Sample Business Contracts


License Agreement - Eli Lilly & Co. and Cubist Pharmaceuticals Inc.


                              License Agreement

This Agreement is made this 7th day of November, 1997 (the "Effective Date"), 
by and between ELI LILLY & COMPANY having its principal place of business at 
Lilly Corporate Center, Indianapolis, Indiana 46285 and its Affiliates 
(collectively, "ELI LILLY") and Cubist Pharmaceuticals Incorporated, a 
Delaware corporation having its principal place of business at 24 Emily 
Street, Cambridge, MA, 02139 and its Affiliates (collectively "CUBIST") as 
follows:

                                    Article 1
                                   Definitions

As used throughout this Agreement, the following terms shall have the 
meanings indicated in this Article.

"Affiliate" means any corporation or other entity which directly or 
indirectly controls, is controlled by or is under common control with a party 
to this Agreement.  A corporation or other entity shall be regarded as in 
control of another corporation or entity if it owns or directly or indirectly 
controls more than [         ]* of the outstanding voting stock or other 
ownership interest of the other corporation or entity, or if it possesses, 
directly or indirectly, the power to manage, direct or cause the direction of 
the management and policies of the corporation or other entity or the power 
to elect or appoint [         ]* or more of the members of the governing body 
of the corporation or other entity.  Any such other relationship as in fact 
results in actual control over the management, business and affairs of a 
corporation or other entity shall also be deemed to constitute control.

"Average Market Price" shall mean the average closing price for CUBIST common 
stock for twenty consecutive trading days, the last day of which is 
immediately prior to five days prior to the event that triggered such payment 
of CUBIST common stock to ELI LILLY.

"Compound" means [         ]* or a pharmaceutically acceptable salt thereof 
or a pharmaceutically acceptable formulation thereof which is in Lilly's 
possession on the Effective Date.

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*    Confidential Treatment requested:  material has been omitted and filed
     separately with the Commission.

<PAGE>

"Confidential Information" means any information and data received by a party 
from the other party, as well as the terms of this Agreement. Notwithstanding 
the foregoing, Confidential Information shall not include any part of such 
Confidential Information that: (1) is or becomes part of the public domain 
other than by unauthorized acts of the party obligated not to disclose such 
Confidential Information; (ii) can be shown by written documents to have been 
disclosed to the receiving party by a third party, provided such Confidential 
Information was not obtained by such third party directly or indirectly from 
the disclosing party with an obligation for such third party to maintain the 
confidentiality of such information; (iii) prior to disclosure under this 
Agreement, was already in the possession of the receiving party and such 
possession can be evidenced by written documents, provided such Confidential 
Information was not obtained directly or indirectly from the disclosing party 
with an obligation to maintain the confidentiality of such information, (iv) 
can be shown by written documents to have been independently developed by the 
receiving party without breach of any of the provisions of this Agreement and 
such independent development can be evidenced by written documents', or (v) 
is disclosed by the receiving party pursuant to interrogatories, requests for 
information or documents, subpoena, civil investigative demand issued by a 
court or governmental agency or as otherwise required by law, provided, 
however, that the receiving party notifies the disclosing party immediately 
upon receipt thereof, giving such disclosing party sufficient advance notice 
to permit it to seek a protective order or other similar order with respect 
to such Confidential Information and provided, further, that the receiving 
party furnishes only that portion of the Confidential Information which it is 
advised by counsel is legally required whether or not a protective order or 
other similar order is obtained by the disclosing party.

"ELI LILLY Program" shall mean a research, development and/or marketing 
project that ELI LILLY, its Affiliates, and/or a third party, pursuant to an 
Agreement with ELI LILLY, have been committing non-trivial financial and/or 
human resources to advance.

"Field" shall mean the treatment of infectious diseases except, [         ]*

"Know-How" means all information and data reasonably useful for the 
development, process development, regulatory approval, manufacture, 

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*    Confidential Treatment requested:  material has been omitted and filed
     separately with the Commission.

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<PAGE>

use, formulation or sale of Compound in the Field which (i) is in the 
possession of ELI LILLY as of the Effective Date or is created by ELI LILY 
after the Effective Date, (ii) ELI LILLY can provide using reasonble efforts 
and (iii) ELI LILLY is free to provide without obligation to any third party. 
Such Know-How may include information that is secret, whether or not 
patentable, relating to materials, methods, processes, procedures, protocols, 
techniques, formulae and data reasonably useful for the development, 
regulatory approval, manufacture or use of Compound in the Field.

"Major Market Country" shall mean the United States, Canada, Japan, the 
United Kingdom, Germany, France, Italy, Spain, Switzerland, Netherlands and 
Belgium.

"Net Sales" means the amounts received by CUBIST and/or its sublicensees on 
sales or other transfers for commercial use of Compound, and products 
incorporating Compound, to independent third parties in bona fide arms length 
transactions, less the following deductions actually allowed and taken by 
such independent third parties and not otherwise recovered by or reimbursed 
by CUBIST or its sublicensees:

     (a)  [         ]*;

     (b)  [         ]*;

     (c)  [         ]*; and

     (d)  [         ]*.

If CUBIST or its sublicensees sell or transfer Compound, or any products 
incorporating Compound for commercial use, other than (i) reasonable 
quantities of promotional samples or (ii) to an independent third party in a 
bona fide arm's length transaction, Net Sales shall be determined based upon 
the resale or other retransfer to an independent third party in an arm's 
length transaction by the entity to whom such Compound, or product, was sold 
or transferred by Cubist or its sublicensee.  If there is no such resale or 
retransfer, Net Sales shall be determined based on the average Net Sales 
price as determined in the immediately preceding royalty accounting period as 
set forth in Section 4.02.

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*    Confidential Treatment requested:  material has been omitted and filed
     separately with the Commission.

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<PAGE>

In the event Compound is sold as a component of a combination of functional 
elements, Net Sales for purposes of determining royalty payments on such 
combination shall be calculated by multiplying the Net Sales price of such 
combination by the fraction [         ]*  In the event no separate sale of 
either such above-designated Compound or such above-designated non-Compound 
portion of the combination is made during the accounting period in which the 
sale of the combination was made, Net Sales shall be calculated by 
multiplying the Net Sales price of the combination by the fraction [         ]
*.

"Patent(s)" means any of ELI LILLY's patents, pending patent applications, 
and future. patent applications, including, but not limited to, those set 
forth on Exhibit 3 attached hereto, which claim Compound, formulations of 
Compound, processes for preparing Compound or use of Compound in the Field, 
any United States or foreign counterpart patents and applications, and any 
continuing, divisional, reissue, re-examination and substitute patents and 
applications based, in whole or in part, on any of the foregoing patents and 
patent applications, together with all continuations, continuations-in-part, 
divisions, patents of addition, reissues, renewals, extensions, supplementary 
protection certificates and complementary protection certificates of any of 
the foregoing which are owned by ELI LILLY and under which ELI LILLY has 
rights to grant a sublicenses.

"Phase II Clinical Trial" shall mean clinical studies conducted in accordance 
with Good Clinical Practices ("GCPs") in a small number of healthy volunteers 
to establish efficacy and obtain a preliminary indication of the dosage of 
Compound.

"Phase III Clinical Trial" shall mean large scale clinical studies in 
patients conducted in accordance with GCPs primarily to establish safety and 
efficacy of Compound.

"Valid Claim" shall mean a claim of an issued and unexpired Patent which has 
not been withdrawn, canceled, revoked, disclaimed, or held invalid, 
unenforceable or unpatentable by a final and unappealed (within the time 
allowed for appeals) or unappealable judgment or decision of a court or other 
governmental agency of competent jurisdiction.

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*    Confidential Treatment requested:  material has been omitted and filed
     separately with the Commission.

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<PAGE>


                                    Article 2
                                  License Grant

2.00   ELI LILLY grants to CUBIST the following worldwide, exclusive licenses 
subject to the conditions set forth herein below in Section 2.01:

(a)    Under the Patents, to develop, manufacture, formulate, have 
manufactured, import, use, distribute for sale, market and sell Compound in 
the Field; and

(b)    To use the Know-How for the development, manufacture, formulation, 
use, distribution for sale, marketing, and sale of Compound consistent with 
the terms of this Agreement.

2.01   (i)  Subject to Section 2.01(ii) below, CUBIST shall have the right to 
grant sub-licenses under the Patents and Know-How, for use in the Field, 
provided that the terms and conditions of such sub-licenses are consistent 
with and no less restrictive than the terms and conditions of this Agreement, 
and any such disclosure or transfer of Compound shall be limited to use 
solely in the Field.  

       (ii) In the event that, during the term of this Agreement, CUBIST 
actively seeks to grant a sub-license to a third party for the development of 
the Compound in the Field which sublicense includes, but is not necessarily 
limited to, the right to develop and/or commercialize an oral or intravenous 
formulation of the Compound, CUBIST agrees to inform ELI LILLY of such 
determination by written notice, which notice shall include (a) a description 
in reasonable detail of the subject matter of the proposed sub-license and 
(b) the terms on which CUBIST would be willing to grant ELI LILLY such rights 
(the "Sublicense Notice").  ELI LILLY shall thereupon have a period of 
[         ]* (the "Notice Period") to either accept CUBIST's terms in writing 
or to make a written counter-proposal.  If ELI LILLY accepts CUBIST's 
proposal or makes a counter-proposal, the parties will, for a period of up to 
[         ]* from receipt by ELI LILLY of the Sublicense Notice (the 
"Negotiation Period"), seek in good faith to enter into a definitive 
agreement for such rights.  If ELI LILLY does not by the expiration of the 
Notice Period either accept CUBIST's proposal or make a counter-proposal, or 
the parties negotiate in 

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

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<PAGE>

good faith and fail to reach agreement by the expiration of the Negotiation 
Period, CUBIST shall be free to enter into a sub-license for such rights with 
a third party,[         ]*.

2.02   CUBIST shall notify ELI LILLY within [         ]* of the identity of 
each sublicensee together with a summary of the principal terms of any 
sub-license, and shall take all reasonable steps in the event of a breach of 
any sub-license by the sub-licensee to enforce the same.

2.03   CUBIST acknowledges that ELI LILLY has disclosed certain Know-How to 
CUBIST prior to the execution of this Agreement and CUBIST shall treat such 
Know-How in accordance with the terms of this Agreement.  During the term of 
this Agreement, ELI LILLY shall disclose to CUBIST such other Know-How as is 
directly related to CUBIST's activities under the license granted in Article 
2.00 and which ELI LILLY can provide to CUBIST using reasonable efforts.

2.04   Promptly after the Effective Date, ELI LILLY may provide CUBIST with 
reasonable access to consult with pertinent ELI LILLY employees that have had 
prior experience working with Compound in the Field at ELI LILLY to enhance 
the preclinical or clinical development and manufacturing of the Compound, 
provided that such consultation shall occur at a mutually agreeable time and 
place and that ELI LILLY will only provide such access to current employees 
which are reasonably able to provide CUBIST with ELI LILLY Know-How relating 
to the scale-up, manufacture, or formulation of Compound for use in the 
Field.  CUBIST shall be responsible for all reasonable expenses its own 
personnel and ELI LILLY personnel incur in association with any such 
consultations.  Upon CUBIST's request, ELI LILLY shall provide CUBIST and its 
sublicensees with all Know-How, information and data owned by ELI LILLY which 
ELI LILLY can provide using reasonable efforts to the extent such Know-How, 
information and data is reasonably required to further CUBIST's or its 
sub-licensees' ability to develop, scale-up, obtain regulatory approval for, 
manufacture, distribute, use, formulate or sell Compound for use in the 
Field.  CUBIST agrees to treat all Know-How disclosed to it as Confidential 
Information of ELI LILLY.

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                       -6-

<PAGE>

2.05   ELI LILLY shall deliver to CUBIST, ELI LILLY's available inventory of 
Compound.  ELI LILLY shall not be required to perform any manufacturing of 
Compound for CUBIST.


                                    Article 3
                                  Diligence and
                                   Regulatory

3.00   CUBIST shall use commercially reasonable efforts to develop and test 
the Compound in the Field, to perform all pre-clinical, clinical and other 
studies of such Compound necessary to obtain regulatory approval for the 
manufacture, use and sale of Compound, and to market and sell Compound in the 
Field in all countries in which it is commercially reasonable to market such 
Compound.  CUBIST shall fully fund these efforts, as well as any other work 
that is required for CUBIST to develop and market Compound in the Field.

CUBIST has prepared and provided to ELI LILLY a preliminary development plan 
attached hereto as Exhibit 2, which contains CUBIST's estimate, based upon 
data currently available to CUBIST concerning the subject matter of this 
Agreement, of the probable course of Compound development hereunder. As 
Compound development progresses, CUBIST will revise the plan from time to 
time to reflect the development and evolution of its plans regarding 
development, regulatory approvals, manufacturing and formulation, and 
clinical trials, and will provide ELI LILLY with a copy of any such 
materially revised plan as soon as reasonably possible after such revision 
occurs.  [         ]*.  The terms under which ELI LILLY shall acquire back 
all such rights shall be the subject of a separate agreement to be negotiated 
in good faith by the parties.

3.01   CUBIST represents that it intends to conduct clinical testing of 
Compounds to the extent that such testing is supported by safety and efficacy 
data required by the applicable regulatory agency.

3.02   Within thirty (30) days of the Effective Date, ELI LILLY shall deliver 
to CUBIST a copy of the Investigational New Drug Application filed with the 
United States Food and Drug Administration and foreign equivalents, if any 
relating to the Compound, and as soon thereafter as is commercially 
practicable, ELI LILLY shall transfer all other reasonably 

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                       -7-

<PAGE>

transferable information used in regulatory filings, laboratory data, 
clinical data, toxicology data, and scale-up, manufacturing and formulation 
information relating to Compound to CUBIST in a commercially reasonable time 
frame.

3.03   Both ELI LILLY and CUBIST shall submit information and file reports to 
various governmental agencies to the extent they are lawfully required on 
compounds under clinical investigation, compounds proposed for marketing, or 
marketed drugs.  Information must be submitted at the time of initial filing 
for investigational use in humans and at the time of a request for market 
approval of a new drug.  In addition, supplemental information must be 
provided on compounds at periodic intervals and adverse drug experiences must 
be reported at more frequent intervals depending on the severity of the 
experience.  Consequently, ELI LILLY and CUBIST agree, to the extent required 
by applicable law or regulations, to:

       1) provide to one another for initial and/or periodic submission to 
governmental agencies significant information on Compound from pre-clinical 
laboratory, animal toxicology and pharmacology studies, as well as serious or 
unexpected adverse experience reports from clinical trials and marketed 
commercial experiences with Compound.

       2) report to one another in such a manner and time so as to enable 
each party to comply with all governmental laws and regulations in 
territories for which registration is or will be sought.

       Serious adverse experience means any experience that suggests a 
significant hazard, contraindication, side effect or precaution, or any 
experience that is fatal or life threatening, is permanently disabling, 
requires or prolongs inpatient hospitalization, or is a congenital anomaly, 
cancer or overdose.

       Unexpected adverse experience is one not identified in nature, 
specificity, severity or frequency in a current investigator brochure for 
Compound, or in CUBIST's labeling for Product.

3.04   CUBIST also agrees that if it contracts with a third party for 
research to be performed by such third party on Compound or if it sublicenses 
its rights herein to a third party, it will require such third party to 
comply with the reporting obligations (both to ELI LILLY and to regulatory 
agencies) set forth in this Section.


                                       -8-

<PAGE>

3.05   CUBIST shall comply with all applicable laws and regulations regarding 
the care and use of experimental animals, in a country where the development 
is carried out.  All animals used to evaluate Compound shall be provided 
humane care and treatment in accordance with the most acceptable veterinary 
practices.


                                    Article 4
                                    Payments

4.00   Cubist will pay [         ]* to ELI LILLY as a license fee upon the 
Effective Date of this Agreement.

4.01   CUBIST will also pay to ELI LILLY the following payments:

       (a) [         ]* as a license fee, to be paid upon the earlier of (i) 
completion of CUBIST or CUBIST's sub-licensee's first Phase II Clinical Trial 
in a Major Market Country or (ii) upon the initiation of CUBIST or CUBIST's 
sub-licensees of patient dosing in the first Phase III Clinical Trial in a 
Major Market Country; said license fee to be paid in CUBIST common stock 
based on the Average Market Price for such CUBIST common stock;

       (b) [         ]* as a license fee, to be paid upon the date of 
CUBIST's or CUBIST's sub-licensee's first regulatory submission in a Major 
Market Country for a license to market Compound, said license fee to be paid 
in CUBIST common stock, based on the Average Market Price for such CUBIST 
Common Stock; and 

       (c) [         ]* as a license fee, to be paid upon the date of 
CUBIST's or CUBIST's sub-licensee's first regulatory approval in a Major 
Market Country for their application to market Compound, said license fee to 
be paid in CUBIST common stock, based on the Average Market Price for such 
CUBIST Common Stock.

4.02   During the first [         ]* after the first commercial sale of 
Compound in a Major Market Country, CUBIST will pay ELI LILLY royalties of 
[         ]* on the first [         ]* of aggregate annual Net Sales of 
Compounds and [         ]* on aggregate Net Sales between [         ]* and 
[         ]* and [         ]* on aggregate annual Net Sales in excess of 

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                       -9-

<PAGE>

$150,000,000 in all countries ("Protected Countries") for so long as (a) the 
manufacture, use or sale of Compound is covered by a Valid Claim, or (b) 
there is no significant generic competition which causes a reduction of Net 
Sales of Compound by [thirty (30) percent]* or more in any [twelve month]* 
period.

After the expiration of the first [         ]* after first commercial sale in 
a Major Market Country, CUBIST will pay ELI LILLY royalties of [         ]* 
on the first [         ]* of aggregate annual Net Sales of Compound and 
[         ]* on aggregate annual Net Sales between [         ]* and 
[         ]* and [         ]* on aggregate annual Net Sales in excess of 
[         ]* in all countries ("Protected Countries") for so long as (a) the 
manufacture, use or sale of a Compound is covered by a Valid Claim, or (b) 
there is no significant generic competition which causes a reduction of Net 
Sales of Compound by [         ]* or more in any [twelve month]* period.

4.03   For a period of [         ]* following first commercial sale in a 
Major Market Country, CUBIST will pay ELI LILLY royalties of [         ]* of 
aggregate annual Net Sales in all countries that are not Protected Countries, 
but where the manufacture, use, sale or transfer of Compound utilizes 
Know-How provided to CUBIST by ELI LILLY.  [         ]* of Net Sales in 
countries that are not Protected Countries shall be included in aggregate 
annual Net Sales of Compound calculated pursuant to Section 4.02 for purposes 
of determining the appropriate royalty percentage in Section 4.02.

4.04   In the event that CUBIST can demonstrate that external factors beyond 
its control (such as government-imposed price controls) have materially 
reduced CUBIST's profitability on sales of Compound in any Country, ELI LILLY 
agrees to consider in good faith an equitable reduction in the royalty rate 
applicable to such country under Section 4.02 or 4.03, as applicable.  

4.05   The first payment under Articles 4.04 and 4.05 shall be due within 
[         ]* after December 31 or June 30, whichever such date occurs first 
after the first commercial sale or transfer of Compound.  Thereafter, 
payments under Articles 4.04 and 4.05 shall be made within [         ]* of 
each of December 31 and June 30 of each year.  Payments shall be 

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -10-

<PAGE>

accompanied by a report showing all facts necessary to the calculation of 
amounts due.

4.06   All royalty payments to ELI LILLY shall be in United States dollars.  
Royalty payments based on Net Sales in currencies other than United States 
dollars shall be converted to US dollars according to the average official 
rate of exchange for that currency as published in the Wall Street Journal on 
the first and last days of the six-month period in which that royalty accrued 
(or, if not published on that day, the first and last publication days for 
the Wall Street Journal during that six month period).  If such exchange rate 
is not published in the Wall Street Journal, then the rate shall be 
determined using average conversion rates that are accepted in the industry 
on the first and last days of the six month period in which the royalty 
accrued.  All payments that are not to be made in CUBIST common stock, as 
specified herein. shall be paid in United States dollars.

4.07   If by law, regulation, or fiscal policy of a particular country, 
conversion into United States dollars or transfer of funds of a convertible 
currency to the United States is restricted or forbidden, CUBIST shall give 
ELI LILLY prompt written notice and shall pay the royalty due under this 
Article 4 through such means or methods as are lawful in such country as ELI 
LILLY may reasonably designate.  Failing the designation by ELI LILLY of such 
lawful means or methods within thirty (30) days after such written notice is 
given to ELI LILLY, CUBIST shall deposit such royalty payment in local 
currency to the credit of ELI LILLY in a recognized banking institution 
designated by ELI LILLY, or if none is designated by ELI LILLY within the 
thirty (30) day period described above, in a recognized banking institution 
selected by CUBIST In and identified in a written notice to ELI LILLY by 
CUBIST, and such deposit shall fulfill all obligations of CUBIST with respect 
to such royalties.

4.08   CUBIST and its sub-licensees, if any, shall maintain complete and 
accurate books and records with respect to sale and use of Compound and all 
other information necessary to permit calculation and verification of amounts 
due under this Article 4 and Article 5 and Article 6, set forth below.  Upon 
reasonable prior written notice to CUBIST, ELI LILLY may cause an independent 
agent to audit the books and records of CUBIST and its sub-licensees, if any, 
pertaining to the payment to ELI LILLY hereunder, for the sole purpose of 
confirming the amounts due, and the accuracy of the payments and reports; 
provided that no such audit shall 


                                      -11-

<PAGE>

be permitted for periods exceeding [         ]* prior to the date CUBIST 
receives such written notice.  Any such audit shall be performed at ELI 
LILLY's expense during normal business hours and shall, if so required by 
CUBIST, be performed by a firm of independent public accountants reasonably 
acceptable to CUBIST.  The independent agent shall report only such 
information as would properly be included in such a report.  In the event of 
an underpayment, CUBIST shall promptly remit to ELI LILLY all amounts due.  
CUBIST shall require any sublicensee to agree to comply with all of the terms 
of this paragraph, including but not limited to making such report, 
maintaining such records, and permitting such audit.

[         ]*

4.09   Any late payments due to ELI LILLY shall be subject to interest 
charges which rate shall be established at [         ]* above the prime 
interest rate in effect on the date that such payment was first due to ELI 
LILLY.

                                    Article 5
                                Minimum Royalties

5.00   [         ]* after December 31 or June 30, whichever date occurs 
first, following the first twelve (12) month period after the first 
commercial sale of Compound in a Major Market Country, CUBIST will pay ELI 
LILLY [         ]* as a minimum royalty.

5.01   [         ]* after December 31 or June 30, whichever date occurs 
first, following the second twelve (12) month period after the first 
commercial sale of Compound in a Major Market Country, CUBIST will pay to ELI 
LILLY [         ]* as a minimum royalty.

5.02   [         ]* after December 31 or June 30, whichever date occurs 
first, following the third twelve (12) month period after the first 
commercial sale of Compound in a Major Market Country, CUBIST will pay ELI 
LILLY [         ]* as a minimum royalty.

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*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -12-

<PAGE>

5.03   CUBIST shall deduct any withholding taxes from the payments agreed 
upon under this Agreement and pay them to the proper tax authorities as 
required by applicable law.  CUBIST shall maintain official receipts of any 
withholding taxes and forward these receipts to ELI LILLY.  The parties will 
exercise their best efforts to ensure that any withholding taxes imposed are 
reduced as far as legally possible under the provisions of any treaties 
applicable to any payment made hereunder.


                                    Article 6
              Indemnification, Insurance and Limitation of Damages

6.00   CUBIST shall indemnify ELI LILLY and its directors, officers, 
employees and agents, as set forth in Article 6.02, with respect to (a) any 
third party claim or action against ELI LILLY based on CUBIST's or CUBIST's 
sublicensee's developing, making, distributing, selling, marketing, using or 
otherwise transferring Compound and (b) breach of any representation or 
warranty contained in Article 7 by CUBIST, provided, however that CUBIST 
shall have no duty to indemnify ELI LILLY to the extent that any such claim 
or action is subject to ELI LILLY's duty of indemnification set forth in 
Article 6.01.

6.01   ELI LILLY shall indemnify CUBIST, as set forth in Article 6.02, with 
respect to (a) any third party claim or action against CUBIST based on (i) 
activities of ELI LILLY, Its employees, or its agents with respect to 
Compound prior to the Effective Date, (ii) the negligence or willful 
misconduct of ELI LILLY, its employees and agents, and (b) breach of any 
representation or warranty contained in Article 7 by ELI LILLY, provided, 
however, that ELI LILLY shall have no duty to indemnify CUBIST to the extent 
that any such claim or action Is subject to CUBIST's duty of indemnification 
set forth in Article 6.00.

6.02   With respect to the claims and actions referenced in Articles 6.00 and 
6.01 above, the indemnifying party shall defend any such claim or action 
against the indemnified party and shall pay all damages, judgments, costs, 
expenses (including attorneys' fees, but only to the extent that the 
indemnifying party fails to promptly assume the defense of such claims and 
actions) and liability awarded against the indemnified party, or settlements 
entered into, with respect to such claim or action, provided that the 
indemnified party (a) provides prompt written notice to the indemnifying 
party of any such claim or action, (b) allows the indemnifying party to 
assume the defense and settlement thereof, with counsel of its choice, and 
(c) provides reasonable assistance to the indemnifying party in connection 
with the defense and settlement thereof.

                                      -13-

<PAGE>

6.03   Prior to administration of Compound to any human, CUBIST shall provide 
to ELI LILLY an endorsement verifying customary levels of insurance for 
damages, judgments, costs, expenses (including attorneys' fees) and liability 
with respect to any third party claim or action based on CUBIST's or CUBIST's 
sublicensee's manufacture, distribution, use, marketing or sale of Compound, 
naming ELI LILLY, its directors, officers and employees as additional 
insureds on the policy, and shall have copies of such insurance policies 
delivered to ELI LILLY as soon as reasonably practical.  In addition, 
evidence of insurance in the form of such endorsement shall be furnished to 
ELI LILLY at the inception of each subsequent phase of human clinical trials, 
as well as upon granting of NDA and PLA, but in no event less than annually 
upon the insurance policy renewal date.  Such insurance shall remain in 
effect at customary levels throughout the term of this Agreement.  ELI LILLY 
shall be informed thirty (30) days prior to any cancellation of or material 
decrease in the amount of coverage of such insurance by CUBIST or any other 
action that CUBIST reasonably should believe will result in decrease or 
cancellation of such insurance, or immediately upon receipt by CUBIST of a 
notice of cancellation of such insurance, on the effective date of which 
cancellation or decrease, clinical use of Compound must immediately cease, 
subject to CUBIST obtaining adequate replacement insurance.  The foregoing 
shall not be interpreted to limit the scope or amount of CUBIST's 
indemnification obligation under Article 6.00.

Notwithstanding the foregoing, CUBIST shall be entitled to adopt an insurance 
program containing self insurance elements, to the extent that CUBIST is able 
to demonstrate to the reasonable satisfaction of ELI LILLY that such a 
program is not unusual in the industry for companies similarly situated 
(including financial condition to support such a program) or with respect to 
products with a risk profile similar to products licensed hereunder.

6.04   Other than as set forth elsewhere in this Agreement, in no event shall 
either party be liable for any special, consequential, indirect, or 
incidental damages, however caused and on any theory of liability, arising 
out of this Agreement.  These limitations shall apply notwithstanding any 
failure of essential purpose of any limited remedy.

                                      -14-

<PAGE>


                                    Article 7
                   Representations, Warranties And Disclaimer

7.00   Each party represents and warrants to the other party that (a) it has 
the right to enter into this Agreement; (b) this Agreement has been duly 
authorized by all necessary action of such party and (c) the execution of 
this Agreement by the party will not conflict with or breach any other 
agreement to which it is a party or by which it is bound.

7.01   ELI LILLY represents that (a) it is party to an agreement with 
Ophidian which Agreement includes a covenant not to compete (b) if CUBIST 
notifies ELI LILLY that it desires to develop Compound for the treatment of 
clostridium difficile-induced colitis, ELI LILLY shall notify CUBIST if such 
covenant has expired or is terminated, (c) there is no other agreement known 
to ELI LILLY to which it is a party and by which it is bound that would 
conflict with or be breached by ELI LILLY granting the license in Article 2, 
(d) except as previously disclosed in writing to CUBIST, no other person or 
entity has claimed, or to ELI LILLY's knowledge has, any rights to or 
interest in the Patents and the Know- How in the Field to be licensed 
hereunder, and that to its knowledge, the manufacture, use, distribution, 
marketing or sale of the Compound(s) can be performed without infringing the 
patent rights of any third party, and (e) as of the Effective Date ELI LILLY 
is conducting no development program relating to analogs or derivatives of 
the Compound, provided that ELI LILLY shall be free to commence and conduct 
any such program at any time hereafter.

7.02   ELI LILLY makes no representation or warranty that Compound made, 
used, or sold under the licenses granted herein is or will be free of claims 
of infringement of the patent rights of any third party (although it 
represents and warrants that it has no knowledge of (i) such infringement not 
heretofore disclosed to Cubist and (ii) any payment obligations that CUBIST 
will have to third parties in connection with CUBIST's development, 
manufacturing, marketing or sale of Compound) and makes no warranty or 
representation that any of the Patents to be licensed hereunder are valid or 
enforceable.

7.03   EXCEPT AS SET FORTH IN ARTICLES 7.00 AND 7.01 ABOVE, ELI LILLY 
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT 
LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, 
OR NON-INFRINGEMENT.

                                      -15-

<PAGE>

7.04   CUBIST acknowledges that the Compound(s) are highly experimental in 
nature [         ]*.

7.05   CUBIST warrants that all CUBIST common stock to be paid to ELI LILLY 
pursuant to this Agreement shall be properly issued and all legal 
requirements associated with such issuance to ELI LILLY shall be fulfilled.

The number of shares of CUBIST common stock payable to ELI LILLY shall be 
determined by dividing the payment amount by the Average Market Price to 
determine the number of shares.

For illustration purposes only, upon completion of CUBIST's first Phase II 
Clinical Trial, CUBIST shall pay ELI LILLY [         ]* in CUBIST common 
stock.  The number of shares to be transferred to ELI LILLY shall be 
determined by dividing [         ]* by the Average Market Price.


                                  Article 8
                            Patents And Know-How

8.00   In the event either of the parties shall learn of the infringement, or 
a challenge to the validity, enforceability, or title of any Patent 
(including any action for a declaratory Judgment) right licensed hereunder, 
or an action for unauthorized use or misappropriation of Know-How licensed 
hereunder, such party shall promptly notify the other party thereof in 
writing and shall provide the other party with any evidence in its possession 
of such infringement, challenge or action.

8.01   Actions Affecting Other ELI LILLY Programs.

       (i)  During the term of this Agreement, ELI LILLY shall have the sole 
right, but no obligation, to bring or defend any suit or action relative to 
the patenting or patent enforcement directly relating to Compound, 
manufacture, use, distribution, marketing or sale of Compound in the Field 
which suit or action also materially affects intellectual property rights of 
ELI LILLY that relate to an active ELI LILLY Program, including the fight to 
recover for past infringement, or the unauthorized use or misappropriation of 
Know-How in the Field.  If ELI LILLY finds it necessary or desirable to join 
CUBIST in such suit or action, CUBIST 

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -16-

<PAGE>

shall execute all papers and perform such other acts as may reasonably be 
required, at ELI LILLY's expense, to join CUBIST in such suit or action. 
CUBIST may, at its option, join as a party to such suit and be, at its 
expense, represented by counsel of its choice, provided that ELI LILLY shall 
continue to control the prosecution or defense of such suit.  Unless CUBIST 
and ELI LILLY otherwise agree, any amount recovered in any such action, 
whether by judgment or settlement, after deducting ELI LILLY's reasonable 
expenses (including attorneys' fees), and payment to CUBIST of damages in 
respect of CUBIST's lost profits for which ELI LILLY recovers payment and 
CUBIST's reasonable expenses (including attorneys' fees) incurred in 
connection with an action or suit in which ELI LILLY requested that CUBIST be 
Joined or in which CUBIST voluntarily joined, shall be paid to or retained by 
ELI LILLY.

       (ii) In the event ELI LILLY faIls to take action with respect to such 
infringement, or challenge to validity, enforceability or title, or action 
for unauthorized use or misappropriation of Know-How in the Field which 
materially affect intellectual property rights of ELI LILLY that relate to an 
active ELI LILLY program, within a reasonable period, no less than three (3) 
months, following receipt by ELI LILLY of reliable evidence of infringement, 
CUBIST shall have the right, but no obligation, to bring, or defend any such 
suit or action.  ELI LILLY may, at its option, join as a party to such suit 
and be, at its expense, represented by counsel of its choice, provided that 
CUBIST shall continue to control the prosecution or defense of such suit.  If 
CUBIST finds it necessary to join ELI LILLY in such suit or action, ELI LILLY 
shall execute all papers and perform such other acts as may be reasonably 
required at CUBIST's expense.  Unless CUBIST and ELI LILLY otherwise agree, 
any amount recovered in any such action or suit, whether by judgment or 
settlement, after deducting CUBIST's reasonable expenses (including 
attorneys' fees) and payment to ELI LILLY of damages in respect of ELI 
LILLY's lost royalties for which CUBIST recovers payment and after payment to 
ELI LILLY of its reasonable expenses (including attorneys' fees) incurred in 
connection with an action or suit in which CUBIST requested that ELI LILLY be 
joined or which ELI LILLY voluntarily owned, shall be paid to or retained 
entirely by CUBIST.

                                      -17-

<PAGE>

8.02   Actions Not Affecting Other Lilly Programs.

       (i)  During the term of this Agreement, CUBIST shall have the sole 
right, but no obligation, to bring or defend any suit or action relative to 
the patenting or patent enforcement directly relating to Compound, 
manufacture, use, distribution, marketing or sale of Compound in the Field 
which suit or action does not materially affect intellectual property rights 
of ELI LILLY that relate to an active ELI LILLY Program, including the right 
to recover for past infringement, or the unauthorized use or misappropriation 
of Know-How in the Field.  If CUBIST finds it necessary or desirable to join 
ELI LILLY in such suit or action, CUBIST shall execute all papers and perform 
such other acts as may reasonably be required, at CUBIST's expense, to join 
ELI LILLY in such suit or action. ELI LILLY may, at its option, join as a 
party to such suit and be, at its expense, represented by counsel of its 
choice, provided that CUBIST shall continue to control the prosecution or 
defense of such suit.  Unless CUBIST and ELI LILLY otherwise agree, any 
amount recovered in any such action or suit, whether by Judgment or 
settlement, after deducting CUBIST's reasonable expenses (including 
attorneys' fees) and payment to ELI LILLY of damages in respect of ELI 
LILLY's lost royalties for which CUBIST recovers payment and after payment to 
ELI LILLY of its reasonable expenses (including attorneys' fees) in 
connection with an action or suit in which CUBIST requested that ELI LILLY be 
joined or which ELI LILLY voluntarily joined, shall be paid to or retained 
entirely by CUBIST.

       (ii) In the event CUBIST faIls to take action with respect to such 
infringement, or challenge to validity, enforceability or title, or action 
for unauthorized use or misappropriation of Know-How in the Field which does 
not materially affect intellectual property rights of ELI LIILLY that relate 
to an active ELI LILLY program, within a reasonable period, no less than 
three (3) months, following receipt by CUBIST of reliable evidence of 
infringement, ELI LILLY shall have the right, but no obligation, to bring, or 
defend any such suit or action.  If ELI LILLY finds it necessary to join 
CUBIST in such suit or action, CUBIST shall execute all papers and perform 
such other acts as may be reasonably required at ELI LILLY's expense.  CUBIST 
may, at its option, join as a party to such suit and be, at its expense, 
represented by counsel of its choice, provided that ELI LILLY shall continue 
to control the prosecution or defense of such suit.  Unless CUBIST and ELI 
LILLY otherwise agree, any amount recovered in any such action, whether by 
judgment or settlement, after deducting ELI LILLY's reasonable expenses 
(including attorneys' fees), and payment to CUBIST of damages in respect of 
CUBIST's lost profits 

                                      -18-

<PAGE>

for which ELI LILLY recovers payment and CUBIST's reasonable expenses 
(including attorneys' fees) incurred in connection with an action or suit in 
which ELI LILLY requested that CUBIST be joined or in which CUBIST 
voluntarily joined, shall be paid to or retained by ELI LILLY.

8.03   If CUBIST determines in good faith in consultation with ELI LILLY that 
the manufacture, use or sale of Compound in the Field would infringe the 
intellectual property rights of a third party unaffiliated with either CUBIST 
or ELI LILLY, and it therefore becomes necessary to pay a royalty, license 
fee or other compensation to that party to avoid a claim of infringement, 
then CUBIST and ELI LILLY shall each bear [         ]* provided that ELI 
LILLY's share of such obligation shall be deducted from CUBIST's royalty 
payments due to ELI LILLY, and further provided that CUBIST's payment, 
pursuant to this Agreement, to ELI LILLY in any one (1) year would never be 
reduced by more than [         ]*.  If, as a result of the preceding 
sentence, CUBIST bears more than [         ]* of the royalty, license fee or 
other compensation due to a third party under this Section 8.04, the amount 
of the excess may be carried forward and used by CUBIST as a credit against 
royalties due ELI LILLY in subsequent royalty periods, provided that in no 
event shall CUBIST's royalty payments to ELI LILLY be reduced by more than 
[         ]*.

8.04   Each party agrees to cooperate with the other in legal action taken to 
enforce, defend or maintain a Patent licensed hereunder or concerning 
Know-How licensed hereunder, including litigation proceedings.

8.05   ELI LILLY shall take all steps necessary to maintain the Patents in 
the Field, including without limitation the preparation, filing and 
prosecution of new patent applications, through an attorney of their choice.  
CUBIST shall reimburse ELI LILLY for one half (1/2) of its reasonable 
out-of-pocket expenses incurred after the Effective Date paid to third 
parties for patent preparation, reasonable attorney fees, patent filing fees, 
applications for patent term extensions and SPC's, translation fees for 
patent purposes, and patent maintenance fees for Patents licensed hereunder 
within thirty (30) days of receipt of an itemized expense report from ELI 
LILLY for such patent related expenses.

(a)    If CUBIST reasonably believes that ELI LILLY is failing to maintain 
one or more of its Patents in the Field, CUBIST shall provide 

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -19-

<PAGE>

ELI LILLY sixty (60) days written notice of its intent to assume maintenance 
of such Patents itself If ELI LILLY fails to resume maintenance of the 
Patents in the Field that CUBIST reasonably believes that ELI LILLY is 
failing to maintain or to provide reasonable evidence demonstrating that ELI 
LILLY is maintaining these Patents in the Field at the expiration of such 
sixty (60) day period, CUBIST may, through an attorney of their choice, take 
all necessary actions to maintain the Patents, and shall be entitled to 
deduct [         ]* of the costs and expenses incurred from any of CUBIST's 
payments pursuant to Article 4.04. In such event, ELI LILLY shall complete 
all acts and execute and deliver all instruments and other documents and 
render CUBIST assistance as is necessary or desirable for CUBIST to assume 
the filing, prosecution and maintenance of such Patents in the Field that ELI 
LILLY has not resumed maintenance of or demonstrated that it is maintaining.

(b)    ELI LILLY shall keep CUBIST currently advised as to the status of all 
patents and patent applications which relate to Patents and to supply CUBIST 
promptly with copies of all patents, patent applications, substantive patent 
office actions, substantive responses received or filed in connection with 
such applications.  CUBIST may itself or through its attorney offer comments 
and suggestions with respect to the matters that are the subject of this 
Article 8.06, and ELI LILLY agrees to consider carefully such comments and 
suggestions; however, nothing herein shall obligate ELI LILLY to follow such 
comments or suggestions.

(c)    ELI LILLY shall notify CUBIST of their intention to abandon a patent 
or patent application which relates to Patents (either a total series of 
Patents or patent applications or on a country by country basis). At CUBIST's 
option, CUBIST may maintain such patent or patent application relating to 
Patent that ELI LILLY plans to abandon either a total series of Patents or 
patent applications or on a country by country basis) at CUBIST's sole 
expense, and CUBIST shall receive title to such patent or patent application 
and such patent shall no longer then be considered a Patent for purposes of 
this Agreement.

8.06   CUBIST shall take all steps necessary to maintain its patents and 
patents relating to Compound in the Field, including without limitation the 
preparation, filing and prosecution of new patent applications through 

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -20-

<PAGE>

an attorney of its choice, provided that a copy of any new patent 
applications relating to Compound in the Field, to be filed by CUBIST or a 
sub-licensee of CUBIST, will be supplied to ELI LILLY at least thirty (30) 
days prior to the filing date of such patent application.

       CUBIST shall keep ELI LILLY currently advised as to the status of all 
patents and patent applications which relate to patents filed by CUBIST in 
the Field and to supply ELI LILLY promptly with copies of all patents, patent 
applications, patent office actions, responses and other papers received or 
filed in connection with such applications.  ELI LIILLY may itself or through 
its attorney offer the other comments and suggestions with respect to the 
matters that are the subject of this Article 8.06, and CUBIST agrees to 
consider carefully such comments and suggestions, however, nothing herein 
shall obligate CUBIST to follow such comments or suggestions.


                                    Article 9
                                   Assignment

9.00   Neither party may assign or delegate any of its rights or duties under 
this Agreement without the prior written consent of the other, except that 
either party may assign this Agreement to a person or party that has 
purchased or succeeded to all or substantially all of the business and assets 
of the assignor to which the Agreement relates, and that has assumed in 
writing or by operation of law such party's obligations under this Agreement, 
provided that CUBIST shall be permitted to sub-license its rights hereunder 
as provided under Section 2.01 above.  This Agreement shall inure to the 
benefit of, and shall be binding upon, the parties hereto and their 
respective successors and assigns insofar as this Agreement is assignable.  
The assignor of this Agreement shall guarantee the performance of the 
obligation of this Agreement by such successor or assigns.  Nothing herein is 
intended to confer on any person other than the parties hereto or their 
respective successors and assigns any rights, remedies, obligations, or 
liabilities under or by reason of this Agreement.

                                      -21-

<PAGE>

                                   Article 10
                              Term And Termination

10.00  The term of this Agreement shall be for the period commencing as of 
the Effective Date and ending on the later of [         ]* unless and until 
earlier terminated as provided in this Article.  Upon the expiration of this 
Agreement, CUBIST shall retain a fully paid-up, royalty free license under 
the Know-How for purposes consistent with this Agreement and limited to use 
in the Field.

10.01  If either party defaults in the performance of its material 
obligations hereunder, including but not limited to CUBIST's failure to use 
commercially reasonable efforts to develop Compound (provided, however, that 
this shall not be construed as a guarantee that any Compound will be 
successfully developed), and if any such default is not corrected within 
[         ]* after it shall have been called to the attention of the 
defaulting party, in writing, by the other party, then the other party, at 
its option, may, in addition to any other remedies it may have, thereupon 
terminate this Agreement by giving written notice of termination to the 
defaulting party.

10.02  This Agreement may be terminated by either party, on notice, (i) upon 
the institution by the other party of insolvency, receivership or bankruptcy 
proceedings, (ii) upon the institution of such proceedings against the other 
party, which are not dismissed or otherwise resolved in such party's favor 
within sixty (60) days thereafter, and (iii) upon the other party's 
dissolution or ceasing to do business in the normal course.

10.03  CUBIST may terminate this Agreement at any time, upon thirty (30) days 
prior written notice to ELI LILLY and upon a reasonable determination by 
CUBIST that continued development of the Compound hereunder is not 
commercially reasonable.  [         ]*.

10.04  Termination of this Agreement for any reason shall not result in any 
obligation by ELI LILLY to repay any payments made to it by CUBIST prior to 
such termination.

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -22-

<PAGE>

10.05  Upon termination of this Agreement for any reason, the sub-licenses 
shall be automatically assigned to ELI LILLY, and ELI LILLY shall be bound by 
the terms of such sub-licenses provided that the sub-licensees continue to 
perform in accordance with their respective sublicense agreements. 
Notwithstanding the foregoing, ELI LILLY's obligations to any such 
sublicensee shall not be interpreted to extend beyond any obligations to 
CUBIST hereunder with respect to the subject matter of the sub-license.

10.06  Upon termination of this Agreement for any reason, except for 
termination caused by material breach by ELI LILLY, all licenses granted to 
CUBIST pursuant to Article 2 shall terminate, Cubist furthermore shall 
transfer to ELI LILLY all regulatory filings and regulatory correspondence, 
patent filings and patent office correspondence, any and all other clinical 
and non-clinical data, records and tabulations related to the Compound; and 
shall execute any and all documents of such patent offices and/or patent 
receiving offices, and/or regulatory agencies, including the US FDA, so as to 
allow ELI LILLY to make immediate use of such data, records, patent 
applications and/or patents and regulatory filings.  ELI LILLY shall not be 
obligated to treat such information received pursuant to this Section 10.06 
as Confidential Information and may use such information, data and know-how 
for any purpose at ELI LILLY's discretion.

       If CUBIST terminates this Agreement due to ELI LILLY's material 
breach, CUBIST's licenses pursuant to Article 2 shall continue for so long as 
CUBIST continues to fulfill their payment obligations pursuant to Articles 4 
and 5.

10.07  Termination of this Agreement for any reason shall not terminate the 
provisions set forth in Article 6 with respect to actions arising with 
respect to periods prior to termination, as well as Articles 7, 10, 13, 15, 
and 17 hereof The obligations of those Articles shall continue in full force 
and effect following any such termination.

10.08  Upon termination of this Agreement for any reason, neither party shall 
be relieved of obligations with respect to periods prior thereto, including 
any obligation to make payments, including but not limited to obligations 
pursuant to Articles 4, 5, 6 or 10, or reports regarding sale prior to such 
termination.

                                      -23-

<PAGE>

10.09  If CUBIST determines that it will not develop or market Compound in 
one or more countries, either by itself or through the efforts of a 
sublicensee, or if ELI LILLY makes written request to CUBIST to develop or 
sell Compound in one or more countries and in which countries CUBIST either 
by itself or through the efforts of a sublicensee, has taken no action, all 
rights including rights to develop, market and sell Compound in that 
country(ies) shall revert to ELI LILLY [         ]* after CUBIST receives 
written notice of ELI LILLY's intent to pursue those rights is received by 
CUBIST if CUBIST either by itself or through the efforts of a sublicensee, 
has taken no action toward such development or marketing prior to the end of 
that year.


                                   Article II
                                  Force Majeure

11.00  If the performance of this Agreement or any obligations hereunder, 
except the making of payments, is prevented, restricted or interfered with by 
reason of fire or other casualty or accident, earthquake, supplier delay, 
strikes or labor disputes, war or other violence, any law, order, 
proclamation, regulations, ordinance, demand or requirement of any government 
agency, or any other act or condition beyond the reasonable control of the 
parties hereto ("Event of Force Majeure"), the party so affected upon giving 
prompt notice to the other party shall be excused from such performance to 
the extent of such prevention, restriction, or interference; provided that 
the party so affected shall use its reasonable best efforts to avoid or 
remove such causes of nonperformance and shall continue performance hereunder 
with the utmost dispatch and that such party exercises due diligence to 
overcome such circumstances.

11.01  The party suffering an Event of Force Majeure shall notify the other 
party within fifteen (15) days of the occurrence of such Events of Force 
Majeure and within thirty (30) days shall furnish the other party with a 
recovery plan of action.  Without limiting the foregoing, a party suffering 
an Event of Force Majeure shall use its reasonable best efforts to limit the 
impact of the Event of Force Majeure on such party's performance of this 
Agreement.

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -24-

<PAGE>


                                   Article 12
                                     Notices

12.00  Any notice required or permitted to be given under this Agreement 
shall be in writing and shall be deemed to have been sufficiently given for 
all purposes five (5) days after having been mailed by first class certified 
or registered mail, postage prepaid or by fax which is confirmed by certified 
mail.  Unless otherwise specified in writing, the mailing addresses of the 
parties shall be as described below.

For ELI LILLY
       ELI LILLY & COMPANY
       Attn: Legal Division
       Lilly Corporate Center
       Indianapolis, Indiana 46285

For CUBIST:
       Mark Carthy
       Chief Business Officer
       Cubist Pharmaceuticals Incorporated
       24 Emily Street
       Cambridge, MA 02139

with a copy to:
       CUBIST's Legal Counsel:
       Michael Lytton
       Palmer & Dodge
       One Beacon Street
       Boston, MA 02108


                                   Article 13
                                  Governing Law

13.00  This Agreement shall be governed by and interpreted in accordance with 
the laws of the State of Indiana, United States of America, without reference 
to conflict of laws principles.

In the event of any action, controversy or claim arising out of or relating 
to any provision of this Agreement or the breach, termination or 
enforceability thereof, ELI LILLY and CUBIST shall make all efforts to settle 
those conflicts amicably between themselves.  Should they fail to 

                                      -25-

<PAGE>

agree, the parties may assert any remedy available at law or in equity to 
enforce its rights under this Agreement.


                                   Article 14
                                Partial Validity

14.00  If any provision of this Agreement shall be found or be held to be 
invalid or unenforceable by a court of competent jurisdiction in which this 
Agreement is being performed, then the meaning of said provision shall be 
construed, to the extent feasible, so as to render the provision enforceable, 
and if no feasible interpretation would save such provision, it shall be 
severed from the remainder of this Agreement, which shall remain in full 
force and effect.  In such event, the parties shall negotiate, in good faith, 
a substitute, valid and enforceable provision which most nearly effects the 
parties' intent in entering into this Agreement.


                                   Article 15
                                 Confidentiality

15.00  Except as otherwise provided in this Article 15, during the term of 
this Agreement and for a period of [         ]* the parties shall maintain 
the Confidential Information in confidence and use it only for purposes 
specifically authorized under this Agreement.  To the extent it is reasonably 
necessary or appropriate to fulfill its obligations or exercise its rights 
under this Agreement: (i) a party may disclose Confidential Information it is 
otherwise obligated under this Article 15 not to disclose to third parties, 
on a need-to- know basis and on condition that such entities or persons agree 
to keep the Confidential Information confidential for the same time periods 
and to the same extent as such party is required to keep the Confidential 
Information confidential hereunder; and (ii) a party may disclose such 
Confidential Information to government or other regulatory authorities as 
required by law or statute.  The parties hereto understand and agree that 
remedies at law may be inadequate to protect against any breach of any of the 
provisions of this Article 15 by either party or their employees, agents, 
officers or directors or any other person acting in concert with it or on its 
behalf Accordingly, each party shall be entitled to, but not limited to, the 
granting of injunctive relief by a court of competent Jurisdiction against 
any action that constitutes any such breach of this Article 15.

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -26-

<PAGE>

15.01  Notwithstanding the provisions of Section 15.00 above, CUBIST shall be 
free to make disclosures to third parties of Confidential Information of ELI 
LILLY consisting of data regarding the Compound in the Field under 
circumstances where, in CUBIST's reasonable business judgment, such 
disclosures will (i) further the development and commercialization of the 
Compound and (ii) not adversely affect any patent rights of ELI LILLY of 
which it is aware, provided, however, that in the case of (a) technical 
papers disclosing such Confidential Information, or (b) other disclosures 
where LILLY's name is used or would reasonably be implied from the context, 
CUBIST will provide a copy of the proposed paper or disclosure to ELI LILLY 
at least [         ]* in advance of publication and will not proceed with 
such publication or disclosure without the consent of ELI LILLY, which 
consent will not be unreasonably withheld; and further, provided, that in the 
case of all other written disclosures of Confidential Information, CUBIST 
will provide to ELI LILLY a copy of the material incorporating such 
disclosure as promptly as is practicable, and in no event later than one (1) 
week after the disclosure takes place.

15.02  ELI LILLY will make no public pronouncements referencing this 
Agreement or CUBIST without CUBIST's express written approval.  No license or 
rights are granted to either party to use the name of the other without 
express written approval.  CUBIST's first public announcement of this 
Agreement, attached hereto as Exhibit 4, may be released by CUBIST upon full 
execution of this Agreement.  Except as provided by Exhibit 4, CUBIST shall 
not release any information regarding the existence or terms of this 
Agreement that is not required by law.


                                   Article 16
                                Entire Agreement

16.00  The terms and conditions herein contained, including the Exhibits 
hereto, constitute the entire agreement and understanding of the parties 
relating to the subject matter of this Agreement and supersedes all previous 
communications, proposals, representations, and agreements, whether oral or 
written, relating to the subject matter of this Agreement.

---------------

*      Confidential Treatment requested:  material has been omitted and
       filed separately with the Commission.

                                      -27-

<PAGE>

No agreement or understanding varying or extending the same shall be binding 
upon either party hereto unless in a written document which expressly refers 
to this Agreement and which is signed by both parties to be bound thereby.


                                   Article 17
                                  Miscellaneous

17.00  It is understood and agreed that each party shall have the status of 
an independent contractor under this Agreement and that nothing in this 
Agreement shall be construed as authorization for either ELI LILLY or CUBIST 
to act as agent for the other.  Nothing contained herein or done in pursuance 
of this Agreement shall constitute either party the agent of the other party 
for any purpose or in any sense whatsoever, or constitute the parties as 
partners or joint venturers.

17.01  The failure of either party to enforce at any time any of the 
provisions of this Agreement, or the failure to require at any time 
performance by the other party of any of the provisions of this Agreement, 
shall in no way be construed to be a present or future waiver of such 
provisions, nor in any way affect the validity of either party to enforce 
each and every such provision thereafter.

17.02  The headings set forth at the beginning of the various Articles of 
this Agreement are for reference and convenience and shall not affect the 
meanings of the provisions of this Agreement.

17.03  During the term of this Agreement, ELI LILLY shall not, directly or 
indirectly through or in connection with any third party, conduct research, 
develop, make or market Compound for use in the Field.

17.04  This Agreement may not be amended, supplemented, or otherwise modified 
except by an instrument in writing signed by both parties.

                                      -28-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
signed in duplicate by duly authorized officers or representatives as of the 
date first above written.

ELI LILLY & COMPANY                    CUBIST PHARMACEUTICALS
                                       INCORPORATED

By:/s/ William R. Ringo                By:/s/ Mark Carthy
   --------------------------             ---------------------------
   William R. Ringo
   President, Infectious Diseases       Print name: Mark Carthy
                                                    --------------------
   Business Unit                        Title: Vice President and Chief
                                               ---------------------------
                                               Business Officer
                                               ---------------------------

                                      -29-

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