approval has been granted by the
governing health authority of such country.
1.22 "First Refusal Right" shall have the meaning set forth in the two
subsections of 7.5.3(b).
1.23 "Invention" shall mean all ideas, data, writings, inventions,
discoveries, improvements and other technology which are directed to the
identification, development, manufacture or use of a target, Candidate Target,
Selected Target, Discontinued Target, target
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assay, Validated Assay, Active Cubist Compound, Active Cubist Compound
Derivative, Novartis Compound or a Product, whether or not patentable or
copyrightable.
1.24 "Joint Invention" shall mean any Invention, other than a Cubist
Invention or a Novartis Invention, that is discovered, made or conceived during
and as a result of the Research Program jointly by employees of Cubist and
Novartis or others working on behalf of Cubist and Novartis.
1.25 "Joint Patent Rights" shall mean any United States or foreign
patent applications, provisional patent applications, patents, patent
extensions, certificates of invention and applications for certificates of
invention, together with any divisions, continuations or continuations-in-part,
reissues, renewals, or additions claiming a Joint Invention.
1.26 "Joint Research Steering Committee" shall mean the joint committee
composed of representatives of Cubist and Novartis described in Section 2.3.
1.27 "Joint Research Steering Committee Term" shall have the meaning
set forth in Section 2.3.
1.28 "Joint Technology" shall mean all proprietary data, information,
know-how, inventions, trade secrets, copyrights, regulatory submissions or other
intellectual property of any kind made or developed jointly by Cubist and
Novartis in the performance of the Research Program.
1.29 "Major Market Country" shall mean the United States, the United
Kingdom, Germany, France, Italy, Japan and Canada.
1.30 "Milestone Revenue Income" shall mean any payments that Cubist
receives from a non-Affiliate licensee in consideration of the license of rights
pursuant to Section 7.6 which are due upon the achievement of product
development milestones by such licensee, but excluding the following payments:
royalties, license fees, license maintenance fees, payments made in
consideration for the issuance of equity or debt securities of Cubist and,
payments specifically committed to the research and development of Cubist
Products.
1.31 "NDA" shall mean a new drug application filed with the FDA after
completion of human clinical trials to obtain marketing approval for a Product
in the United States or any comparable application filed with the regulatory
authorities of a country other than the United States to obtain marketing
approval for a Product in that country.
1.32 "Net Sales" with respect to any Product shall mean the invoiced
sales of all such Product to Third Parties by the Seller, its Affiliates or its
licensees or sublicensees, less the following items as applicable to such
Product: (a) credits or allowances granted upon returns, rejections or recalls;
(b) freight, shipping and insurance costs; (c) quantity and other trade
discounts, credits or allowances actually allowed and taken; (d) customs duties,
taxes and surcharges and other governmental charges incurred in connection with
exportation or importation; and (e) government mandated rebates; all in
accordance with standard allocation
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procedures and accounting methods consistently applied, which methods are in
accordance with generally accepted accounting principles. The transfer of any
Product by Seller or one of its Affiliates to another Affiliate of Seller shall
not be considered a sale; in such cases, Net Sales shall be determined based on
the invoiced sales price by the Affiliate to its customer, less the deductions
allowed under this Section.
If a Product is sold in bulk (as distinguished from packaged
pharmaceutical form) for resale in packaged or finished form, Net Sales shall be
calculated by determining the quantity of Product in packaged pharmaceutical
form that would reasonably be produced from the bulk quantity of Product so
sold, and by multiplying such quantity by the average price for such Product in
packaged pharmaceutical form during the applicable royalty reporting period. If
a Product is sold, or otherwise commercially disposed of for value (including,
without limitation, disposition in connection with the delivery of other
products or services), in a transaction that is not an outright arm's length
sale to an independent Third Party, then the amount invoiced in such transaction
shall be deemed to be the amount that would have been paid had there been such a
sale at the average sale price of such Product during the applicable royalty
reporting period.
In the event a Product is sold in a combination with other active
ingredients, Net Sales, for purposes of royalty payments of the combination
product, shall be calculated by multiplying the Net Sales for that combination
product by the fraction A/B, where A is the gross selling price of the Product
sold separately and B is the gross selling price of the combination product. As
used herein, the term "active ingredient" does not include ingredients the
primary effect of which is the enhancement of drug delivery, even if such
ingredients have pharmacological activity.
1.33 "Novartis Compound" shall mean any compound, other than an Active
Cubist Compound, or an Active Cubist Compound Derivative, owned or controlled by
Novartis or obtained from a Third Party which is either (a) screened in a
Validated Assay and has antibacterial activity against a Selected Target or (b)
has antibacterial activity against a Selected Target (regardless of whether or
not a Validated Assay was used to determine such antibacterial activity), and
any derivative, isomer, analog or homolog thereof made or synthesized by
Novartis.
1.34 "Novartis Improvement" shall mean any improvement to an Active Cubist
Compound, other than an Active Cubist Compound Derivative derived therefrom,
developed by Novartis.
1.35 "Novartis Invention" shall mean any Invention, other than a Cubist
Invention or a Joint Invention, that is conceived during and as a result of the
Research Program solely by employees of Novartis or others acting on behalf of
Novartis.
1.36 "Novartis Patent Rights" shall mean any United States or foreign
patent applications, provisional patent applications, patents, patent
extensions, certificates of invention and applications for certificates of
invention, together with any divisions, continuations or continuations-in-part,
reissues, renewals, or additions owned or controlled by Novartis as of the
Effective Date or during the term or as a result of the Research Program.
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1.37 "Novartis Product" shall mean any product which consists of or
incorporates an Active Cubist Compound, an Active Cubist Compound Derivative, or
a Novartis Compound.
1.38 "Novartis Technology" shall mean all proprietary data, information,
know-how, inventions, trade secrets, copyrights, regulatory submissions or other
intellectual property of any kind, other than Novartis Patent Rights, owned or
controlled by Novartis as of the Effective Date and during the term of the
Research Program.
1.39 "Party" shall mean Cubist or Novartis.
1.40 "Primary Contact Person" shall have the meaning set forth in Section
2.2.
1.41 "Product" shall mean collectively Cubist Products and Novartis
Products.
1.42 "Research Funding Payment" shall have the meaning set forth in Section
8.1.
1.43 "Research Plan" shall mean the plan for conducting the research under
the Research Program, as amended from time to time by the Joint Research
Steering Committee, which plan, including all amendments, shall be attached to
this Agreement as Exhibit A.
1.44 "Research Program" shall mean the research performed by Cubist and
Novartis in accordance with the Research Plan as revised from time to time as
provided in this Agreement to identify compounds active against validated
bacterial targets.
1.45 "Research Year" shall mean each twelve (12) month period during the
term of the Research Program beginning on the Effective Date.
1.46 "Selected Target" shall mean a Candidate Target selected by the Joint
Research Steering Committee as a Selected Target to undergo research for high
throughput screening in accordance with Section 4.3.
1.47 "Seller" shall mean Novartis with respect to a Novartis Product, or
Cubist with respect to a Cubist Product.
1.48 "Stock Purchase Agreement" shall have the meaning set forth in Section
8.2.
1.49 "Third Party" shall mean any entity other than Cubist or Novartis and
their respective Affiliates.
1.50 "Valid Claim" shall mean either (a) a claim of an issued and unexpired
patent included within the Cubist Patent Rights, Joint Patent Rights or Novartis
Patent Rights, which has not been held permanently revoked, unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, and
which has not been admitted to be invalid or unenforceable through reissue or
disclaimer or otherwise or (b) a claim of a pending patent application included
within the Cubist Patent Rights, Joint Patent Rights or Novartis Patent Rights,
which claim was filed in
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good faith and has not been abandoned or finally disallowed without the
possibility of appeal or refiling of said application.
1.51 "Validated Assay" shall mean a primary assay for high-throughput
screening of the Selected Targets which is developed by Cubist in the
performance of the Research Program and which has been accepted by the Joint
Research Steering Committee.
1.52 "VITA(TM)" or "Validation In Vivo of Targets for Antiinfectives" shall
mean Cubist's proprietary technology for the validation of antiinfective targets
during an established infection in a mouse model system and the development of
assays.
ARTICLE 2
SCOPE AND MANAGEMENT OF THE RESEARCH PROGRAM
2.1 General. Cubist and Novartis will establish a research program to
identify and validate a limited number of antibacterial targets and to develop a
select number of validated assays for high-throughput screening to identify new
lead compounds active against such validated targets for the development of
drugs. The Research Program will have a term of [ ]*, unless terminated earlier
pursuant to Article 12. As set forth in Article 8, Novartis will make an equity
investment in Cubist, provide research funding payments during the Research
Program and will also pay Cubist certain milestone payments and royalties.
Cubist shall pay royalties and make certain other payments to Novartis pursuant
to Section 8.5. During the course of the Research Program, Cubist and Novartis
shall communicate regularly and shall assume certain rights and responsibilities
for the discovery and development of products, all as described more
specifically herein.
2.2 Primary Contact Persons. Within ten (10) business days of the Effective
Date, Cubist and Novartis shall each designate a primary contact person
("Primary Contact Person") who shall be responsible for the day-to-day
interactions between the Parties related to the Research Program and the
management of the day-to-day operations of the Research Program. Each Party may
change its Primary Contact Person upon written notice to the other Party.
2.3 Joint Research Steering Committee.
2.3.1 Formation, Composition and Term. A joint committee comprised of
three (3) named representatives of each of Novartis and Cubist (the "Joint
Research Steering Committee") shall be appointed within ten (10) business days
of the Effective Date and shall meet as needed, but not less than once each
quarter during the Joint Research Steering Committee Term. Such meetings shall
be at such times agreed to by Cubist and Novartis and shall alternate between
the offices of the Parties unless the Parties otherwise agree or shall be in
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* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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such other form (e.g. telephone or video conference) as the members of the Joint
Research Steering Committee shall agree. As used herein, the "Joint Research
Steering Committee Term" shall mean the period commencing upon the Effective
Date of the Agreement and continuing until the later of (a) the termination or
expiration of the Research Program, or (b) the expiration of the last
Exclusivity Period in accordance with Section 7.2.3.
2.3.2 Joint Research Steering Committee Functions and Powers. The Joint
Research Steering Committee shall be responsible for the overall supervision and
management of the Research Program. The principal functions of the Joint
Research Steering Committee will be, inter alia, to:
(a) monitor the progress and results achieved under the Research
Program and to revise, as necessary, the Research Plan;
(b) assess the therapeutic relevance and competitiveness of the
research performed under the Research Program;
(c) foster the collaborative relationship between the Parties;
(d) facilitate the transfer of technology in accordance with the
Agreement;
(e) specify the Collaboration Target List and provide regular
updates thereto;
(f) determine the number of, and which specific targets from the
Collaboration Target List will be promoted to Candidate Targets;
(g) determine the number of, and which specific Candidate Targets
will be promoted to Selected Targets and which will remain Candidate Targets;
(h) establish the criteria for antibacterial activity to be used
to determine whether a Cubist Compound is an Active Cubist Compound;
(i) review patent issues related to Joint Inventions; and
(j) review and approve scientific publications relating to the
Research Program.
A Party may change one or more of its representatives to the Joint
Research Steering Committee at any time. Members of the Joint Research Steering
Committee may be represented at any meeting by another member of the Joint
Research Steering Committee, or by a deputy. Either Party may permit additional
employees and consultants to attend and participate (on a non-voting basis) in
the Joint Research Steering Committee meetings, subject to the confidentiality
provisions of Article 9.
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2.3.3 Decisions of the Joint Research Steering Committee. A
quorum of the Joint Research Steering Committee shall be present at any meeting
of the Joint Research Steering Committee if at least one (1) representative of
each Party is present at such meeting in person or by telephone or video
conference. If a quorum exists at any meeting, the unanimous consent of all
members of the Joint Research Steering Committee present at such meeting is
required to take any action on behalf of the Joint Research Steering Committee.
2.3.4 Deadlock. In the event that the Joint Steering Committee
cannot reach agreement within sixty (60) days as to any matter that is subject
to its decision-making authority, Novartis shall cast the deciding vote in good
faith. Notwithstanding the foregoing, the Parties agree that Novartis shall not
(a) unreasonably cast the deciding vote against Cubist's position on matters
related to resource allocation by Cubist for the Research Program or to the
number and selection of Candidate Targets and Selected Targets or (b) have the
right to cast the deciding vote hereunder with respect to the resolution of
technical obstacles which arise in the Research Program which require Cubist's
expertise to resolve. Decisions related to the resolution of technical obstacles
described in this Section 2.3.4(b) must be made with the unanimous consent of
all members of the Joint Research Steering Committee present at such meeting or
such matter shall be referred to dispute resolution in accordance with the
procedures set forth in Section 13.6.
2.3.5 Co-Chairs. The Joint Research Steering Committee shall be
co-chaired by one Novartis representative appointed by Novartis and one Cubist
representative appointed by Cubist from the membership of the Joint Research
Steering Committee.
2.3.6 Minutes and Reports. The Joint Research Steering Committee
shall be responsible for keeping accurate minutes of its deliberations which
record all proposed decisions and all actions recommended or taken. The minutes
of each meeting will include an updated Collaboration Target List and a list of
all Candidate Targets (and the dates upon which the Exclusivity Period for each
such target expires), Selected Targets, Discontinued Targets, Validated Assays,
Discontinued Validated Assays, Active Cubist Compounds, Active Cubist Compound
Derivatives and Back-Up Compounds. Within ten (10) business days of each
meeting, the co-chairs shall provide the Parties with draft minutes of such
meeting and a draft of a written accompanying report describing in reasonable
detail, the status of the Research Program, a summary of the work and progress
to date, any issues requiring resolution and any proposed decisions and the
action to all members of the Joint Research Steering Committee. Within thirty
(30) days of each meeting, the co-chairs will sign final versions of the meeting
minutes and the accompanying report and such minutes and shall report shall
thereafter be recognized as duly accepted by the parties. All records of the
Joint Research Steering Committee shall be available to both Parties.
2.3.7 Information and Results. Except as otherwise provided, the
Parties will make available and disclose to one another all results of the work
conducted pursuant to the Research Program prior to and in preparation for the
Joint Research Steering Committee meetings, by the deadline and in the form and
format to be designated by the Joint Research Steering Committee.
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2.4 Availability of Employees. Each Party agrees to make its employees and
nonemployee consultants reasonably available at their respective places of
employment to consult with the other Party on issues arising during the Research
Program and in connection with any request from any regulatory agency, including
regulatory, scientific, technical and clinical testing issues.
2.5 Visit of Facilities. Representatives of Novartis may, upon reasonable
notice and at times reasonably acceptable to Cubist, visit Cubist's facilities
where the Research Program is being conducted, and consult informally, during
such visits and by telephone, facsimile and email, with Cubist's personnel
performing work on the Research Program.
ARTICLE 3
THE RESEARCH PROGRAM
3.1 Performance of Research Program. Cubist shall use commercially
reasonable efforts to perform the research and development tasks as described in
the Research Plan attached hereto as Exhibit A. Cubist agrees to utilize its
proprietary VITA(TM) technology in the Research Program as determined by the
Joint Research Steering Committee. The Research Program shall be conducted by
Cubist in good scientific manner, and in compliance with all applicable good
laboratory practices and applicable legal requirements.
3.2 Research Plan. The Research Program shall be conducted under the
Research Plan that describes the work to be pursued by Cubist during each
Research Year. The Research Plan will be updated and approved by the Joint
Research Steering Committee no later than sixty (60) days prior to the start of
each Research Year. The Research Plan in effect at any time may not be amended
except as agreed in writing by the Joint Research Steering Committee. If at any
time during the Research Year either Party determines that a change to the
Research Plan would benefit the Research Program, such Party shall prepare and
submit to the Joint Research Steering Committee a written proposal detailing its
proposed changes to the Research Plan. At its next meeting, the Joint Research
Steering Committee shall decide on such proposal.
3.3 Subcontracts. Subject to the provisions of Section 9.1 hereof, Cubist
may subcontract portions of the Research Program to be performed by it to Third
Parties provided it has obtained the prior consent of the Joint Research
Steering Committee; provided, however, that Cubist shall require such Third
Parties to enter into appropriate confidentiality agreements (of which Cubist
will share copies with Novartis) unless such subcontracting would not require
the transfer of confidential information (as defined in Article 9 hereof) to the
Third Party, and provided that Novartis' rights under this Agreement are not
affected.
3.4 Results and Records. The Parties will make available and disclose to
one another all results of the work conducted pursuant to the Research Program
and shall keep such records as described herein provided, that each Party shall
maintain such results and records of the other Party in confidence in accordance
with Article 9 hereof and shall not use such results or records except to the
extent otherwise permitted by this Agreement. The Parties shall maintain records
of the results in sufficient detail and in good scientific manner appropriate
for patent purposes and as will properly reflect all work done and results
achieved in the performance of the
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Research Program (including all data in the form required to be maintained under
any applicable governmental regulations). Such records shall include books,
records, reports, research notes, charts, graphs, comments, computations,
analyses, recordings, photographs, computer programs and documentation thereof,
computer information storage means, samples of materials and other graphic or
written data generated in connection with the Research Program. Each Party shall
give the other Party the right to inspect such records, and shall provide the
other Party with copies of all requested records, to the extent reasonably
required by the other Party for purposes of this Agreement.
ARTICLE 4
TARGET SELECTION AND VALIDATION; VALIDATED ASSAY DEVELOPMENT
4.1 Collaboration Target List. Within one (1) month after the Effective
Date, Cubist and Novartis shall provide to the Joint Research Steering Committee
a list of potential targets for the Collaboration Target List. The Joint
Research Steering Committee shall select the initial Collaboration Target List
within three (3) months of the Effective Date and shall update the Collaboration
Target List throughout the term of the Research Program. The number of targets
on the Collaboration Target List at any one time and the total number of targets
on the Collaboration Target List during the entire term of the Research Program
shall be determined by the Joint Research Steering Committee and shall not
exceed the number of targets which the personnel assigned to the Research
Program can reasonably accomplish consistent with the Research Plan and the
allocation of resources thereunder.
4.2 Candidate Targets.
4.2.1 Selection. From time to time as appropriate during the Research
Program, with the goal of promptly identifying appropriate targets for assay
development, the Joint Research Steering Committee will designate as Candidate
Targets specific targets from the Collaboration Target List that appear the most
promising for target validation and/or assay development. Promptly after such
selection, Cubist will conduct appropriate experimentation and bench work on the
Candidate Targets as required by the Joint Research Steering Committee which may
include, without limitation, an analysis of target inhibition utilizing
VITA(TM). Within a time frame as set by the Joint Research Committee, Cubist
shall provide to the Joint Research Steering Committee the results of all work
Cubist performs pursuant to this Section 4.2 utilizing a format and within a
time frame acceptable to the Joint Research Steering Committee. Each Candidate
Target shall be subject to the rights set forth in Section 7.2. The number of
Candidate Targets at any one time and the total number of Candidate Targets
during the entire term of the Research Program shall be determined by the Joint
Research Steering Committee and shall not exceed the number of Candidate Targets
which the personnel assigned to the Research Program can reasonably accomplish
consistent with the Research Plan and the allocation of resources thereunder.
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4.2.2 Exclusivity Period. A target selected as a Candidate Target shall
remain a Candidate Target until (a) the expiration of the Exclusivity Period,
which shall be the [ ]* period from the date the Joint Research Steering
Committee selected such target as a Candidate Target, or (b) the Candidate
Target is selected as a Selected Target pursuant to Section 4.3 below, whichever
shall first occur. Upon the expiration of the Exclusivity Period, any Candidate
Target which has not been selected as a Selected Target shall be subject to the
co-exclusive license set forth in Section 7.2.2.
4.3 Selected Targets.
4.3.1 Selection. From time to time as appropriate during the Research
Program, the Joint Research Steering Committee will select as Selected Targets
specific Candidate Targets that appear the most promising to develop further for
high throughput screening.
4.3.2 Validated Assay Development. Promptly after the selection of each
Selected Target, Cubist will develop an appropriate Validated Assay for such
Selected Target in accordance with the Research Plan. Cubist shall promptly
provide to the Joint Research Steering Committee the results of all work Cubist
performs pursuant to this Section 4.3. It is anticipated that one Validated
Assay will be developed by the end of the third quarter of 1999 and a second
Validated Assay will be developed by the end of the second quarter of 2000.
4.3.3 Validated Assay Transfer and Implementation. Upon completion,
each Validated Assay will be transferred to Novartis with a protocol and any
preliminary data generated by Cubist from such Validated Assay that Cubist
ascertains is necessary to enable Novartis to initiate the implementation of the
Validated Assay. For all purposes of this Agreement including Section 8.3, each
Validated Assay delivered to Novartis as described herein shall be deemed to be
successfully transferred to, and implementation thereof shall be deemed to be
initiated by, Novartis unless Novartis demonstrates by documentary evidence
within sixty (60) days of the date of delivery to Novartis that Novartis cannot
initiate the implementation of the Validated Assay since the results obtained by
Cubist from such Validated Assay cannot be replicated by Novartis. In the event
a Validated Assay is so demonstrated to have not been successfully transferred
to, and implemented by, Novartis, Cubist shall continue its development work on
such Validated Assay until the implementation of the Validated Assay is
successfully initiated by Novartis.
ARTICLE 5
COMPOUND SCREENING; ACTIVE CUBIST COMPOUNDS
5.1 Screening of Compounds. In accordance with the Research Plan and
decisions made by the Joint Research Steering Committee, Cubist shall screen
Cubist Compounds in each
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Validated Assay and Novartis shall screen its own compounds in each Validated
Assay. The primary goal of the screening is to identify Active Cubist Compounds
and compounds of Novartis that have antibacterial activity against a Selected
Target. The parties shall provide the Joint Research Steering Committee with
reports on the status of compound screening.
5.1.1 Third Party Compounds. The Joint Research Steering Committee may
agree to obtain from Third Parties the right to screen in the Validated Assays
compounds owned or controlled by such Third Parties; provided, however, that if
any fees would be payable to such Third Party or any rights conferred upon such
Third Party for screening such compounds or making, using or selling products
containing such compounds, no such Third Party compounds will be screened
without the written consent of both Parties.
5.2 Identification of Active Cubist Compounds. Upon the request of the
Joint Research Steering Committee at any time during the screening of compounds
described in Section 5.1 and promptly after completing the screening of a batch
of Cubist Compounds or Novartis compounds under Section 5.1 in the appropriate
Validated Assays, Cubist and Novartis, respectively, will provide to the Joint
Research Steering Committee the results of such screening, without the
obligation, however, to disclose to each other the structure of any of the
compounds screened. The Joint Research Steering Committee will review such
results promptly after receipt and will determine which of the Cubist Compounds
screened in the Validated Assays meet the requirements established by the Joint
Research Steering Committee for designation as an Active Cubist Compound.
5.2.1 Active Cubist Compound. In the event a Cubist Compound meets the
requirements for designation as an Active Cubist Compound, Cubist will promptly
determine if such Cubist Compound is a Committed Compound. If the Cubist
Compound is not a Committed Compound, it shall be designated as an Active Cubist
Compound, and Cubist will disclose to Novartis the structure of such Active
Cubist Compound. Each Active Cubist Compound shall be subject to the option
rights granted to Novartis as set forth in Section 7.5.1 and the diligence
requirements set forth in Section 7.5.2.
5.2.2 Novartis Compound/Active Cubist Compound Derivative. In the event
Novartis exercises its option pursuant to Section 7.5.1 and makes or synthesizes
an Active Cubist Compound Derivative, [ ]*
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* Confidential Treatment Requested: Material has been omitted and filed
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ARTICLE 6
INTELLECTUAL PROPERTY RIGHTS
6.1 Ownership of Inventions.
6.1.1 Disclosure of Inventions. During the term of the Research
Program, each Party shall promptly disclose to the other Party the Inventions
made by employees or others acting on behalf of such Party to the extent that
the other Party has a license thereto under this Agreement.
6.1.2 Cubist Inventions. All right, title and interest in all Cubist
Inventions shall be owned by Cubist. Novartis shall execute, without charge to
Cubist, irrevocable assignments of such right, title and interest in and to
Cubist Inventions to Cubist.
6.1.3 Novartis Inventions. All right, title and interest in all
Novartis Inventions shall be owned by Novartis. Cubist shall execute, without
charge to Novartis, irrevocable assignments of such right, title and interest in
and to Novartis Inventions to Novartis.
6.1.4 Joint Inventions. All right, title and interest in all Joint
Inventions shall be owned jointly by Novartis and Cubist.
6.1.5 Cooperation of Employees. Each Party represents and agrees that
all employees or others acting on its behalf in performing its obligations under
this Agreement shall be obligated under a binding written agreement to assign to
such Party, or as such Party shall direct, all Inventions made or conceived by
such employee or other person, or in the case of non-employees working for other
companies or institutions on behalf of Cubist or Novartis.
6.2 Filing, Prosecution and Maintenance of Patent Rights.
6.2.1 Cubist Inventions. Cubist shall have sole responsibility for and
control over the filing, prosecution, maintenance and enforcement of the Cubist
Patent Rights claiming Cubist Inventions, at Cubist's expense. The Cubist Patent
Rights as to which Novartis is licensed under this Agreement as of the Effective
Date shall be listed on Exhibit C hereto and at regular intervals, or upon
request, Cubist shall provide Novartis with updated information on its patent
portfolio as to which Novartis is licensed under this Agreement, and Exhibit C
hereto shall be amended accordingly. If Cubist shall elect not to continue to
prosecute or maintain any patent application or patent included in the Cubist
Patent Rights, then Cubist shall give Novartis the timely opportunity to direct
Cubist to continue to prosecute or maintain the patent application or patent in
Cubist' name and at Novartis' expense.
Cubist shall notify Novartis of the issuance of each patent included
within the Cubist Patent Rights as to which Novartis is licensed under this
Agreement, giving the date of issue, patent number and normal expiry date for
each such patent. Cubist shall notify Novartis of each filing for patent term
restoration under the United States Drug Price Competition and Patent Term
Restoration Act of 1984, any allegations of failure to show due diligence, and
all awards of patent term restoration in the United States with respect to the
Cubist Patent Rights as
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to which Novartis is licensed under this Agreement. Novartis shall make
corresponding notifications to Cubist in respect of any patent included within
the Joint Patent Rights.
6.2.2 Novartis Inventions. Novartis shall have sole responsibility for
and control over the filing, prosecution, maintenance and enforcement of the
Novartis Patent Rights claiming Novartis Inventions, at Novartis' expense.
6.2.3 Joint Inventions. Subject to Article 7, Novartis and Cubist shall
have and retain sole and exclusive title to their interest in Joint Inventions
provided however responsibility for patent filing with respect to Joint
Inventions shall be as set forth in this Section 6.2.3 and provided further
that, except in connection with a permitted assignment of this Agreement
pursuant to Section 13.2, neither Party may transfer its interest in any Joint
Invention which is claimed in a patent application or patent unless notice of
such transfer has been first given to the other Party and the transferee agrees
in writing to be bound by the terms of this Agreement with respect to the
interest so transferred. Novartis shall have the first right to assume
responsibility at its sole expense for the preparation, filing, prosecution and
maintenance of any Joint Patent Rights and shall keep Cubist reasonably informed
of, and consult with Cubist with respect to, all significant actions relating
thereto. If Novartis elects not to assume such responsibility, Cubist shall have
the right to do so and shall keep Novartis reasonably informed of, and consult
with Novartis with respect to, all significant actions relating thereto; and in
such event, Novartis shall bear one-half the reasonable expenses of preparation,
filing, prosecution and maintenance thereof. If Cubist assumes such
responsibility but Novartis declines to pay its one-half share of expenses,
Novartis shall automatically grant to Cubist an exclusive, perpetual, paid-up
license under its interest in such Joint Patent Rights.
6.2.4 Patent Term Extension. Cubist shall cooperate with Novartis in
obtaining patent term extension or supplemental protection certificates and the
like with respect to the Cubist Patent Rights and Joint Patent Rights as to
which Novartis is licensed under this Agreement, in each country and region
where it is possible to do so. Novartis shall have the right to make the
election and Cubist agrees to abide by such election.
6.3 No Other Technology Rights. Except as otherwise expressly provided in
this Agreement, under no circumstances shall a Party hereto, as a result of this
Agreement, obtain any ownership interest in or other right to any technology,
know-how, patents, pending patent applications, products, or chemical or
biological materials of the other Party, including items owned, controlled or
developed by the other Party, or transferred by the other Party to said Party at
any time pursuant to this Agreement. It is understood and agreed that this
Agreement does not grant, except to the extent specifically set forth herein (i)
Novartis any license or other right under the Cubist Patent Rights, Cubist
Technology or Cubist's interest in Joint Patent Rights or Joint Technology,
VITA(TM), Candidate Targets, Selected Targets, Discontinued Targets, Validated
Assays, Discontinued Validated Assays, Cubist Compounds, Active Cubist Compounds
or Back-Up Compounds and, (ii) Cubist any license or other right under the
Novartis Patent Rights, Novartis Technology or Novartis' interest in Joint
Patent Rights or Joint Technology, Novartis Compounds, Active Cubist Compound
Derivatives, Novartis Improvements or Novartis Products.
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6.4 Infringement Claims. If the manufacture, sale or use of Product
pursuant to this Agreement results in any claim, suit or proceeding lodged by a
Third Party alleging patent infringement by Cubist or Novartis (or its licensees
or sublicensees), or by an Affiliate of Cubist or Novartis, such Party shall
promptly notify the other Party hereto in writing. The Party subject to such
claim shall have the exclusive right to defend and control the defense of any
such claim, suit or proceeding, at its own expense, using counsel of its own
choice; provided, however, that Novartis shall not enter into any settlement
which admits or concedes that any aspect of the Cubist Patent Rights is invalid
or unenforceable without the prior written consent of Cubist. The Party subject
to the claim shall keep the other Party hereto reasonably informed of all
material developments in connection with any such claim, suit or proceeding.
6.5 Enforcement of Joint Patent Rights. Cubist and Novartis shall each
promptly notify the other in writing of any alleged or threatened infringement
of the Joint Patent Rights of which they become aware. Cubist and Novartis shall
then confer and may agree jointly to prosecute any such infringement. If the
Parties do not agree on whether or how to proceed with enforcement activity (i)
within ninety (90) days following the notice of alleged infringement or (ii) ten
(10) business days before the time limit, if any, set forth in the appropriate
laws and regulations for the filing of such actions, whichever comes first, then
Cubist may commence litigation with respect to the alleged or threatened
infringement at its own expense, and credit against the percentage of Milestone
Revenue Income and royalties otherwise due Novartis under Section 8.5 all of its
expenses incurred in such action (including attorneys' fees and expenses). In
the event that Cubist does not commence litigation within five (5) business days
of the above-specified date, Novartis may do so and credit against the
development milestones payments due Cubist under Section 8.3.2 and the royalties
due Cubist under Section 8.4 all of its expenses incurred in such action
(including attorneys' fees and expenses). In the event a Party brings an
infringement action, the other Party shall cooperate fully, including, if
required to bring such action, the furnishing of a power of attorney. Neither
Party shall have the right to settle any patent infringement litigation under
this Section in a manner that diminishes the rights or interests of the other
Party without the express written consent of such other Party.
Except as otherwise agreed to by the Parties as part of a cost sharing
arrangement, any recovery realized as a result of such litigation (whether by
way of settlement or otherwise) shall be first allocated to reimbursement of
unreimbursed legal fees and expenses incurred by the Party initiating the
proceeding, then toward reimbursement of any unreimbursed legal fees and
expenses of the other Party, then, if applicable, toward reimbursement of the
other Party for the amount of any payments withheld by the Party initiating the
proceeding as permitted above, and then the remainder shall be divided between
the Parties as follows: (i) if the award is based on lost profits, Seller shall
receive an amount equal to the damages the court determines the Seller has
suffered as a result of the infringement less the amount of any royalties that
would have been due to the other party on sales of Products lost by Seller as a
result of the infringement had Seller made such sales, and the other party shall
receive an amount equal to the royalties and other payments it would have
received under Article 8 if such sales had been made by Seller; and (ii) as to
awards other than those based on lost profits, sixty percent (60%) to the party
initiating such proceedings and forty percent (40%) to the other party.
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ARTICLE 7
OPTION AND LICENSE RIGHTS
7.1 VITA(TM). Subject to the terms of this Agreement, Cubist hereby grants
Novartis a worldwide, non-exclusive right and license during the term of the
Research Program, without the right to sublicense, under the Cubist Patent
Rights and Cubist Technology covering VITA(TM) for research use solely as
necessary for Novartis to participate in the Research Program with respect to
the Collaboration Target List and Candidate Targets.
7.2 Candidate Targets.
7.2.1 Exclusive License During Exclusivity Period. With respect to each
Candidate Target, subject to the terms of this Agreement, Cubist hereby grants
Novartis a worldwide exclusive right and license during the Exclusivity Period,
with the right to sublicense, under the Cubist Patent Rights, Cubist Technology
and Cubist's interest in Joint Patent Rights and Joint Technology covering such
Candidate Target to use such Candidate Targets in Novartis' research program
aimed at making, having made, using, selling and importing Novartis Products.
7.2.2 Co-Exclusive License After Exclusivity Period. Upon the
expiration of the Exclusivity Period for a Candidate Target pursuant to Section
4.2.2, Novartis' license under Section 7.2.1 shall become a co-exclusive license
with Cubist, with the right to sublicense. Subject to Section 8.5, Cubist and
its Affiliates and licensees shall be free to make, have made, use, sell and
import Cubist Products based on the Candidate Targets subject to the
co-exclusive rights hereunder.
7.2.3 Effect of Termination of Research Program. With respect to any
Candidate Target which was selected by the Joint Research Steering Committee
less than one (1) year prior to the expiration of the Research Program in
accordance with Section 12.1.1 or the termination of the Research Program in
accordance with Section 12.1.2, the exclusive license granted by Cubist to
Novartis pursuant to this Section 7.2 shall continue beyond the expiration or
termination of the Research Program for the remainder of the Exclusivity Period
provided however that upon the expiration of the Exclusivity Period, in the
event the Joint Research Steering Committee has not selected such Candidate
Target as a Selected Target, then Novartis' license under Section 7.2.1 shall
become a co-exclusive license with Cubist, with the right to sublicense. Subject
to Section 8.5, Cubist and its Affiliates and licensees shall be free to make,
have made, use, sell and import Cubist Products based on the Candidate Targets
subject to the co-exclusive rights hereunder.
7.3 Selected Targets and Discontinued Targets.
7.3.1 Exclusive License to Selected Targets. With respect to each
Selected Target, subject to the terms of this Agreement including without
limitation Section 7.3.2, Cubist hereby grants Novartis a worldwide exclusive
right and license, with the right to sublicense, under the Cubist Patent Rights,
Cubist Technology and Cubist's interest in Joint Patent Rights and Joint
Technology covering such Selected Target to use such Selected Target in
Novartis' research program aimed at making, having made, using, selling and
importing Novartis Products
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provided however that in the event Novartis decides to discontinue a given
Selected Target in its research program or fails to meet the diligence
obligations set forth in Section 7.3.2, then it will inform Cubist of its
decision and the Selected Target shall become a Discontinued Target and shall be
subject to Section 7.3.3.
With respect to any Selected Target which was selected by the Joint
Research Steering Committee prior to the expiration or termination of the
Research Program in accordance with Sections 12.1.1 or 12.1.2, the exclusive
license granted by Cubist to Novartis as set forth in this Section 7.3.1 shall
continue beyond the expiration or termination of the Research Program.
7.3.2 Due Diligence Obligation for Selected Targets and Corresponding
Validated Assays. As a condition for Novartis maintaining an exclusive license
to a Selected Target pursuant to Section 7.3.1 and an exclusive license to a
corresponding Validated Assay pursuant to Section 7.4.1, Novartis shall, upon
the transfer to, and initiation of implementation by, Novartis of a Validated
Assay for such Selected Target pursuant to Section 4.3.3, be obligated to
maintain itself or through its Affiliates or sublicensees a diligent, continuous
program of utilizing the Selected Target and its corresponding Validated Assay
to identify potential antibacterial compounds.
Novartis shall be deemed not to be maintaining a diligent continuous
program with respect to a Selected Target and its corresponding Validated Assay
unless (i) Novartis is actively using the Selected Target and its corresponding
Validated Assay in Novartis' screening systems or, (ii) upon the designation of
an Active Cubist Compound or an Active Cubist Compound Derivative or a Novartis
Compound active against such Selected Target, Novartis is actively undertaking
diligent, commercially reasonable efforts, similar to those used for products of
comparable commercial potential originating in Novartis for the continuing
development of such Active Cubist Compound or Active Cubist Compound Derivative
or Novartis Compound and the commercialization of a Novartis Product including,
without limitation, the performance of an active derivatisation and lead
optimisation program, the designation of EDC Status, initiation of clinical
trials, submission of regulatory filings and commercial launch of a Novartis
Product.
In the event Novartis fails to maintain a diligent continuous program
described in (i) or (ii) above or if Novartis notifies Cubist that it is not
interested in maintaining a diligent program with respect to such Selected
Target or its corresponding Validated Assay, then such Selected Target and
Validated Assay shall be subject to the provisions of Sections 7.3.3 and 7.4.2,
respectively.
During the term of the Research Program, Novartis shall provide
information regarding its screening systems and programs described herein to the
Joint Research Steering Committee on a quarterly basis. Thereafter, at any time
during the term of an exclusive license to a Selected Target, Novartis shall on
a not less than quarterly basis provide documentation to the reasonable
satisfaction of Cubist that Novartis is maintaining a diligent, continuous
program with respect to the Selected Target and its corresponding Validated
Assay.
7.3.3 Co-Exclusive License to Discontinued Targets. In the event
Novartis fails to meet the diligence obligations for a Selected Target or
notifies Cubist that it is not interested
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in maintaining a diligent program for a Selected Target, as provided in Section
7.3.2, then such Selected Target shall become a Discontinued Target and the
exclusive license granted to Novartis under Section 7.3.1 shall become a
co-exclusive license with Cubist, with the right to sublicense. Subject to
Section 8.5, Cubist and its Affiliates and licensees shall be free to make, have
made, use, sell and import Cubist Products based on such Discontinued Targets
subject to co-exclusive rights hereunder.
7.4 Validated Assays and Discontinued Validated Assays.
7.4.1 Exclusive License to Validated Assays. With respect to each
Validated Assay, subject to the terms of this Agreement including without
limitation Section 7.3.2, Cubist hereby grants Novartis a worldwide exclusive
license, with the right to sublicense, under Cubist Patent Rights, Cubist
Technology and Cubist's interest in Joint Patent Rights and Joint Technology
covering such Validated Assay to use the Validated Assay in Novartis' research
program aimed at making, having made, using, selling and importing Novartis
Products. Notwithstanding the foregoing, Cubist retains the right to utilize
each Validated Assay in order to screen compounds in accordance with the
Research Plan as it may be amended by the Joint Research Steering Committee.
7.4.2 Co-exclusive License to Discontinued Validated Assays. In the
event Novartis fails to meet the diligence obligations for a Selected Target and
its corresponding Validated Assay or notifies Cubist that it is not interested
in maintaining a diligent program for a Selected Target, as provided in Section
7.3.2, then such Validated Assay shall become a Discontinued Validated Assay and
the exclusive license granted to Novartis under Section 7.3.1 shall become a
co-exclusive license with Cubist, with the right to sublicense. Subject to
Section 8.5, Cubist and its Affiliates and licensees shall be free to make, have
made, use, sell and import Cubist Products based on such Discontinued Validated
Assays subject to co-exclusive rights hereunder.
7.5 Active Cubist Compounds and Back-Up Compounds.
7.5.1 Active Cubist Compounds. With respect to each Active Cubist
Compound, subject to the terms of this Agreement including without limitation
Section 7.5.2, Cubist hereby grants Novartis an exclusive option to an exclusive
right and license, with the right to sublicense, under the Cubist Patent Rights,
Cubist Technology and Cubist's interest in Joint Patent Rights and Joint
Technology covering such Active Cubist Compound to (i) create Active Cubist
Compound Derivatives, (ii) use such Active Cubist Compound or Active Cubist
Compound Derivatives in Novartis' research and development program and to make,
have made, use, sell and import Novartis Products. The option granted to
Novartis in this Section 7.5.1 may be exercised by Novartis by providing written
notice to Cubist within [ ]* of the designation
- ---------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
of the Cubist Compound as an Active Cubist Compound by the Joint Research
Steering Committee.
7.5.2 Due Diligence Obligation for Active Cubist Compounds. In the
event Novartis exercises the option right to an Active Cubist Compound granted
to Novartis pursuant to Section 7.5.1, as a condition for Novartis maintaining
the exclusive license to such Active Cubist Compound, Novartis shall itself or
through its Affiliates or sublicensees undertake diligent, commercially
reasonable efforts, similar to those used for products of comparable commercial
potential originating in Novartis, for the continuing development of such Active
Cubist Compound and the commercialization of a Novartis Product including,
without limitation, the designation of EDC Status, initiation of clinical
trials, submission of regulatory filings and commercial launch of a Novartis
Product. In the event Novartis fails to undertake and maintain the diligent,
commercially reasonable program described herein for an Active Cubist Compound,
the exclusive license to such Active Cubist Compound shall be terminated in
accordance with Section 12.4 and Cubist shall have the rights set forth in
Section 7.5.3(a).
During the term of the Research Program, Novartis shall provide
information regarding its programs described herein to the Joint Research
Steering Committee on a quarterly basis. Thereafter, during the term of an
exclusive license to an Active Cubist Compound, Novartis shall provide Cubist on
a not less than quarterly basis with documentation to the reasonable
satisfaction of Cubist that Novartis is maintaining diligent, commercially
reasonable efforts with respect to the Active Cubist Compound.
7.5.3 Cubist First Refusal Right.
(a) Novartis Improvements to Active Cubist Compounds. In the event an
exclusive license to an Active Cubist Compound is terminated in accordance with
Section 12.4, then Cubist shall have the right to obtain a worldwide, exclusive
royalty-bearing license on commercially reasonable terms under Novartis Patent
Rights, Novartis Technology and Novartis' interest in Joint Patent Rights and
Joint Technology covering any Novartis Improvement to the Active Cubist Compound
to use such Novartis Improvement in Cubist's research and development program
and to make, have made, use, sell and import products. Novartis shall disclose
any Novartis Improvement to an Active Cubist Compound within [ ]* of the
termination of the exclusive license to such Active Cubist Compound, and Cubist
and Novartis shall negotiate in good faith a term sheet for a license agreement
for an additional period of [ ]* and a definitive agreement for such license for
an additional period of up to [ ]*. If, at the end of either of such periods,
Cubist and Novartis are unable to agree on terms for the license agreement for
the Novartis Improvement, then, unless the parties agree to extend the
negotiation period, Novartis shall promptly deliver to Cubist a final proposal
detailing the terms on which it would enter into such a license agreement (the
"Final Proposal"). Cubist shall have [ ]* from receipt of the Final Proposal to
notify Novartis of its willingness to enter into
- -----------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
an agreement on such terms. If Cubist does not so notify Novartis, then Novartis
shall be free to enter into a license agreement for the Novartis Improvement
with a Third Party; provided however, that the financial terms thereof, as a
whole, are no more favorable to such Third Party than the Final Proposal
delivered to Cubist. If Novartis desires to offer a Third Party a license for
such Novartis Improvement at terms more favorable, then Novartis shall offer
such more favorable terms to Cubist and, if [ ]* of such offer, Cubist informs
Novartis that it is prepared to entered into an agreement with Novartis in
accordance with such terms, Novartis shall conclude such agreement with Cubist
upon such terms. If no such statement is made by Cubist within said [ ]*,
Novartis shall be free to enter into an agreement in accordance with such terms
with a Third Party.
(b) Discontinued Novartis Compounds.
(i) Globally Discontinued Novartis Compounds. In the event that
(aa) Novartis determines, or is forced, to discontinue the development or the
global commercialization of a Novartis Product based on a Novartis Compound or
an Active Cubist Compound Derivative (such Novartis Compound or Active Cubist
Compound Derivative being referred to herein as a "Globally Discontinued
Novartis Compound"), and (bb) if Novartis, at its sole discretion, decides to
license to a Third Party such Globally Discontinued Novartis Compound, then
Novartis shall notify Cubist in writing of the occurrence of the above. Cubist
shall then have the right of first refusal (the "First Refusal Right"),
following the same negotiation procedure and deadlines as outlined under Section
7.5.3(a) above, to obtain a worldwide, exclusive royalty-bearing license under
Novartis Patent Rights, Novartis Technology and Novartis' interest in Joint
Patent Rights and Joint Technology covering the Globally Discontinued Novartis
Compound to use such Globally Discontinued Novartis Compound in Cubist's
research and development program and to make, have made, use, sell and import
products.
(ii) Locally Discontinued Novartis Compounds. In the event that
(aa) in any country, following the First Commercial Sale of a Novartis Product
based on a Novartis Compound or an Active Cubist Compound Derivative, there is a
continuous one (1) year period in which no such Novartis Product is sold in such
country (provided that such sale is not prevented by force majeure, government
regulation or intervention or institution of a law suit by a Third Party), (such
Novartis Compound or Active Cubist Compound Derivative being referred to herein
as a "Locally Discontinued Novartis Compound"), and (bb) if Novartis, at its
sole discretion, decides to license to a Third Party such Locally Discontinued
Novartis Compound, Novartis shall notify Cubist in writing of the occurrence of
the above. Cubist then shall have the right of first refusal (the "First Refusal
Right"), following the same negotiation procedure and deadlines as outlined
under Section 7.5.3(a) above, to obtain an exclusive royalty-bearing license
under Novartis Patent Rights, Novartis Technology and Novartis' interest in
Joint
- ----------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
Patent Rights and Joint Technology covering the Locally Discontinued Novartis
Compound to use such Locally Discontinued Novartis Compound in Cubist's research
and development program and to make, have made, use, sell in and import products
into the country where sales have been discontinued.
7.5.4 Back-Up Compounds. With respect to each Active Cubist Compound to
which Novartis has exercised its option pursuant to Section 7.5.1, Novartis
shall also be free to designate up to five (5) other Active Cubist Compounds as
"Back-Up Compounds" which Novartis may develop to a certain early stage of
development (usually at EDC Status) and which are parked at this stage to serve
as possible replacements for a more advanced Active Cubist Compound whose
development and/or commercialization efforts have to be abandoned. In the event
Novartis discontinues its research and development program with respect to an
Active Cubist Compound pursuant to Section 7.5.2, Novartis shall so notify
Cubist in writing and Novartis shall obtain an exclusive [ ]* option to
designate one of the Back-Up Compounds as an Active Cubist Compound which
thereafter shall be subject to Sections 7.5.1 and 7.5.2 while those Back-Up
Compounds which will not be so designated shall continue to be Back-Up
Compounds. Upon the expiration of the [ ]* period, if Novartis has not
designated any of the Back-Up Compounds as an Active Cubist Compound, Novartis
shall have no rights with respect to any Back-Up Compound for the discontinued
Active Cubist Compound. Thereafter, if Novartis is interested in obtaining
rights to the former Back-Up Compound, Cubist will, subject to availability,
discuss the possibility of licensing such former Back-Up Compound to Novartis
provided that Cubist shall have no obligation to grant any rights to Novartis.
7.6 Sublicenses and Licenses. Any sublicense by Novartis of the rights
granted to Novartis in this Article 7 shall be consistent with the terms of this
Agreement and shall include an obligation for the sublicensee to comply with the
applicable obligations of this Agreement including, without limitation, Section
8.6 pertaining to reports and audits and Article 9 pertaining to
confidentiality. Novartis shall notify Cubist of the existence of any sublicense
of the rights granted herein to a non-Affiliate of Novartis and to the inclusion
into such sublicense(s) of the obligation set forth in this Section 7.6 within
ten (10) business days of entering into such sublicense.
Cubist shall be free to license Cubist's co-exclusive rights pursuant
to Sections 7.2.2, 7.3.3 and 7.4.2 provided that each license shall be
consistent with the terms of this Agreement and shall include an obligation for
the licensee to comply with the applicable obligations of this Agreement
including, without limitation, Section 8.6 pertaining to reports and audits and
Article 9 pertaining to confidentiality. Cubist shall notify Novartis of the
existence of any license of the rights retained herein to a non-Affiliate of
Cubist and to the inclusion into such sublicense(s) of the obligation set forth
in this Section 7.6 within ten (10) business days of entering into such license.
- ------------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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7.7 Reservation of Rights. Notwithstanding the grant of any licenses
pursuant to this Article 7, Cubist at all times reserves the rights under the
Cubist Patent Rights, Cubist Technology and Cubist's interest in Joint Patent
Rights and Joint Technology to (i) use VITA(TM) for any purpose provided such
purpose is not in conflict with any of the obligations Cubist undertakes under
this Agreement, (ii) to use each Candidate Target, Selected Target, Discontinued
Target, Validated Assay and Discontinued Validated Assay for research uses in
accordance with this Agreement, (iii) to make, use and sell Cubist Compounds
which are not designated as Active Cubist Compounds, or Active Cubist Compounds
as to which Novartis' option rights are not exercised or as to which Novartis'
license rights have been terminated, for any purpose, provided, however, that
Cubist shall not develop, make, have made, use and sell itself or license to a
Third Party any such Cubist Compounds or Active Cubist Compounds that show
activity to any Candidate Targets or Selected Targets as to which, and for so
long as, Novartis is licensed exclusively hereunder, (iv) to make and use, for
research purposes only, Active Cubist Compounds as to which Novartis has
exercised its option and (v) to make and have made Cubist Products in accordance
with Sections 7.8 and 8.5 below.
7.8 Manufacturing Rights. Novartis or its designee shall be responsible for
the manufacture of each Novartis Product. Novartis shall also be responsible for
providing all documentation to regulatory authorities regarding the manufacture
of such Novartis Products for commercial sale needed to register the Novartis
Products and arranging for pre-approval inspections. Cubist or its designee
shall be responsible for the manufacture of each Cubist Product. Cubist shall
also be responsible for providing all documentation to regulatory authorities
regarding the manufacture of such Cubist Products for commercial sale needed to
register the Cubist Products and arranging for pre-approval inspections.
7.9 Trademarks. Novartis shall be free to use and to register in any
trademark office any trademark for use with a Novartis Product in its sole
discretion. Novartis shall own all right, title and interest in and to any such
trademark in its own name during and after the term of this Agreement.
Cubist shall be free to use and to register in any trademark office any
trademark for use with a Cubist Product in its sole discretion. Cubist shall own
all right, title and interest in and to any such trademark in its own name
during and after the term of this Agreement.
ARTICLE 8
PAYMENTS
8.1 Funding of the Research Program by Novartis. In consideration of
Cubist's performance of its obligations under the Research Program, Novartis
will pay Cubist [ ]* U.S. Dollars ($[ ]*) in each Research Year. Such funding
represents support for [ ]* full-
- -----------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
time Cubist employees per year at a cost of [ ]* U.S. Dollars ($[ ]*) per
full-time employee per year. The amounts payable for each Research Year shall be
paid in advance by certified or bank check or wire transfer in United States
dollars in four equal payments to be paid quarterly upon presentation of an
invoice by Cubist. (each such payment referred to as a "Research Funding
Payment"). Research Funding Payments shall be made no later than (a) by the
first (1st) business day of each Research Year quarter or (b) thirty (30) days
after receipt of the corresponding invoice, whichever is the later. Research
Funding Payments shall not be credited against equity, milestone or royalty
payments due Cubist under Sections 8.2 through 8.4 below.
8.2 Equity Investment by Novartis. Upon the execution of this Agreement,
Novartis shall make an investment in Cubist's Common Stock in the aggregate
amount of Four Million Dollars ($4,000,000) on the terms and subject to the
conditions set forth in the Stock Purchase Agreement dated as of the date hereof
between the Parties (the "Stock Purchase Agreement"), a copy of which is
attached hereto as Exhibit B. Payments made to Cubist pursuant to the Stock
Purchase Agreement are solely for the purchase of Cubist Common Stock and will
not be credited against any payments due Cubist under this Collaborative
Research and License Agreement.
8.3 Milestone Payments by Novartis.
8.3.1 Technology Transfer Milestone Payments. In consideration of
Cubist's work on the Research Program and the license and option rights granted
to Novartis hereunder, Novartis shall pay the following amounts to Cubist upon
the achievement (prior to the expiration or termination of this Agreement
pursuant to Article 12) of each of the applicable milestones:
<TABLE>
<CAPTION>
==========================================================================================================
Milestone Payment
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. First successful transfer to, and successful initiation of implementation
by, Novartis of a Validated Assay $[ ]*
==========================================================================================================
2. Each subsequent transfer to, and successful initiation of implementation
by, Novartis of a Validated Assay $[ ]*
==========================================================================================================
</TABLE>
provided however, that in no event shall Novartis be required to pay Cubist
under this Section 8.3 more than [ ]* U.S. Dollars ($[ ]*). Payments made to
Cubist pursuant to this Section 8.3.1 will not be credited against Research
Funding Payments payable under Section 8.1 or equity, development milestone, or
royalty payments due Cubist under Sections 8.2 through 8.4.
8.3.2 Development Milestone Payments. In consideration of Cubist's work
on the Research Program and the license and option rights granted to Novartis
hereunder, Novartis
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* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
shall pay the following amounts to Cubist upon the achievement of each of the
applicable milestones:
(a) For each (except Milestone A) Active Cubist Compound or Active
Cubist Compound Derivative:
<TABLE>
<CAPTION>
==========================================================================================================
Milestone Payment
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. First compound to reach EDC Status (one-time payment only, i.e. payable
only for the first Compound, whether this be an Active Cubist Compound
or an Active Cubist Compound Derivative, to achieve this milestone) $[ ]*
----------------------------------------------------------------------------------------------------------
B. Initiation of Phase I clinical trial $[ ]*
----------------------------------------------------------------------------------------------------------
C. Initiation of Phase III clinical trial $[ ]*
----------------------------------------------------------------------------------------------------------
D. First NDA Submission in a Major Market Country $[ ]*
----------------------------------------------------------------------------------------------------------
E. First launch in a Major Market Country $[ ]*
==========================================================================================================
</TABLE>
(i) provided however that [ ]* percent ([ ]*%) of the payments made
to Cubist pursuant to this Section 8.3.2(a) shall be credited against royalties
due to Cubist for Novartis Products incorporating such Active Cubist Compound or
Active Cubist Compound Derivative pursuant to Section 8.4(a) hereof;
(ii) provided further that no royalty payment under Section 8.4(a)
shall be reduced by more than [ ]* percent ([ ]* %); and
(iii) provided further that if an Active Cubist Compound or an
Active Cubist Compound Derivative is abandoned during development after one or
more of the milestone payments B., C., or D. above has been made, and if a
replacement compound is developed to replace such abandoned Active Cubist
Compound or Active Cubist Compound Derivative, then no milestone payment B., C.
or D. shall be made in respect of the replacement compound which milestone
payment has already been made in respect of the abandoned Active Cubist Compound
or Active Cubist Compound Derivative; provided however, that the provisions of
this subsection (iii) shall not apply with respect to a replacement compound if
(aa) the abandoned compound is an Active Cubist Compound, and (bb) Novartis,
pursuant to the provisions of Section 7.5.4 had parked one or more Back-Up
Compounds as possible replacement compounds for such Active Cubist Compound. If
the conditions of (aa) and (bb) above are met, then Novartis shall pay, with
respect to the replacement compound for the abandoned Active Cubist Compound,
regular milestone payments upon the achievement of each of the applicable
milestones as set forth in this Section 8.3.2(a), irrespective of whether the
replacement compound is a Back-Up Compound or not.
- -------------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
(b) For each (except Milestone A) Novartis Compound:
<TABLE>
<CAPTION>
==========================================================================================================
Milestone Payment
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. First compound to reach EDC status (one-time payment only, i.e. payable
only for the first Novartis Compound to achieve this milestone) $[ ]*
----------------------------------------------------------------------------------------------------------
B. Initiation of Phase I clinical trial $[ ]*
----------------------------------------------------------------------------------------------------------
C. Initiation of Phase III clinical trial $[ ]*
----------------------------------------------------------------------------------------------------------
D. First NDA Submission in a Major Market Country $[ ]*
----------------------------------------------------------------------------------------------------------
E. First launch in a Major Market Country $[ ]*
==========================================================================================================
</TABLE>
(i) provided however that [ ]* percent ([ ]*%) of the payments made
to Cubist pursuant to this Section 8.3.2(b) shall be credited against royalties
due to Cubist for Novartis Products incorporating such Novartis Compound
pursuant to Section 8.4(b) hereof;
(ii) provided further that no royalty payment under Section 8.4(b)
shall be reduced by more than [ ]* percent ([ ]*%); and
(iii) provided further that if a Novartis Compound is abandoned
during development after one or more of the milestone payments B., C., or D.
above has been made, and if a replacement compound is developed to replace such
abandoned Novartis Compound, then no milestone payment B., C. or D. shall be
made in respect of the replacement compound which milestone payment has already
been made in respect of the abandoned Novartis Compound.
8.3.3 Payment by Novartis of Milestone Payments. All payments to be
made by Novartis to Cubist pursuant to this Section 8.3 shall be made within
thirty (30) days of receipt of an invoice from Cubist. Novartis shall promptly
report to Cubist the occurrence of any event triggering a milestone payment
according to Sections 8.3.1 or 8.3.2 above.
8.4 Royalties on Net Sales by Novartis. In consideration of the licenses
granted to Novartis pursuant to Article 7 hereof, Novartis shall pay Cubist the
following royalties on Net Sales:
(a) For each Novartis Product consisting of or incorporating an
Active Cubist Compound or an Active Cubist Compound Derivative:
<TABLE>
<CAPTION>
==========================================================================================================
Net Sales per annum Royalty Rate
----------------------------------------------------------------------------------------------------------
<S> <C>
on Net Sales less than $300,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $300,000,000 but less
than $500,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $500,000,000 but less
than $1,000,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $1,000,000,000 [ ]*%
==========================================================================================================
</TABLE>
- ---------------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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provided, however, that royalties under this Section 8.4(a) shall be
payable on a country-by-country basis for the longer of (i) the period that such
Novartis Product, its manufacture, use or sale is covered by a Valid Claim in
such country or (ii) [ ]* from the date of First Commercial Sale of each
Novartis Product in such country; and,
provided, furthermore, that if after expiry of the relevant Valid Claim in
a country, substantial competition in the sale of a Novartis Product under this
Section 8.4(a) is created by any independent Third Party entering the market
with such a Product, then with respect solely to such country any royalty still
payable shall be reduced by [ ]* percent ([ ]*%) of the amounts set forth above,
commencing with the first full calendar quarter following written notice to
Cubist of such substantial competition and continuing for only so long as such
substantial competition exists. As used in this Section, "substantial
competition" shall mean a market share of an independent Third Party entering
the market greater than twenty percent (20%) of the Novartis market as shown by
IMS Panel data or, if not available, such market research data mutually agreed
upon by the Parties.
(b) For each Novartis Product consisting of or incorporating a
Novartis Compound:
<TABLE>
<CAPTION>
==========================================================================================================
Net Sales per annum Royalty Rate
----------------------------------------------------------------------------------------------------------
<S> <C>
on Net Sales less than $300,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $300,000,000 but less
than $500,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $500,000,000 but less
than $1,000,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $1,000,000,000 [ ]*%
==========================================================================================================
</TABLE>
provided, however, that royalties under this Section 8.4(b) shall be
payable on a country-by-country basis for [ ]* from the date of First Commercial
Sale of each Novartis Product in such country.
- ------------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
8.5 Percentage of Milestone Revenue Income and Royalties by Cubist. With
respect to each Cubist Product sold by Cubist or its Affiliates or any licensee
of Cubist, Cubist shall pay Novartis the following:
(a) [ ]** percent ([ ]*%) of all Milestone Revenue Income received
by Cubist from any licensee.
All payments to be made by Cubist to Novartis pursuant to this
Section 8.5(a) shall be made within thirty (30) days of receipt of an invoice
from Novartis. Cubist shall promptly report to Novartis the occurrence of any
event triggering a milestone payment according to this Section 8.5(a).
(b) the following royalties shall be payable on a
country-by-country basis for [ ]* from the date of First Commercial Sale of each
Cubist Product in such country whether such Cubist Product is commercialized by
Cubist itself, by an Affiliate of Cubist, or a licensee of Cubist:
<TABLE>
<CAPTION>
==========================================================================================================
Net Sales per annum Royalty Rate
----------------------------------------------------------------------------------------------------------
<S> <C>
on Net Sales less than $300,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $300,000,000 but less
than $500,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $500,000,000 but less
than $1,000,000,000 [ ]*%
----------------------------------------------------------------------------------------------------------
on the increment of Net Sales equal to or greater than $1,000,000,000 [ ]*%
==========================================================================================================
</TABLE>
8.6 Method of Payment/Reports/Audits. All payments to be made by Novartis
to Cubist pursuant to Sections 8.3 and 8.4 and all payments to be made by Cubist
to Novartis pursuant to Section 8.5 shall be made in United States dollars.
8.6.1 Royalty Reports, Exchange Rates. During the term of this
Agreement, following the First Commercial Sale in any country of a Novartis
Product or a Cubist Product, the Seller shall furnish to the other Party a
written quarterly report showing, on a country by country basis: (i) the gross
sales of all Products sold by Seller and its Affiliates and any of its
distributors who are not Affiliates and its licensees or sublicensees during the
reporting period and the calculation of Net Sales from such gross sales; (ii)
the royalties and other payments payable in United States dollars which shall
have accrued hereunder in respect of such sales; (iii) withholding taxes, if
any, required by law to be deducted in respect of such sales, as applicable;
(iv) the dates of the First Commercial Sales of any Products in any country by
Seller and its
- -----------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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CONFIDENTIAL TREATMENT
Affiliates and any of its distributors who are not Affiliates and its licensees
or sublicensees during the reporting period; (v) the amount of any credits
against the royalties and other payments which have accrued hereunder pursuant
to Sections 6.4 and 8.3; and (vi) the exchange rates used in determining the
amount of United States dollars. All amounts payable will first be calculated in
the currency of sale and then converted into United States dollars using as a
rate of exchange the average exchange rate reported in the Wall Street Journal
during the calendar quarter to which the payment relates. Reports together with
the royalty payable for the periods to which the reports relate shall be due on
the sixtieth (60th) day following the close of each calendar quarter. If no
royalty is due for any royalty period hereunder, the parties shall so report.
Seller shall keep complete and accurate records in sufficient detail to properly
reflect all gross sales and Net Sales and to enable the royalties payable
hereunder to be determined.
8.6.2 Audits. Upon the written request of the other Party, Seller shall
permit an independent certified public accountant selected by the requesting
Party and acceptable to Seller, which acceptance shall not be unreasonably
withheld or delayed, to have access during normal business hours to such of the
records of Seller as may be reasonably necessary to verify the accuracy of the
royalty reports hereunder in respect of any fiscal year ending not more than
twenty-four (24) months prior to the date of such request. All such
verifications shall be conducted at the expense of the requesting Party and not
more than once in each calendar year.
In the event such accountant concludes that additional royalties were
owed during such period, the additional royalty shall be paid within thirty (30)
days of the date the requesting Party delivers to Seller such accountant's
written report so concluding. The fees charged by such accountant shall be paid
by the requesting Party unless the audit discloses that the royalties payable by
Seller for the audited period are more than one hundred and ten percent (110%)
of the royalties actually paid for such period, in which case Seller shall pay
the reasonable fees and expenses charged by the accountant.
Seller shall include in each license or sublicense granted by it
pursuant to this Agreement a provision requiring the licensee or sublicensee to
make reports to Seller, to keep and maintain records of sales made pursuant to
such license or sublicense and to grant access to such records by the other
Party's independent accountant to the same extent required of Seller under this
Agreement.
The parties agree that all information subject to review under this
Section 8.6.2 or under any sublicense agreement is confidential and that it
shall cause its accountant to retain all such information in confidence.
8.6.3 Royalty Payment Terms. Royalties shown to have accrued by each
royalty report provided for under this Agreement shall be due and payable on the
date such royalty report is due. Payment of royalties in whole or in part may be
made in advance of such due date. Royalties determined to be owing, and any
overpayments to be credited, with respect to any prior quarter shall be added,
together with interest thereon accruing under this Agreement from the date of
the report for the quarter for which such amounts are owing, or credited, as the
case may be, to the next quarterly payment hereunder.
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CONFIDENTIAL TREATMENT
8.7 Withholding of Taxes. Any withholding of taxes levied by tax
authorities outside the United States on the payments hereunder shall be
deducted by Seller from the sums otherwise payable by it hereunder for payment
to the proper tax authorities on behalf of the other Party and shall be borne by
such other Party. Seller agrees to cooperate with the other Party in the event
the other Party claims exemption from such withholding or seeks deductions under
any double taxation or other similar treaty or agreement from time to time in
force, such cooperation to consist of providing receipts of payment of such
withheld tax or other documents reasonably available to Seller.
8.8 Exchange Controls. Except as hereinafter provided in this Section,
all payments to be made pursuant to this Article 8 shall be paid in United
States dollars. If at any time legal restrictions prevent the prompt remittance
of part or all royalties with respect to any country where the Product is sold,
payment shall be made through such lawful means or methods as Seller may
determine. When in any country the law or regulations prohibit both the
transmittal and deposit of royalties on sales in such a country, royalty
payments shall be suspended for as long as such prohibition is in effect, and as
soon as such prohibition ceases to be in effect, all royalties that Seller or
its licensees or sublicensees would have been obligated to transmit or deposit,
but for the prohibition, shall forthwith be deposited or transmitted promptly to
the extent allowable, as the case may be. If the royalty rate specified in this
Agreement should exceed the permissible rate established in any country, the
royalty rate for sales in such country shall be adjusted to the highest legally
permissible or government-approved rate.
8.9 Interest on Late Payments. Any payments by Seller that are not paid
on or before the date such payments are due under this Agreement shall bear
interest, to the extent permitted by applicable law, at the Base Rate of
interest declared from time to time by BankBoston N.A. in Boston, Massachusetts,
calculated on the number of days payment is delinquent.
ARTICLE 9
CONFIDENTIALITY
9.1 Nondisclosure Obligations. Except as otherwise provided in this Article
9, during the term of this Agreement and for a period of [ ]* thereafter, both
Parties shall maintain in confidence and use only for purposes specifically
authorized under this Agreement information and data received from the other
Party during the Program ("Information").
To the extent it is reasonably necessary or appropriate to fulfil its
obligations or exercise its rights under this Agreement, a Party may disclose
Information it is otherwise obligated under this Section not to disclose to its
Affiliates, licensees, sublicensees, consultants, outside contractors and
clinical investigators, on a need-to-know basis on condition that such entities
or persons agree to keep the Information confidential for the same time periods
and to the
- --------------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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same extent as such Party is required to keep the Information confidential; and
a Party or its licensees or sublicensees may disclose such Information to
government or other regulatory authorities to the extent that such disclosure is
reasonably necessary to obtain patents or authorizations to conduct clinical
trials with and to commercially market any Product. The obligation not to
disclose Information shall not apply to any part of such Information that (i) is
or becomes patented, published or otherwise part of the public domain other than
by acts of the Party obligated not to disclose such Information or its
Affiliates or licensees or sublicensees in contravention of this Agreement; (ii)
is disclosed to the receiving Party or its Affiliates or licensees or
sublicensees by a Third Party, provided such Information was not obtained by
such Third Party directly or indirectly from the other Party under this
Agreement; (iii) prior to disclosure under this Agreement, was already in the
possession of the receiving Party or its Affiliates or licensees or
sublicensees, provided such Information was not obtained directly or indirectly
from the other Party under this Agreement; or (iv) can be shown by written
documents to have been independently developed by the receiving Party or its
Affiliates without breach of any of the provisions of this Agreement.
9.2 Samples. Samples of compounds provided by one Party (the "Supplying
Party") to the other Party (the "Receiving Party") during the Research Program
shall not be supplied or sent by the Receiving Party to any Third Party without
the written consent of the Supplying Party.
9.3 Terms of this Agreement/Use of Name. Except as required by applicable
law or regulation, neither Party shall use the name of the other Party in any
publicity or advertising without the prior written approval of the other Party,
except that either party may disclose the existence of the collaboration. Cubist
and Novartis each agrees not to disclose any terms or conditions of this
Agreement to any Third Party without the prior consent of the other Party,
except as required by applicable law or to persons with whom Novartis or Cubist
has entered into or proposes to enter into a business relationship related to
the subject matter hereof, and provided that such persons are subject to
appropriate confidentiality agreements. Notwithstanding the foregoing, Novartis
and Cubist agree that the information contained in a press release mutually
agreed by the Parties may be used to describe the nature of this transaction,
and Novartis and Cubist may disclose such information, as modified by mutual
agreement from time to time, without the other Party's consent.
9.4 Publications. Cubist and Novartis each acknowledge the other Party's
interest in publishing certain of the results of the Research Program to obtain
recognition within the scientific community and to advance the state of
scientific knowledge. Each Party also recognizes the mutual interest in
obtaining valid patent protection. Consequently, either Party, its employees or
consultants wishing to make a publication (including any oral disclosure made
without obligation of confidentiality) relating to work performed as part of the
Research Program (the "Publishing Party") shall transmit to the Joint Research
Steering Committee and the other Party (the "Reviewing Party") a copy of the
proposed written publication at least forty-five (45) days prior to submission
for publication, or an abstract of such oral disclosure at least fifteen (15)
days prior to submission of the abstract or the oral disclosure, whichever is
earlier. The Joint Research Steering Committee and/or the Reviewing Party shall
have the right (a) to propose
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modifications to the publication for accuracy and/or patent reasons, (b) to
request a delay in publication or presentation in order to protect patentable
information or maintain trade secrets.
If the Joint Research Steering Committee or the Reviewing Party
requests such a delay, the Publishing Party shall delay submission or
presentation of the publication for a period determined by the Joint Research
Steering Committee to enable patent applications protecting each Party's rights
in such information to be filed or to protect trade secrets. Upon the expiration
of forty-five (45) days, in the case of proposed written disclosures, or fifteen
(15) days, in the case of an abstract of proposed oral disclosures, from
transmission of such proposed disclosures to the Joint Research Steering
Committee and the Reviewing Party, the Publishing Party shall be free to proceed
with the written publication or the oral presentation, respectively, unless the
Joint Research Steering Committee or the Reviewing Party has requested the delay
described above.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Authorization. Each Party represents and warrants to the other that it
has the legal right and power to enter into this Agreement, to extend the rights
and licenses granted or to be granted to the other in this Agreement, and to
fully perform its obligations hereunder, and that it has not made nor will it
make any commitments to others in conflict with or in derogation of such rights
or this Agreement. Except as otherwise disclosed, each Party further represents
to the other that it is not aware of any legal obstacles which could prevent it
from carrying out the provisions of this Agreement.
10.2 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, CUBIST MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
QUALITY OF RESULTS GENERATED PURSUANT TO THE RESEARCH PROGRAM, CUBIST COMPOUNDS,
TARGETS IDENTIFIED BY CUBIST FOR THE COLLABORATION TARGET LIST, CANDIDATE
TARGETS, SELECTED TARGETS, VALIDATED ASSAYS OR ANY CUBIST TECHNOLOGY OR PATENT
RIGHTS THEREIN, OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
ARTICLE 11
INDEMNITY
11.1 Novartis Indemnity Obligations. Except to the extent attributable to
Cubist's negligence, a breach of warranty by Cubist or willful or tortious acts
or omissions of Cubist, Novartis agrees to defend, indemnify and hold Cubist,
its Affiliates and their respective employees and agents harmless from all
claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by Novartis, its
Affiliates or sublicensees by virtue of which Novartis Products manufactured,
distributed or sold by Novartis, its Affiliates or sublicensees shall be alleged
or determined to be adulterated, misbranded, mislabeled or otherwise not in
compliance with any applicable law or regulation; (b)
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claims for bodily injury, death or property damage attributable to the
development, manufacture, distribution, sale or use of Novartis Products by
Novartis, its Affiliates or sublicensees; or (c) a recall of Novartis Products
manufactured, distributed or sold by Novartis, its Affiliates or sublicensees
ordered by a governmental agency or required by a confirmed Novartis Product
failure as reasonably determined by Novartis.
11.2 Cubist Indemnity Obligations. Except to the extent attributable to
Novartis' negligence, a breach of warranty by Novartis or willful or tortuous
acts or omissions of Novartis, Cubist agrees to defend, indemnify and hold
Novartis, its Affiliates and their respective employees and agents harmless from
all claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by Cubist, its
Affiliates or sublicensees by virtue of which Cubist Products manufactured,
distributed or sold by Novartis, its Affiliates or sublicensees shall be alleged
or determined to be adulterated, misbranded, mislabeled or otherwise not in
compliance with any applicable law or regulation; (b) claims for bodily injury,
death or property damage attributable to the development, manufacture,
distribution, sale or use of Cubist Products by Cubist, its Affiliates or
sublicensees; or (c) a recall of Cubist Products manufactured, distributed or
sold by Cubist, its Affiliates or sublicensees ordered by a governmental agency
or required by a confirmed Cubist Product failure as reasonably determined by
Cubist.
11.3 Procedure. A Party or any of its Affiliates or their respective
employees or agents (the "Indemnitee") that intends to claim indemnification
under this Article 11 shall promptly notify the other Party (the "Indemnitor")
of any loss, claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall
assume the defense thereof with counsel mutually satisfactory to the Parties;
provided, however, that an Indemnitee shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential conflicting interests between
such Indemnitee and any other Party represented by such counsel in such
proceedings. The indemnity agreement in this Article 11 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if materially prejudicial to its ability to defend such action, shall relieve
such Indemnitor of any liability to the Indemnitee under this Article 11, but
the omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
11. The Indemnitee under this Article 11, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
11.4 Novartis Insurance. Novartis shall maintain product liability
insurance with respect to development, manufacture and sales of Novartis
Products by Novartis in such amount as Novartis customarily maintains with
respect to sales of its other products. Novartis shall maintain such insurance
for so long as it continues to manufacture or sell any Novartis Products, and
thereafter for so long as Novartis maintains insurance for itself covering such
manufacture or
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sales. Novartis shall provide Cubist with written evidence of such insurance
upon request by Cubist.
11.5 Cubist Insurance. Cubist shall maintain product liability insurance
with respect to development, manufacture and sales of Cubist Products by Cubist
in such amount as Cubist customarily maintains with respect to sales of its
other products. Cubist shall maintain such insurance for so long as it continues
to manufacture or sell any Cubist Products, and thereafter for so long as Cubist
maintains insurance for itself covering such manufacture or sales. Cubist shall
provide Novartis with written evidence of such insurance upon request by
Novartis.
ARTICLE 12
TERM AND TERMINATION
12.1 The Research Program.
12.1.1 Expiration of the Research Program. Unless this Agreement is
sooner terminated in accordance with the provisions of this Article 12, the term
of the Research Program shall expire upon the completion of [ ]* Research Years.
12.1.2 Termination of the Research Program. The Research Program may
be terminated by Novartis, in its discretion, at the end of [ ]* Research Years
upon written notice to Cubist before the end of [ ]* from the Effective Date. If
such notice is not received before the end of [ ]* from the Effective Date, the
Parties agree that Novartis will be obligated to provide the full amount of
research funding pursuant to Section 8.1 for the third Research Year.
12.1.3 Existing Obligations. The expiration or termination of the
Research Program shall not relieve the Parties of any obligation that accrued
prior to such expiration or termination.
12.1.4 Effect of Expiration and Termination of Research Program. In
the event of the expiration or termination of the Research Program pursuant to
Section 12.1, then (a) the Exclusivity Period for Candidate Targets set forth in
Section 7.2.3 shall survive; (b) the co-exclusive rights to Candidate Targets as
provided in Section 7.2.2, to Discontinued Targets as provided in Section 7.3.3
and to Discontinued Validated Assays as provided in Section 7.4.2 shall survive;
(c) the exclusive rights to Selected Targets as set forth in Section 7.3.1 shall
survive; (d) Novartis' due diligence obligations pursuant to Sections 7.3.2 and
7.5.2 shall survive; (e) Cubist's rights pursuant to Section 7.5.3(a) and
Cubist's First Refusal Right pursuant to Section 7.5.3(b) shall survive; and (f)
the exclusive rights to Active Cubist Compounds for which Novartis exercised its
option prior to the expiration or termination of the Research Program shall
survive.
- --------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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12.2 Expiration of This Agreement. Unless terminated earlier pursuant to
Section 12.3, this Agreement shall expire on the expiration of Novartis' or
Cubist's obligations to pay royalties to the other Party under this Agreement,
and the licenses granted by either Party to the other hereunder shall become
fully paid up and royalty-free, on a country-by-country basis.
12.3 Termination of This Agreement. This Agreement may be terminated in the
following circumstances:
12.3.1 Material Breach. By one Party upon written notice by reason of
a material breach by the other Party not described in Section 12.3.2 or 12.3.3
that the breaching Party fails to remedy within sixty (60) days after written
notice thereof by the non-breaching Party;
12.3.2 Failure of Novartis to Pay. By Cubist, if Novartis fails to
make (i) any payment under Sections 8.1, 8.2 or 8.3 within twenty (20) business
days after such payment becomes payable or (ii) any royalty payment under
Section 8.4 within thirty (30) days after such payment becomes payable, and, in
any such case under (i) and (ii), such failure is not remedied within thirty
(30) days after notice thereof from Cubist.
12.3.3 Failure of Cubist to Pay. By Novartis, if Cubist fails to make
any Milestone Revenue Income or royalty payment under Section 8.5 within twenty
(20) business days after such payment becomes payable, and, in any such case,
such failure is not remedied within thirty (30) days after notice thereof from
Novartis.
12.3.4 Bankruptcy. By either Party upon bankruptcy, insolvency,
dissolution or winding up of the other.
12.3.5 By Novartis. By Novartis, in its discretion, in its entirety,
or with respect to a Novartis Product on a country-by-country basis, at any time
upon delivery by Novartis to Cubist of six (6) months prior notice thereof.
12.4 Failure of Novartis to Diligently Develop and Sell Novartis Product
Based on Active Cubist Compound. In the event that (a) Novartis fails to use
commercially reasonable efforts to develop a Novartis Product based on an Active
Cubist Compound in accordance with Section 7.5.2 or (b) following the First
Commercial Sale of a Novartis Product based on an Active Cubist Compound in a
Major Market County, there is a continuous one (1) year period in which no such
Novartis Product is sold in such Major Market Country (provided that such sale
is not prevented by force majeure, government regulation or intervention or
institution of a law suit by a Third Party), and Novartis fails to remedy or
take reasonable action to initiate a remedy of such default within ninety (90)
days after notice thereof by Cubist, Cubist shall have the right to terminate
the license and right granted to Novartis to such Active Cubist Compound
pursuant to Section 7.5 in such Major Market Country for such Active Cubist
Compound-based Novartis Product (and Cubist shall have the rights set forth in
Section 7.5.3(a)), but Cubist shall not have the right to terminate this
Agreement in its entirety.
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CONFIDENTIAL TREATMENT
12.5 Effect of Expiration or Termination of This Agreement.
12.5.1 Existing Obligations. Expiration pursuant to Section 12.2 or
termination pursuant to Section 12.3 of this Agreement for any reason shall not
relieve the Parties of any obligation that accrued prior to such expiration or
termination.
12.5.2 Survival of Sublicenses. Upon termination of this Agreement for
any default by Novartis, any existing sublicenses of Novartis shall be
automatically assigned to Cubist, and Cubist shall be bound by the terms of such
sublicenses provided that the sublicensees continue to perform in accordance
with their respective sublicense agreements. Notwithstanding the foregoing,
Cubist's obligations to any such sublicensee shall not be interpreted to extend
beyond any obligations to Novartis hereunder with respect to the subject matter
of the sublicense.
12.5.3 Survival. Upon expiration or termination of this Agreement, the
obligations which by their nature are intended to survive expiration or
termination of the Agreement, shall survive.
12.5.4 Effect of Termination by Novartis. In the event of termination
of this Agreement by Novartis pursuant to Sections 12.3.1, 12.3.3 or 12.3.4,
Novartis may elect to either (a) terminate this Agreement, in which case all
licenses and rights granted to Novartis shall terminate and Novartis will
immediately cease to manufacture and sell Novartis Products (except as provided
in Section 12.5.6) and Novartis shall be entitled to claim from Cubist all
damages which would otherwise be due to Novartis under law or equity or (b)
offset the amount of damages and/or costs obtained in a final judgment or award
of monetary damages and/or costs against Cubist based on Cubist's default
against any amounts otherwise due to Cubist under Article 8.
12.5.5 Effect of Termination by Cubist. In the event of termination of
this Agreement by Cubist pursuant to Sections 12.3.1, 12.3.2 or 12.3.4, all
licenses and rights granted to Novartis hereunder shall terminate and, except as
provided in Section 12.5.6 below, Novartis will immediately cease to manufacture
and sell each Novartis Product.
12.5.6 Disposition of Inventory of Products. Novartis may dispose of
its inventory of Novartis Products on hand as of the effective date of
termination, and may fill any orders for Novartis Products accepted prior to the
effective date of termination, for a period of [ ]* after the effective date of
termination and (b) within [ ]* after disposition of such inventory and
fulfillment of such orders (and in any event within [ ]* after termination)
Novartis will forward to Cubist a final report containing the details required
by Section 8.6 hereof and pay Cubist all royalties due for Net Sales in such
period.
- ---------------------
* Confidential Treatment Requested: Material has been omitted and filed
separately with the Commission.
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ARTICLE 13
MISCELLANEOUS
13.1 Force Majeure. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, including but not limited to fire, floods,
embargoes, war, acts of war (whether war is declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other Party; provided, however, that the Party so affected shall use reasonable
commercial efforts to avoid or remove such causes of nonperformance, and shall
continue to perform hereunder with reasonable dispatch whenever such causes are
removed. Either Party shall provide the other Party with prompt written notice
of any delay or failure to perform that occurs by reason of force majeure. The
Parties shall mutually seek a resolution of the delay or the failure to perform
as noted above.
13.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either Party without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that each of the Parties may, without such consent, assign this
Agreement and its rights and obligations hereunder to its Affiliates or in
connection with the transfer or sale of all or substantially all of the portion
of its business to which this Agreement relates, or in the event of its merger
or consolidation or change in control or similar transaction or, in the case of
Cubist, the creation of a special purpose corporation or research and
development limited partnership. Any purported assignment in violation of the
preceding sentences shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement in writing.
13.3 Severability. Each Party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the Parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement
without the invalid provisions.
13.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid (where
applicable), addressed to such other Party at its address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor and shall be effective upon receipt by the addressee.
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If to Cubist: Cubist Pharmaceuticals, Inc.
39 Emily Street
Cambridge, Massachusetts 02139
Attention: President
Fax: (617) 576-0271
with a copy to: Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02109
Attention: Michael Lytton, Esq.
Fax: (617) 227-4420
If to Novartis: Novartis Pharma AG
P.O. Box
CH-4002 Basel-Switzerland
Attention: Legal Department
Fax: +41-61-324-6859
13.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of New York.
13.6 Dispute Resolution. Any disputes arising between the Parties relating
to, arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement, shall be
resolved as follows:
13.6.1 Joint Research Steering Committee. During the term of the
Research Program, the dispute shall be referred to the Joint Research Steering
Committee for resolution in accordance with Article 2.
13.6.2 Chief Executive Officers. If the dispute cannot be resolved by
the Joint Research Steering Committee in accordance with Article 2, the Joint
Research Steering Committee shall promptly notify the Head of Research of
Novartis and the Chief Executive Officer of Cubist, who shall meet in person at
a mutually acceptable time and location or by means of telephone or video
conference within thirty (30) days of such notice and attempt to negotiate a
settlement.
13.6.3 Mediation. If the matter remains unresolved within sixty (60)
days after the date of notice by the Joint Research Steering Committee or if the
Chief Executive Officers fail to meet within thirty (30) days, then either Party
may initiate mediation upon written notice to the other party, whereupon both
parties shall be obligated to engage in a mediation proceeding under the then
current Center for Public Resources ("CPR") Model Procedure for Mediation of
Business Disputes, except that specific provisions of this Section shall
override inconsistent provisions of the CPR Model Procedure. The mediator will
be selected from the CPR Panel of Neutrals. If the Parties cannot agree upon the
selection of the mediator within ten (10) days of the initiation of the
mediation, then CPR shall appoint the mediator. The Parties shall attempt to
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resolve the dispute through mediation until one of the following occurs: (i) the
Parties reach a written settlement; (ii) the mediator notifies the Parties in
writing that they have reached an impasse; (iii) the Parties agree in writing
that they have reached an impasse; or (iv) the Parties have not reached a
settlement within sixty (60) days of the initiation of the mediation.
13.6.4 Arbitration. If the parties fail to resolve the dispute through
mediation, then such dispute shall be finally resolved by binding arbitration.
Whenever a Party shall decide to institute arbitration proceedings, it shall
give written notice to that effect to the other Party. Any arbitration hereunder
shall be conducted under the Commercial Arbitration Rules of the American
Arbitration Association. Each such arbitration shall be conduced in the English
language by a panel of one or three arbitrators appointed in accordance with
such Rules. Any such arbitration shall be held in Boston, Massachusetts. The
arbitrators shall have the authority to grant specific performance, and to
allocate between the Parties the costs of arbitration in such equitable manner
as they determine. Judgment upon the award so rendered may be entered in any
court having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be.
13.7 Entire Agreement. This Agreement, together with the Exhibits hereto
and the Stock Purchase Agreement between the Parties, dated the date hereof,
contains the entire understanding of the Parties with respect to the subject
matter hereof. In the event of any conflict or inconsistency between any
provision of any Exhibit hereto and any provision of this Agreement, the
provisions of this Agreement shall prevail. All express or implied agreements
and understandings, either oral or written, heretofore made are expressly merged
in and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both Parties
hereto.
13.8 Headings. The captions to the several Articles and Sections hereof and
Exhibits hereto are not a part of this Agreement, but are merely guides or
labels to assist in locating and reading the several Articles and Sections
hereof.
13.9 Independent Contractors. It is expressly agreed that Cubist and
Novartis shall be independent contractors and that the relationship between the
two Parties shall not constitute a partnership, joint venture or agency. Neither
Cubist nor Novartis shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other Party to do so.
13.10 Agreement Not to Solicit Employees. During the term of this Agreement
and for a period of two (2) years following the termination of the Research
Program, Cubist and Novartis agree not to seek to persuade or induce any
employee of the other company to discontinue his or her employment with that
company in order to become employed by or associated with any business,
enterprise or effort that is associated with its own business.
13.11 Waiver. The waiver by either Party hereto of any right hereunder or
the failure to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.
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13.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
CUBIST PHARMACEUTICALS, INC. NOVARTIS PHARMA AG
By: /s/ Scott M. Rocklage By: /s/ Paul S. Herrling
----------------------------- ----------------------------
Name: Scott M. Rocklage, Ph.D. Name: Dr. P. Herrling
--------------------------- --------------------------
Title: President and Chief Financial Officer Title: Head of Research
------------------------------------- -------------------------
Noartis Pharma Inc.
S-386, 13.06
CH - 4002 Buse/Switzerland
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Exhibits
Exhibit A Research Plan
Exhibit B Stock Purchase Agreement
Exhibit C Cubist Patent Portfolio
<PAGE>
Exhibit 10.2
NOVARTIS PHARMA AG
AND
CUBIST PHARMACEUTICALS, INC.
STOCK PURCHASE AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the ____ day of February,
1999, by and between Novartis Pharma AG ("Novartis" or the "Investor"), a
corporation organized under the laws of Switzerland, with its principal place of
business at Lichtstrasse 35, CH-4002, Basel, Switzerland, and Cubist
Pharmaceuticals, Inc., (the "Company"), a Delaware corporation with its
principal place of business at 24 Emily Street, Cambridge, Massachusetts 02139,
USA.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Common Stock.
1.1 Sale of the Common Shares. Subject to the terms and conditions hereof,
the Company will issue and sell to the Investor, and the Investor will buy from
the Company, at the Closing, the Common Stock, par value $.001 per share of the
Company (the "Common Stock") for a purchase price of $4,000,000 in cash in U.S.
dollars, (the "Aggregate Purchase Price"). The parties agree that Novartis may
assign the right and obligation to purchase the Common Stock for the Purchase
Price, and all of its other rights and obligations under this Agreement, to an
"Affiliate," as defined in Section 10.16 of this Agreement, in which case the
term "Investor" shall refer herein to such Affiliate.
1.2 The Company shall sell and issue to the Investor, and the Investor
shall purchase and receive from the Company that number of shares of Common
Stock (the "Shares") equal to $4,000,000 divided by the "Share Price." The
"Share Price" shall mean 114% of the average closing price per share of the
Common Stock, as quoted in The Wall Street Journal, for the 10 consecutive
trading day period prior to the Closing Date. In the event of any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company prior to the Closing which affects or
relates to the Common Stock, the number of Shares and Share Price (but not the
Aggregate Purchase Price) shall be adjusted proportionately.
1.3 Closing. The closing of purchase and sale of the Shares to be sold and
purchased hereunder (the "Closing") shall occur at a time mutually agreeable to
the parties hereto on the Closing Date (as defined in Section 2.1) at the
Company's offices at 24 Emily Street, Cambridge, Massachusetts 02139, USA.
2. Closing Date, Delivery.
2.1 Closing Date. The Closing shall be held on the date hereof or such
other date as the Company and the Investor may agree upon (the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Investor a
stock certificate, registered in the Investor's name, representing the Shares,
against payment of the Purchase Price by certified or cashier's check payable to
the Company, or by wire
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transfer of same day funds per the Company's wiring instructions. The Company
will also make all such deliveries as are contemplated by Section 5 of this
Agreement.
2.3 Further Assurances. The Company and the Investor hereby covenant and
agree, without the necessity of any further consideration, to execute,
acknowledge and deliver any and all such other documents and take any such other
action as may be reasonably necessary to carry out the intent and purposes of
this Agreement.
3. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
corporate authority to own and operate its properties and assets, to carry on
its business as now conducted and as proposed to be conducted, to enter into
this Agreement, to sell the Shares and to carry out the other transactions
contemplated hereunder. The Company is qualified to transact business and is in
good standing in each jurisdiction in which the failure to qualify would have,
or could reasonably be expected to have, a material adverse effect on the
business, properties, financial condition or results of operations of the
Company (a "Material Adverse Effect"). The Company has delivered to the Investor
true, correct and complete copies of the Company's Restated Certificate of
Incorporation (the "Certificate") and the Company's By-laws in effect on the
date hereof. The Company has not taken any action that conflicts with,
constitutes a default under, or results in a violation of, any provision of the
Certificate or By-laws.
3.2 Capitalization and Voting Rights.
(a) The authorized capital of the Company as of the date hereof
consists of:
(i) 25,000,000 shares of Common Stock
(ii) 5,000,000 shares of Preferred Stock, $.001 par value per share
(b) Except as set forth in the Company's Annual Report on Form 10-K for
the year ended, December 31, 1998, the Company's Quarterly Reports on Form 10-Q
for the periods ended, March 31, 1998, June 30, 1998 and September 30, 1998 ,
(collectively, the "Company's Public Filings") or in Section 3.2 of the
Disclosure Schedule attached hereto as Exhibit A to this Agreement, there are:
(i) no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements pursuant to which the Company is or may become obligated
to issue, sell or repurchase any shares of its capital stock or any other
securities of the Company; (ii) no restrictions on the transfer of capital stock
of the Company imposed by the Certificate or By-laws of the Company, or any
agreement to which the Company is a party, any order of any court or any
governmental agency to which the Company is subject, or any statute other than
those imposed by relevant state and federal securities laws; (iii) no cumulative
voting rights for any of the Company's capital stock; (iv) no registration
rights under the Securities Act of 1933, as amended (the
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"Securities Act") with respect to shares of the Company's capital stock; and (v)
to the Company's knowledge and belief, no options or other rights to purchase
shares of capital stock from shareholders of the Company granted by such
shareholders. The Company has reserved up to 3,000,000 shares of its Common
Stock for the issuance of Common Stock pursuant to the exercise of outstanding
options and warrants or options to be granted in the future under its Amended
and Restated 1993 Stock Option Plan and up to 250,000 shares of its Common Stock
for the issuance of Common Stock under its 1997 Employee Stock Purchase Plan.
(c) Except as set forth in the Company's Public Filings or in Section
3.2 of the Disclosure Schedule, the Company is not a party to or is not subject
to any agreement or understanding relating to, and to the Company's knowledge
there is no agreement or understanding between any persons and/or entities which
affects or relates to, the voting of shares of capital stock of the Company or
the giving of written consents by a shareholder or director of the Company.
(d) The outstanding shares of Common Stock are all duly authorized,
validly issued and outstanding, fully paid and nonassessable, and were issued in
compliance with all applicable laws.
3.3 Subsidiaries. Except as set forth in the Company's Public Filings or in
Section 3.3 of the Disclosure Schedule, the Company has never owned and does not
presently own or control, directly or indirectly, any other corporation,
association, or other business entity and has never owned or controlled and does
not currently own or control, directly or indirectly, any capital stock or other
ownership interest, directly or indirectly, in any corporation, association,
partnership, trust, joint venture or other entity. The Company does not have any
subsidiaries.
3.4 Authorization. All corporate action on the part of the Company and its
shareholders necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Shares to be sold hereunder, has
been taken or will be taken prior to the Closing. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors rights.
3.5 No Conflict. The execution, delivery and performance of this Agreement
and compliance with the provisions hereof by the Company, do not and will not:
(a) violate any provision of law, statute, ordinance, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body, the violation of which
would have a Material Adverse Effect;
(b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under (i) any material agreement,
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document, instrument, contract, understanding, arrangement, note, indenture,
mortgage or lease to which the Company is a party or under which the Company or
any of its assets is bound (ii) the Company's Certificate, or (iii) the By-laws
of the Company; or
(c) result in the creation of any Encumbrance, as defined in Section
10.16 of this Agreement, upon any of the Shares or on any of the properties or
assets of the Company.
3.6 Valid Issuance of the Shares. When issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, the
Shares will be validly issued and outstanding, fully paid and nonassessable and
not subject to any preemptive rights, rights of first refusal or other similar
rights imposed by the Company.
3.7 Indebtedness and Contractual Liabilities. Except as set forth in the
Company's Public Filings or Section 3.7 of the Disclosure Schedule, the Company
has not incurred any unpaid indebtedness for money borrowed or any other
contractual liabilities in excess of $500,000 individually, or $1,000,000 in the
aggregate.
3.8 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
the Agreement, other than any filings pursuant to any federal or state
securities laws or any filing pursuant to the Hart-Scott-Rodino Premerger
Notification Act ("HSR Act"), if applicable.
3.9 Litigation. Except as set forth in Section 3.9 of the Disclosure
Schedule, there is no action, suit, proceeding or investigation pending or, to
the Company's knowledge, currently threatened in writing or orally (which oral
threat is non-frivolous) against the Company which questions the validity of
this Agreement or the right of the Company to enter into it, or to consummate
the transactions contemplated hereby, or which reasonably would be expected to
have, either individually or in the aggregate, a Material Adverse Effect, or
result in any change in the current equity ownership of the Company.. To the
Company's knowledge, there are no legal actions or investigations pending or
threatened involving the employment by or with the Company of any of the
Company's current or former employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers or alleging a violation of any federal, state or local statute or
common law relationship with the Company. The Company is not a party to any
order, writ, injunction, judgment or decree of any court.
3.10 Employees and Consultants. Except as set forth in Section 3.10 of the
Disclosure Schedule:
(a) To the Company's knowledge, none of its employees is obligated
under any contract (including licenses, covenants or contracts of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of the Company or
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that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any material contract, covenant or instrument under which any of
such employees is now obligated.
(b) Each employee of, or consultant to, the Company, who has or is
proposed to have access to confidential or proprietary information of the
Company, is a signatory to, and is bound by, an agreement with the Company
relating to noncompetition, nondisclosure, proprietary information and
assignment of patent, copyright and other intellectual property rights.
(c) No employee of, or consultant to, the Company is in violation of
any term of any employment contract, patent disclosure agreement or any other
contract or agreement with the Company including, but not limited to, those
matters relating to (i) the relationship of any such employee with the Company
or to any other party as a result of the nature of the Company's business as
currently conducted, or (ii) unfair competition, trade secrets or proprietary
information.
3.11 Patents and Trademarks. Except as set forth in the Company's Public
Filings or in Section 3.11 of the Disclosure Schedule, there are no outstanding
options, licenses, or agreements of any kind relating to the Company's patents,
service marks, trademarks, copyrights, trade secrets, proprietary rights or
other intellectual property (hereinafter collectively the "Intellectual
Property"); nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the Intellectual Property of any other
person or entity. The Company has not received any written communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the Intellectual Property of any other person or
entity. To the best of the Company's knowledge, except as set forth in the
Company's Public Filings, all of its Intellectual Property was validly obtained
and free from any impediments, including but not limited to patent invalidity or
unenforceability.
3.12 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of the Certificate or the Company's By-laws or of any
instrument, judgment, order, writ or decree to which the Company is a party or
in which the Company is specifically named.
3.13 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and as set
forth in the Company's Public Filings or in Section 3.13(a) of the Disclosure
Schedule, there are no agreements, understandings, transactions or proposed
transactions between the Company and any of its officers, directors, or
Affiliates, or any Affiliate thereof of a nature required to be disclosed
pursuant to the provisions of Regulation S-K, and none of any such individuals
or entities has any interest in any party to any such agreement, understanding,
transaction or proposed transaction.
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(b) Except as set forth in the Company's Public Filings or in Section
3.13(b) of the Disclosure Schedule, the Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) made any loans or advances to any
Person, other than ordinary advances to employees for travel expenses, or (iii)
sold, exchanged or otherwise disposed of any of its assets or rights, other than
in the ordinary course of business.
(c) The Company has not admitted in writing its inability to pay its
debts generally as they become due, filed or consented to the filing against it
of a petition in bankruptcy or a petition to take advantage of any insolvency
act, made an assignment for the benefit of creditors, consented to the
appointment of a receiver for itself or for the whole or any substantial part of
its property, or had a petition in bankruptcy filed against it, been adjudicated
a bankrupt, or filed a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws or any other laws of the United States or any
other jurisdiction.
(d) The Company is in compliance with all obligations, agreements and
conditions contained in any evidence of indebtedness or any loan agreement or
other contract or agreement (whether or not relating to indebtedness) to which
the Company is a party or is subject (collectively, the "Obligations"), the lack
of compliance with which could afford to any person the right to (i) accelerate
any indebtedness or (ii) terminate any right or agreement of the Company, the
termination of which would have a Material Adverse Effect. To the best of the
Company's knowledge and belief, all other parties to such Obligations are in
compliance with the terms and conditions of such Obligations.
3.14 Registration Rights. Except as provided in the Company's Public
Filings or in Section 3.14 of the Disclosure Schedule, the Company has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.
3.15 Title to Property and Assets. The Company has good, legal and
merchantable title to all of its assets, including all properties and assets
reflected on its September 30, 1998 Balance Sheet, free and clear of all liens,
claims, restrictions or encumbrances, except those assets disposed of since the
date of such Balance Sheet in the ordinary course of business, none of which
either alone or in the aggregate are material, either in nature or amount, to
the business of the Company. All machinery and equipment included in such
properties which are material to the business of the Company are in good
condition and repair, and each lease of real or personal property to which the
Company is a party is fully effective, affords the Company peaceful and
undisturbed possession of the subject matter of the lease, and is free of any
liens, claims, restrictions or encumbrances. Each such lease constitutes a valid
and binding obligation of, and is enforceable in accordance with its terms
against, the respective parties thereto. Except as provided in the 10-K or in
Section 3.15 of the Disclosure Schedule, with respect to the property and assets
it leases, the Company is in all respects in compliance with such leases, has
not received notice of any allegations that it is in default thereunder in any
respect and holds a valid leasehold interest free of any Encumbrances.
3.16 Financial Statements. The Company has delivered to the Investor (i)
the 10-K containing its audited financial statements (Balance Sheets, Statements
of
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Operations, Statements of Shareholder's Equity and Statements of Cash Flow) at
December 31, 1997 and 1996 and for the fiscal years then ended (the "Audited
Financial Statements"); and (ii) the 10-Qs containing unaudited financial
statements (collectively, the "Financial Statements"). The Financial Statements
have been prepared in accordance with United States generally accepted
accounting principles and practices as in effect from time to time and applied
on a consistent basis throughout the periods indicated ("GAAP") and fairly
present the financial condition and consistent operating results of the Company
as of the dates, and for the periods, indicated therein. Since September 30,
1998, the Company has conducted its business in the ordinary course, and there
has not been any material adverse change in the financial condition or
operations of the Company. Except as set forth in the Financial Statements and
in the material agreements listed in Section 3.16 of the Disclosure Schedule,
the Company has no material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to September
30, 1998 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under GAAP to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and consistently applies and will continue to maintain and
consistently apply a standard system of accounting established and administered
in accordance with GAAP.
Since October 25, 1996, the Company has filed all required reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) with the SEC ("Company SEC Documents").
As of their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and no Company SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in Company SEC Documents complied
as to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.17 Employee Benefit Plans. Except as set forth in Section 3.17 of the
Disclosure Schedule, there are no "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA") maintained by the Company or any stock purchase plan, stock option
plan, fringe benefit plan, bonus plan or any other deferred compensation
agreement, plan, practice or pending
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arrangement sponsored, maintained or to which contributions are made by the
Company or any Subsidiary by or on behalf of current or former employees of the
Company, their dependents or any other party.
3.18 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports as required, and within the time prescribed by law,
including without limitation, all federal, state and local income, excise or
franchise tax returns, real estate and personal property tax returns, sales and
use tax returns, payroll tax returns and other tax returns or reports required
to be filed by it. These returns and reports are true and correct in all
material respects. The Company has paid or made provision for the payment of all
accrued and unpaid taxes and other charges to which the Company is subject and
which are not currently due and payable. The federal income tax returns of the
Company have never been audited by the Internal Revenue Service, and the Company
has not agreed to an extension of the statute of limitations with respect to any
of its tax years. To the best of the Company's knowledge, neither the Internal
Revenue Service nor any other taxing authority is now asserting, nor is
threatening to assert, against the Company any deficiency or claim for
additional taxes or interest thereon or penalties in connection therewith; nor
does such deficiency or claim or basis for such deficiency or claim exist. The
Company has not made any elections pursuant to the Code (other than elections
which relate solely to methods of accounting, depreciation or amortization)
which would have a Material Adverse Effect.
3.19 Insurance. The Company has in full force and effect fire, casualty and
liability insurance policies, with coverage, in the case of property insurance,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed, and in the case of
casualty and liability insurance, in amounts customary and adequate for
businesses similar to the business of the Company.
3.20 Labor Agreements and Actions. The Company does not have any collective
bargaining agreements covering any of its employees, nor is the Company bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a Material Adverse Effect (as the Company's business is presently conducted and
as it is proposed to be conducted), nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that any
officer or key employee, or that any group of key employees, intend to terminate
their employment with the Company, nor does the Company have a present intention
to terminate the employment of any of the foregoing.
3.21 Real Property Holding Corporation. The Company is not, and has not
been at any time, a United States real property holding corporation as defined
in Section 897 of the Code.
3.22 Offering. Subject to the accuracy of the Investor's representations
set forth in Section 4 of this Agreement, the offer, sale and issuance of the
Shares to be issued in
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conformity with the terms of this Agreement constitute transactions which are:
(i) in full compliance with all applicable laws of the United States; and (ii)
exempt from the registration requirements of the Securities Act and from all
applicable state registration or qualification requirements, other than those
with which the Company has complied or will comply prior to the Closing.
3.23 Environmental Matters.
(a) The Company is not in violation of any Environmental Law (as
hereinafter defined) and, to its knowledge, no material expenditures are or will
be required in order to comply with any Environmental Law. As used in this
Agreement, "Environmental Law" shall mean any applicable federal, state and
local law, ordinance, rule or regulation that regulates, fixes liability for, or
otherwise relates to, the handling, use (including use in industrial processes,
in construction, as building materials, or otherwise), treatment, storage and
disposal of hazardous and toxic wastes and substances, and to the discharge,
leakage, presence, migration, actual Release (as hereinafter defined) or
threatened Release (whether by disposal, a discharge into any water source or
system or into the air, or otherwise) of any pollutant or effluent.
(b) The Company has not used, generated, manufactured, refined,
treated, transported, stored, handled, disposed, transferred, produced,
processed or released (hereinafter together defined as "Release") any Hazardous
Materials (as hereinafter defined) on, from or affecting any Property (as
hereinafter defined) in any manner or by any means in violation of any
Environmental Laws and to the best of the Company's knowledge and belief after
due investigation, there is no threat of such Release. As used herein, the term
"Property" shall include, without limitation, land, buildings and laboratory
facilities owned or leased by the Company or as to which the Company now has any
duties, responsibilities (for cleanup, remedy or otherwise) or liabilities under
any Environmental Laws, or as to which the Company may have such duties,
responsibilities or liabilities because of past acts or omissions of the Company
or its predecessors, if any, or because the Company or its predecessors, if any,
in the past was such an owner or operator of, or bore some other relationship
with, such land, buildings or laboratory facilities. The term "Hazardous
Materials" shall include, without limitation, any flammable explosives,
petroleum products, petroleum by-products, radioactive materials, hazardous
wastes, hazardous substances, toxic substances or related materials as defined
by Environmental Laws.
(c) The Company has not received written notice that the Company is a
party potentially responsible for costs incurred at a cleanup site or corrective
action under any Environmental Laws. The Company has not received any written
requests for information in connection with any inquiry by any Governmental
Authority (as hereinafter defined) concerning disposal sites or other
environmental matters. As used herein, "Governmental Authority" shall mean any
nation or government, any federal, state, municipal, local, provincial, regional
or other political subdivision thereof, and any entity or person exercising
executive, legislative, judicial regulatory or administrative functions of or
pertaining to government.
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(d) The shareholders of the Company have had no control over, or
authority with respect to, the waste disposal operations of the Company.
3.24 Securities Laws. Neither the Company nor anyone acting on its behalf
has offered securities of the Company for sale to, or solicited any offers to
buy the same from, or sold securities of the Company to, any Person, in any case
so as to subject the Company, its promoter, directors or officers to any
liability under the Securities Act, the Securities Exchange Act, or any state
securities or blue sky law (collectively, the "Securities Laws"), or any other
applicable laws.
3.25 Licenses and Other Rights; Compliance with Laws. The Company has all
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its business as presently
conducted and is in compliance in all material respects thereunder. The Company
and each Subsidiary are in compliance in all material respects with all laws and
governmental rules and regulations applicable to their businesses, properties
and assets, and to the products and services sold by them, including, without
limitation, all such rules, laws and regulations relating to fair employment
practices, occupational safety and health and public safety, except where the
failure to comply would not have a Material Adverse Effect. The Company is in
compliance with the applicable provisions, if any, of the Clinical Laboratories
Improvement Act of 1967, as amended.
3.26 Reliance. The Company understands that the foregoing representations
and warranties shall be deemed material and to have been relied upon by the
Investor. No representation or warranty by the Company in this Agreement, and no
written statement contained in any document, certificate or other writing
delivered by the Company to the Investor contains any untrue statement of
material fact or omits to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
4. Representations and Warranties of the Investor. Novartis hereby represents
and warrants the following:
4.1 Organization, Good Standing, Authorization, Governmental Consents and
Compliance with Other Instruments. The Investor is a corporation duly organized,
validly existing and in good standing under the laws of Switzerland. The
Investor has all requisite corporate power and authority to carry out the
transactions contemplated hereunder. All corporate action on the part of the
Investor necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of the Investor hereunder has
been taken or will be taken prior to the Closing. This Agreement has been duly
executed and delivered by the Investor and constitutes a valid and legally
binding obligation of the Investor, enforceable in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and similar laws
affecting creditor rights. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Investor is
required in connection with the consummation of the transactions contemplated by
this Agreement, except as may be required by the HSR Act. The execution,
delivery and performance of this Agreement and
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the consummation of the transactions contemplated hereby will not (a) violate
any provision of law, statute, ordinance, rule or regulation or any ruling,
writ, order, judgment or decree of any court, administrative agency or other
governmental body, the violation of which would have a material adverse effect
on the consummation of the transactions contemplated hereby, or (b) result in
any violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either a default under any provision of the
Investor's corporate charter or By-laws or any instrument, judgment, order,
writ, decree or contract to which the Investor is a party or by which it is
bound.
4.2 Purchase Entirely for Own Account. By the Investor's execution of this
Agreement, the Investor hereby confirms that the Shares will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and the Investor
has no present intention of selling, granting any participation, or otherwise
distributing the Shares. By executing this Agreement, the Investor further
represents that the Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Shares.
4.3 Investment Experience and Accredited Investor Status. The Investor
either (i) is an accredited investor (as defined in Regulation D promulgated
under the Securities Act) or (ii) is not a United States Person as that term is
defined in Regulation S of the Securities Act, as amended and is not acquiring
the Shares for the account or benefit of any United States Person. The Investor
is an investor in securities of companies in the development stage and
acknowledges that it is able to fend for itself, and bear the economic risk of
its investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares hereunder.
4.4 Restricted Securities. The Investor understands that the Shares, when
issued, will be restricted securities under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, the Investor represents that
it is familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
4.5 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Investor further represents, warrants and
agrees that it will not make any disposition of all or any portion of the
Shares, except to an Affiliate, unless:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) The disposition is made pursuant to Rule 144 or similar provisions
of federal securities laws as in effect from time to time; or
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(c) (i) the Investor shall have notified the Company of the proposed
disposition; and (ii) if requested by the Company, the Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such Shares
under the Securities Act.
4.6 Legends. It is understood that the certificates evidencing the Shares
will bear the following legends:
(a) These securities have not been registered under the Securities Act
of 1933. They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel reasonably satisfactory to the Company
that such registration is not required or unless sold pursuant to Rule 144 of
such Act.
(b) Any legend required by applicable state securities laws.
5. Conditions to Closing of Investor. The Investor's obligation to purchase the
Shares at the Closing is subject to the fulfillment as of the Closing Date of
the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
except that:
(a) there shall be delivered at the Closing a certificate, signed by an
officer of the Company, which contains the representation and warranty set forth
in Section 3.2(a) but substituting the then current numbers of shares for the
numbers of shares set forth in Section 3.2(a); and
(b) there shall be delivered at the Closing a certificate, signed by an
officer of the Company, which contains the representation and warranty set forth
in Section 3.16, but substituting the most recent financial statements then
available (which shall have been delivered to the Investor at least three
business days prior to such Closing) for the financial statements referred to in
Section 3.16.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects. All proceedings
to have been taken and all waivers and consents to be obtained in connection
with the transactions contemplated by this Agreement shall have been taken or
obtained, and all documents incidental thereto shall be satisfactory to the
Investor and its counsel, and the Investor and its counsel shall have received
copies (executed or certified, as may be appropriate) of all documents which the
Investor or its counsel may reasonably have requested in connection with such
transactions.
5.3 Compliance Certificate. The Company shall have delivered to the
Investor a certificate of the Company in the form of Exhibit B hereto, executed
by the
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President and Chief Executive Officer of the Company, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Legal Opinion. All legal matters incident to the purchase of the Shares
shall be satisfactory to the Investor's counsel and the Investor shall have
received from Bingham Dana LLP, counsel for the Company, such firm's opinion
addressed to the Investor and dated the date of the Closing, in the form of
Exhibit C, hereto.
5.5 Certification of Resolutions and Officers. The Company shall have
delivered to the Investor a certificate or certificates, dated the date of the
Closing, of the Secretary of the Corporation certifying as to (a) the
resolutions of the Company's Board of Directors (and the vote of the
shareholders, if necessary) authorizing the execution and delivery of this
Agreement, the issuance to the Investor of the Shares, the execution and
delivery of such other documents and instruments as may be required by this
Agreement, and the consummation of the transactions contemplated hereby, and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of said date, (b) the name and the signature of the officers of
the Company authorized to sign, as appropriate, this Agreement and the other
documents and certificates to be delivered pursuant to this Agreement by either
the Company or any of its officers, and (c) a specimen certificate representing
the Shares.
5.6 Organizational Documents. The Company shall have delivered to the
Investor a copy of (i) the certificates of incorporation for the Company,
certified by the secretary of state of the jurisdiction in which each such
entity is incorporated or organized, as of a date not earlier than five business
days prior to the Closing Date and accompanied by a certificate of the Secretary
or Assistant Secretary of each such entity, dated as of the Closing Date,
stating that no amendments have been made to such certificate of incorporation
(or similar organizational documents) since such date, and (ii) the By-laws (or
similar organizational documents) of the Company, certified by the Secretary or
Assistant Secretary of each such entity.
5.7 Certification of No Material Adverse Change. The Company shall have
delivered to the Investor a certificate, dated the date of the Closing, of the
Chief Financial Officer of the Corporation, certifying that since September 30,
1998, there has not been any material adverse change in the financial condition
or operations of the Company, and that except to the extent reflected in the
Financial Statements referred to in Section 3.16 (or in such later audited
financial statements, as the case may be), and except for liabilities arising in
the ordinary course of business (none of which liabilities either alone or in
the aggregate are material either in nature or amount to the business of the
Company), the Company has no material accrued or contingent liabilities which
are not specifically described in such Financial Statements.
5.8 Good Standing Certificates. At the Closing, the Company shall have
delivered to the Investor good standing certificates issued with respect to the
Company issued by the Secretary of State (or other applicable Governmental
Authority) of the relevant entity's state of incorporation or organization.
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6. Conditions to Closing of the Company. The Company's obligation to sell the
Shares at the Closing is subject to the fulfillment as of the date of the
following condition:
6.1 Representations and Warranties Correct. The representations and
warranties made by the Investor in Section 4 hereof shall be true and correct in
all material respects as of the date of the Closing with the same force and
effect of though such representations and warranties had been made on such Date.
7. Mutual Conditions of Closing. The obligations of each of the Investor and the
Company to consummate the Closing are subject to the fulfillment as of the
Closing Date of the following conditions:
7.1 Qualifications. All consents, permits, approvals, qualifications and
registrations to be obtained or effected with any governmental authority,
including, without limitation, necessary Blue Sky law permits and qualifications
required by any state for the offer and sale to the Investor of the Shares,
shall have been obtained or effected, and any filings required under the HSR Act
shall have been made and the required waiting period shall have elapsed.
7.2 Absence of Litigation. There shall be no injunction, actions, suits,
proceeding or investigations pending or currently threatened against the Company
or the Investor which questions the validity of this Agreement or the right of
the Company or the Investor to enter into it, or to consummate the transactions
contemplated hereby.
7.3 Collaborative Research and Development Agreement. The Company and the
Investor shall have entered into the Collaborative Research and Development
Agreement in the form of Exhibit D hereto, (the "Development Agreement").
8. Additional Covenants and Agreements.
8.1 Inspection of Books and Records. The Company shall permit the Investor
from time to time, at the Investor's expense, to visit and inspect the Company's
properties and to discuss the Company's affairs, finances and accounts with its
officers, all at such mutually agreed upon times as may be requested by the
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 8.1 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
8.2 HSR Filing. The parties shall each take any and all actions reasonably
necessary to effect any appropriate filings required under the HSR Act as
promptly as possible.
8.3 Listing Requirements. The Company shall take all actions reasonably
necessary to remain listed on the NASDAQ or the New York Stock Exchange.
9. Registration Rights; Compliance with the Act. The Company covenants and
agrees as follows:
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9.1 Definitions. For purposes of this Section 9:
(a) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Shares and (2) any
Common Stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for, or in replacement of, such Shares, excluding in
all cases, however, (i) any Registrable Securities after they have been sold in
a transaction in which registration rights are not assigned, (ii) any
Registrable Securities sold (other than any sale to an Affiliate of the
Investor) to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction or (iii) any Shares eligible for
sale pursuant to Rule 144(k) under the Securities Act.
(c) The term "Holder" means any person owning or having the right to
registration of Registrable Securities hereunder; and
(d) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
9.2 Form S-3 Registration. At any time after six months after the Closing
Date, if the registration of Registrable Securities under the Securities Act can
be effected on Form S-3 (or any successor short-form registration promulgated by
the SEC), subject to the provisions of this Section 9.2, the Company will, upon
written demand of the Investor, promptly file with the SEC a registration under
the Securities Act on Form S-3, including a Form S-3 shelf registration (each an
"Initial Shelf Registration"), of all or such portion of the Registrable
Securities as the Investor (or other Holder(s)) shall specify by written notice
given to the Company; provided, however, that the market value of the
Registrable Securities to be included in any such registration shall be
estimated to be at least $1,000,000 at the time of filing of such registration
statement, and provided further that the Company shall not be required to effect
more than three such registrations pursuant to this Section 9.2. The Company
shall use commercially reasonable efforts to cause each Shelf Registration to be
declared effective under the Securities Act as soon as practicable after filing
(the "Effectiveness Date") and shall keep each Initial Shelf Registration
continuously effective under the Securities Act during the period (the
"Effectiveness Period") ending upon the earlier to occur of (i) the sale of all
Registrable Securities covered by such Initial Shelf Registration or any
Subsequent Shelf Registration (as defined herein) in the manner set forth and as
contemplated in such Initial Shelf Registration, (ii) the Investor's ability to
sell all Registrable Securities cover by such Initial Shelf Registration,
without volume limitation, under Rule 144(k) of the Securities Act and (iii) two
years from the Effectiveness Date for such Initial Shelf Registration.
Thereafter, the Company shall be entitled to withdraw the Initial Shelf
Registration and the Holders shall have no further right to offer or sell any of
the Registrable Shares pursuant to such Shelf Registration Statement (or any
prospectus relating thereto). In addition, the Company shall not be
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obligated to provide the Investor with an underwritten public offering of the
Registrable Shares.
(a) In case the Company shall receive from the Investor a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to shares of Registrable
Securities the reasonably anticipated aggregate price to the public of which,
net of underwriting discounts and commissions, would exceed $1,000,000, the
Company will:
(i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all Holders;
(ii) use its best efforts to effect such registration on or prior
to the second anniversary of the date of this Agreement;
(iii) as soon as practicable, effect all such qualifications and
compliance as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 15 days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 9.2: (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters discounts or commissions)
of less than $1,000,000; or (3) if the Company shall furnish to the Holders a
certificate signed by the President and Chef Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 90 days after receipt of the request of
the Holder or Holders under this Section 9.2; provided, however, that the
Company shall have this right to defer the filing of the Form S-3 registration
statement only once in connection with any written request of the Holder or
Holders; and
(iv) All expenses incurred in connection with the registrations,
qualifications and compliance requested pursuant to Section 9.2, (exclusive of
underwriting discounts and commissions and any fees and expenses of a special
counsel to a Holder) shall be paid by the Company.
(v) Notwithstanding anything in this Agreement to the contrary, if
the Company shall furnish to the Holders a certificate signed by the President
or Chief Executive Officer of the Company stating that the Board of Directors of
the Company has made the good faith determination (A) that continued use by the
Holders of the Registration Statement for purposes of effecting offers or sales
of Registrable Shares pursuant thereto would require, under the Securities Act,
premature disclosure in the
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Registration Statement (or the prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or any
proposed material transaction involving the Company, (B) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction or would make the successful
consummation by the Company of any such material transaction significantly less
likely and (C) that it is therefore essential to suspend the use by the
Investors of such Registration Statement (and the prospectus relating thereto)
for purposes of effecting offers or sales of Registrable Shares pursuant
thereto, then the right of the Holders to use the Registration Statement (and
the prospectus relating thereto) for purposes of effecting offers or sales of
Registrable Shares pursuant thereto shall be suspended for a period (the
"Suspension Period") of not more than 90 days after delivery by the Company of
the certificate referred to above in this Section 9.2(v). During the Suspension
Period, none of the Holders shall offer or sell any Registrable Shares pursuant
to or in reliance upon the Registration Statement (or the prospectus relating
thereto). Notwithstanding the foregoing, the Company shall not be entitled to
suspend the right of Holders to use the Registration Statement (and the
prospectus relating thereto) for more than 90 days in the aggregate in any
consecutive twelve-month period during the term of this Agreement.
(b) If any Initial Shelf Registration or any Subsequent Shelf
Registration ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all of the securities
registered thereunder), the Company shall use commercially reasonable efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
such Initial Shelf Registration in a manner to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities covered by such Initial Shelf Registration (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the Company shall
use commercially reasonable efforts to cause the Subsequent Shelf Registration
to be declared effective under the Securities Act as soon as practicable after
such filing and to keep such Registration Statement continuously effective for
the remainder of the Effectiveness Period. As used herein, the term "Shelf
Registration" means any Initial Shelf Registration and any Subsequent Shelf
Registration.
9.3 Company Registration. If at any time (but without any obligation
hereunder to do so) the Company proposes to register (including for this purpose
a registration effected by the Company for shareholders other than the
Holder(s)) any of its stock or other securities under the Securities Act in
connection with the public offering of such securities (other than (i) a
registration relating solely to the sale of securities to current or former
employees, officers, advisors, consultants or directors of the Company or any
subsidiary of the Company pursuant to a stock purchase plan or stock option or
stock awards approved by the Board of Directors of the Company, (ii) a
registration on Form S-4 or any similar successor form, (iii) a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or (iv) a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt securities
which are also being registered), the Company shall, at such time, promptly give
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each Holder written notice of such registration. Upon the written request of
each Holder given within twenty (20) days after giving of such notice by the
Company in accordance with Section 10.10, the Company shall, subject to the
provisions of Section 9.4, cause to be registered under the Securities Act the
Registrable Securities that each such Holder has requested to be registered. All
expenses incurred in connection with the inclusion of the Holder's Registrable
Securities in the Company's underwritten offering pursuant to this Section 9.3
shall be borne by the Company. The Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 9.3 if,
(i) a registration statement on Form S-3 covering the Registrable Securities is
in effect, (ii) the managing underwriter advises that, in its sole discretion,
inclusion of the Registrable Securities would adversely affect the marketing of
or the price to be received by the Company in the offering, or (iii) at the time
such registration would otherwise be required, the Registrable Securities
requested to be registered may then be sold pursuant to Rule 144(k) of the
Securities Act; provided, however, that if the managing underwriter determines
that the total amount of Registrable Securities requested by the Holders to be
included in such offering exceeds the amount of securities of such Holders that
the managing underwriter determines in its sole discretion is compatible with
the success of the offering, then, notwithstanding anything in Section 9 to the
contrary, the Company shall only be required to include in such registration
that number of shares of Common Stock which the Company is so advised can be
sold in such offering, in accordance with the following priorities, (i) first,
the number of shares of Common Stock proposed to be included in such
registration for the account of the Company (if such registration is a public
offering for the benefit of a Company) or any stockholders of the Company (other
than the Investor) that have exercised demand registration rights (if such
registration is a demand registration), in accordance with the priorities, if
any, then existing among the Company or such stockholders of the Company with
registration rights (other than the Investors), and (ii) second, the shares of
Common Stock requested to be included in such registration by all other
stockholders of the Company who have piggyback registration rights (including,
without limitation, the Investors), pro rata among such other stockholders
(including, without limitation, the Investors) on the basis of the number of
shares of Common Stock that each of them requested to be included in such
registration.
9.4 Obligations of the Company. Whenever required under this Section 9 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities sought to be included therein and use its best
efforts to cause such registration statement to become effective as promptly as
practicable.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities
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Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement. In connection with any offering involving an underwriting of
shares, the Company shall not be required under Section 9 hereof or otherwise to
include the Registrable Shares of any Investor therein unless such Investor
accepts and agrees to the terms of the underwriting, which shall be reasonable
and customary, as agreed upon between the Company and the underwriters selected
by the Company.
(f) Promptly notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement or
any offering memorandum or other offering document includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
9.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 9 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. The Company shall afford the Investor with the opportunity to
participate in the drafting of the registration statement and the documentation
relating thereto.
9.6 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 9:
(a) The Company will indemnify and hold harmless each Holder
registering Registrable Securities for resale, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act, against any and all losses, claims, damages, or liabilities (joint
or several) to which they may become subject under any Securities Laws
including, without limitation, the Securities Act, or any other statute or
common law of the United States of America or any other country or political
subdivision thereof, or otherwise, including the amount paid in settlement of
any litigation commenced or threatened (including any amounts paid pursuant to
or in
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settlement of claims made under the indemnification or contribution provisions
of any underwriting or similar agreement entered into by the Investor in
connection with any offering or sale of securities covered by this Agreement),
and shall promptly reimburse them, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or in any offering memorandum or other offering document
relating to the offering and sale of such securities, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Securities Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Securities Exchange Act or any state
Securities Law; or other applicable laws of any jurisdiction relating to any
actual or alleged action or inaction required of the Company in connection with
such offering; provided, however, the Company shall not be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Investor, provided, however, that the indemnity
agreement contained in this Section 9.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
(b) Each selling Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under
liabilities (or actions in respect thereto) which arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 9.6(b) in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 9.6(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without consent of the Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
this subsection 9.6(b) exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under this Section
9.6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying
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party under this Section 9.6, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 9.6, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 9.6.
(d) The obligations of the Company and Holders under this Section 9.6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 9 and otherwise.
(e) Notwithstanding anything in this Section 9 to the contrary, if, in
connection with an underwritten public offering, the Company, the Investor and
the underwriters enter into an underwriting or purchase agreement relating to
such offering which contains provisions covering indemnification among the
parties, then the indemnification provision of this Section 9.6 shall be deemed
inoperative for purposes of such offering.
9.7 Reports Under Securities Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to use its best efforts to:
(a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act; and
(b) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144, the Securities
Act and the Securities Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC (exclusive of Rule 144A) which permits the
selling of any such securities without registration or pursuant to such form.
9.8 Amendment of Registration Rights. Notwithstanding the extent to which
any provision of Section 9 may be amended or waived with respect to any other
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Holder, no provision of Section 9 may be amended or waived with respect to the
Investor, without the express written consent of the Investor.
9.9 Transfer of Registration Rights. None of the rights of the Investor
under this Agreement shall be transferred or assigned to any person unless (i)
such person is a Qualifying Holder (as defined below), and (ii) such person
agrees to become a party to, and bound by, all of the terms and conditions of,
this Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit E hereto. For purposes of this Section
9, the term "Qualifying Holder" shall mean, with respect to the Investor, (i)
any corporation, partnership, controlling, controlled by, or under common
control with, the Investor, or (iii) any other direct transferee from the
Investor of at least 25% of the Shares. None of the rights of any Investor under
this Agreement shall be transferred or assigned to any Person (other than an
Affiliate) that acquires Registrable Shares in the event that and to the extent
that such Person is eligible to resell such Registrable Shares pursuant to Rule
144 of the Securities Act without limitation as to volume within 90 days or may
otherwise resell such Registrable Shares pursuant to an exemption from the
registration provisions of the Securities Act.
9.10 Lock-Up Agreement. Each Holder which holds or owns (at the time of the
written request of the Company or managing underwriter referred to below in this
Section 9.11 or at any time during the 90 day period commencing on the effective
date of the registration statement relating to such underwritten public offering
of the Company's securities) of record or beneficially (within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) shares of Common Stock of the Company hereby agrees that, at the
written request of the Company or any managing underwriter of any underwritten
public offering of securities of the Company, such Investor shall not, without
the prior written consent of the Company or such managing underwriter, sell,
make any short sale of, loan, grant any option for the purchase of, pledge,
encumber, or otherwise dispose of, or exercise any registration rights (other
than "piggy-back" registration rights pursuant to Section 9.3) with respect to,
any shares of Common Stock during the 90 day period commencing on the effective
date of the registration statement relating to such underwritten public offering
of the Company's securities. In order to enforce the foregoing covenant, the
Company may impose stop transfer instructions with respect to the shares of
Common Stock of each Investor (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such reasonable
and customary period, and the Investors agree to enter into a customary
agreement with the underwriters of such offering reflecting the lock-up
agreement set forth herein.
10. Miscellaneous.
10.1 Survival of Warranties. The warranties and representations of the
Company and the Investor contained in this Agreement (except for those contained
in Section 3.22 but including those contained in the opinion and certificates
delivered pursuant to Section 5 hereof) shall survive until the second
anniversary of the Closing Date. The representations and warranties of the
Company set forth in Section 3.22 shall survive indefinitely until, by their
respective terms, they are no longer operative.
22
<PAGE>
10.2 Indemnification. The Company shall indemnify, defend and hold the
Investor and the Investor's directors, officers, employees, agents and
affiliates harmless against any and all liabilities, losses, cost or damage,
together with all reasonable costs and expenses related thereto (including legal
and accounting fees and expenses), arising from, relating to, or connected with
the untruth, inaccuracy or breach of any statements, representations, warranties
or covenants of the Company contained herein, including, but not limited to, all
statements, representations, warranties or covenants concerning environmental
matters. The foregoing indemnification shall survive the termination of this
Agreement for any reason; provided that the indemnification provisions with
respect to statements, representations and warranties shall only survive until
the third anniversary of the Closing Date.
10.3 Remedies. In case any one or more of the covenants or agreements set
forth in this Agreement shall have been breached by any party hereto, the party
or parties entitled to the benefit of such covenants or agreements may proceed
to protect and enforce their rights either by suit in equity or action at law,
including, but not limited to, an action for damages as a result of any such
breach or an action for specific performance of any such covenant or agreement
contained in this Agreement. The rights, powers and remedies of the parties
under this Agreement are cumulative and not exclusive of any other right, power
or remedy which such parties may have under any other agreement or law. No
single or partial assertion or exercise of any right, power or remedy of a party
hereunder shall preclude any other or further assertion or exercise thereof.
10.4 Successors and Assigns. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. This
Agreement and the rights and duties of the Company set forth herein may be
freely assigned, in whole or in part, upon the written consent of the Investor,
which consent may not be unreasonably withheld. Notwithstanding the foregoing
sentence, the Company may assign this Agreement, and the rights and the duties
of the Company set forth herein, to an entity or person which purchases all or
substantially all of its assets or voting securities, so long as the successor
agrees in writing to be bound by all of the terms of this Agreement.
10.5 Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings, whether
written or oral, with respect thereto; provided, however, that this Agreement is
not intended to supersede the Development Agreement of even date herewith
between the Company and the Investor.
10.6 Governing Law and Consent to Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of New York (without
regard to the conflict of law principles thereof). Each of the parties
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence any action, suit or proceeding relating hereto in
the United States District Court for the Southern District of New York or if
such suit, action or
23
<PAGE>
other proceeding may not be brought in such court for jurisdictional purposes,
in the Supreme Court of the State of New York.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
10.9 Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and
vice-versa.
10.10 Notices. Unless otherwise provided, all notices, requests, consents
and other communications hereunder to any party shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified or duly sent by first class registered or certified mail, or other
courier service, postage prepaid, or telecopied with a confirmation copy by
regular mail, and addressed or telecopied to the party to be notified at the
address or telecopier number indicated for such party at the address or
telecopier number, as the case may be, set forth below or such other address or
telecopier number, as the case may be, as may hereafter be designated in writing
by the addressees to the addressor listing all parties:
To the Company: Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, Massachusetts 02139
Attention: Thomas A. Shea
Fax: 617-576-0232
With a copy (which Bingham Dana, LLP
shall not constitute 150 Federal Street
notice) to: Boston, Massachusetts 02110
Attention: Julio E. Vega, Esq.
Fax: 617-951-8736
To the Investor: Novartis Pharma AG
Lichtstrasse 35
CH-4002 Basel
Switzerland
Attention: Joseph E. Mamie
Fax: 41 61 324 23 22
With a copy to: Jeff Benjamin, Esq.
Vice President and Associate General Counsel
Novartis Corporation
564 Morris Avenue
Summit, New Jersey 07901
Fax: (908)522-6799
24
<PAGE>
All such notices, requests, consents and other communications shall be
deemed to have been received: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the seventh business day
following the date of such mailing; and (c) in the case of facsimile
transmission, when confirmed by facsimile machine report.
10.11 Finder's Fee. The Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the nature
of a finder's fee (and the reasonable costs and expenses of defending against
such liability or asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless the Investor from any liability for any
commission or compensation in the nature of a finder's fee (and the reasonable
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.
10.12 Expenses. Each party shall pay its own fees and expenses with respect
to this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Articles, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
10.13 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only by the
written consent of the party to be charged.
10.14 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, in any jurisdiction, such provision shall
be ineffective, as to such jurisdiction, and the balance of the Agreement shall
be interpreted as if such provision were so excluded, without invalidating the
remaining provisions of this Agreement; and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.15 Confidentiality and Publicity. Neither the Company nor the Investor
will disclose to any person (other than its attorneys, accountants, employees,
officers, and directors) the existence or terms of this Agreement or any of the
transactions contemplated hereby without the prior written consent of the other
party, except as may, in the reasonable opinion of such party's counsel, be
required by law (in which event the disclosing party will first consult with the
other party with respect to such disclosure). If the Company is required to
provide a copy of this Agreement or any related document to any third party, the
Company shall ensure that such document is redacted, to the extent permitted by
law, to eliminate all confidential information. The Investor shall have the
right to review and approve each such document prior to its submission to a
third party. A period of ten business days will be provided for such review
unless not permitted by law, in which case the maximum period allowable up to
ten business days shall be provided. The
25
<PAGE>
Company and the Investor will consult and reach agreement with one another as to
the form and substance of any press release or any other public disclosure of
the existence or terms of this Agreement or the transactions contemplated hereby
prior to issuing any such press release or making any such public disclosure.
10.16 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate" means, with respect to any specified Person, any other
Person that directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such specified Person.
"Aggregate Purchase Price" has the meaning specified in Section 1.1.
"Audited Financial Statements" has the meaning specified in Section
3.16.
"Certificate" has the meaning specified in Section 3.1.
"Closing" has the meaning specified in Section 1.3.
"Closing Date" has the meaning specified in Section 2.1.
"Code" has the meaning specified in Section 3.17.
"Common Stock" has the meaning specified in Section 1.1.
"Company" has the meaning specified in the Introduction to this
Agreement.
"Company Public Filings" has the meaning specified in Section 3.2(b).
"Company SEC documents" has the meaning specified in Section 3.16.
"Development Agreement" has the meaning specified in Section 7.3.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Exhibit A, dated as of the date hereof, and forming a part of this Agreement.
"Effectiveness Date" has the meaning specified in Section 9.2.
"Effectiveness Period" has the meaning specified in Section 9.2.
"Encumbrance(s)" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environmental Law" has the meaning specified in Section 3.23(a).
26
<PAGE>
"ERISA" has the meaning specified in Section 3.17.
"Financial Statements" has the meaning specified in Section 3.16.
"Form S-3" has the meaning specified in Section 9.1(d).
"GAAP" has the meaning specified in Section 3.16.
"Governmental Authority" has the meaning specified in Section 3.23(c).
"Hazardous Materials" has the meaning specified in Section 3.23(b).
"Holder" has the meaning specified in Section 9.1(c).
"HSR Act" has the meaning specified in Section 3.8.
"Initial Shelf Registration" has the meaning specified in Section 9.2.
"Intellectual Property" has the meaning specified in Section 3.11.
"Investor" has the meaning specified in the Introduction to this
Agreement.
"Material Adverse Effect" has the meaning specified in Section 3.1.
"Novartis" has the meaning specified in the Introduction to this
Agreement.
"Obligations" has the meaning specified in Section 3.13(d).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act.
"Property" has the meaning specified in Section 3.23(b).
"Purchase Price" has the meaning specified in Section 1.1.
"Qualifying Holder" has the meaning specified in Section 9.9.
"register, registered and registration" have the meaning specified in
Section 9.1(a).
"Release" has the meaning specified in Section 3.23(b).
"Savings Plan" has the meaning specified in Section 3.17.
"SEC" shall mean the Securities and Exchange Commission.
27
<PAGE>
"Securities Act" has the meaning specified in Section 3.2(b).
"Securities Exchange Act" has the meaning specified in Section 3.16.
"Securities Laws" has the meaning specified in Section 3.24.
"Shares" has the meaning specified in Section 1.2.
"Share Price" has the meaning specified in Section 1.2.
"Shelf Registration" has the meaning specified in Section 9.2(b).
"Subsequent Shelf Registration" has the meaning specified in Section
9.2(b).
"Violation" has the meaning specified in Section 9.6(a).
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
NOVARTIS PHARMA AG
By: /s/ J. Mamie
-----------------------------
Name: J. Mamie
Title: Pharma Finance
By: /s/ Dr. A. Egloff
-----------------------------
Name: Dr. A. Egloff
Title: Senior Legal Counsel
CUBIST PHARMACEUTICALS, INC.
By: /s/ Scott M. Rocklage
-----------------------------
Name: Scott M. Rocklage, Ph.D
Title: President & CEO
29
<PAGE>
Exhibit E
---------
Instrument of Adherence
-----------------------
Reference is made to that certain Stock Purchase Agreement dated as of
February __, 1999, a copy of which is attached hereto (as amended and in effect
from time to time, the "Stock Purchase Agreement"), among CUBIST
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and Novartis
Pharma AG, a corporation organized under the laws of Switzerland (the
"Investor"). Capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Stock Purchase Agreement.
The undersigned, ___________________, in connection with its purchase of
_______ shares of Common Stock (the "Acquired Securities"), hereby agrees that,
(i) the undersigned will become [a Holder/an Investor] party to the Stock
Purchase Agreement and will be entitled to all of the benefits under, and
subject to all of the obligations, restrictions and limitations set forth in
Section 9 of the Stock Purchase Agreement that are applicable to [the Investor/a
Holder], and (ii) all of the Acquired Securities will be entitled to all of the
benefits, and subject to all of the obligations, restrictions, limitations,
provisions and conditions, under Section 9 of the Stock Purchase Agreement. This
Instrument of Adherence shall take effect and shall become a part of the Stock
Purchase Agreement immediately upon execution.
Executed as of the date set forth below under the domestic substantive laws
of the State of New York without giving effect to any choice or conflict of law
provision or rule that would cause the application of the domestic substantive
laws of any other state.
Signature: _________________________
Address: _________________________
_________________________
_________________________
Date: ______________________________
Accepted:
CUBIST PHARMACEUTICALS, INC.
By: __________________________________________
Name:
Title:
Date:_____________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000912183
<NAME> CUBIST PHARMACEUTICALS, INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,776,803
<SECURITIES> 10,289,311
<RECEIVABLES> 354,375
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,768,093
<PP&E> 7,841,191
<DEPRECIATION> (4,205,410)
<TOTAL-ASSETS> 23,361,957
<CURRENT-LIABILITIES> 2,277,739
<BONDS> 0
0
0
<COMMON> 17,516
<OTHER-SE> 19,840,278
<TOTAL-LIABILITY-AND-EQUITY> 23,361,957
<SALES> 0
<TOTAL-REVENUES> 604,375
<CGS> 0
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<OTHER-EXPENSES> 5,206,435
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (163,657)
<INCOME-PRETAX> (4,438,403)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,438,403)
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<EXTRAORDINARY> 0
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<NET-INCOME> (4,438,403)
<EPS-PRIMARY> (.26)
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