ESCROW AGREEMENT
This ESCROW AGREEMENT (this "ESCROW AGREEMENT"), dated as of October
23, 2000, is among Cubist Pharmaceuticals, Inc, a Delaware corporation
("Cubist"), C&T Acquisition Corporation, a corporation duly organized under the
laws of the Province of British Columbia, Canada, and a wholly-owned subsidiary
of Cubist ("ACQUISITION SUB"), TerraGen Discovery, Inc., a corporation duly
organized under the laws of the Province of British Columbia, Canada (the
"COMPANY"), MDS Capital Corp., a corporation duly organized under the laws of
the Province of Ontario, Canada, in its capacity as a representative of the
shareholders of the Company (in such capacity and each of its successors being
referred to as the "SHAREHOLDERS' REPRESENTATIVE") and State Street Bank and
Trust Company, a Massachusetts banking corporation, in its capacity as escrow
agent hereunder (the "ESCROW AGENT"). The Shareholders' Representative and
Cubist are sometimes referred to herein collectively as the "Interested
Parties." Capitalized terms used and not otherwise defined herein have the
respective meanings ascribed to them in the Acquisition Agreement (as defined
below).
WHEREAS, Cubist, Acquisition Sub, the Shareholders' Representative and
the Company have entered into an Acquisition Agreement, dated August 5, 2000
(the "ACQUISITION AGREEMENT"), pursuant to which, among other things, all of the
outstanding Company Shares shall, subject to the satisfaction of the conditions
set forth therein and without any action on the part of the holders thereof, be
deemed to be transferred to the Acquisition Sub in exchange for Exchangeable
Shares issued by the Acquisition Sub or shares of Cubist Common Stock issued by
Cubist (the "ACQUISITION"); and
WHEREAS, Acquisition Sub and Cubist have agreed, pursuant to the
Acquisition Agreement, to deliver to the Escrow Agent at the Effective Time, to
be held in escrow pursuant to the terms hereof, a stock certificate representing
Exchangeable Shares and a stock certificate representing shares of Parent Common
Stock, which certificates shall represent, in the aggregate, ten percent (10%)
of the shares of Cubist Common Stock and Exchangeable Shares issued at the
Effective Time pursuant to the Acquisition, to secure any payment that may be
required to be paid pursuant to the indemnification provisions of the
Shareholders' Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth in this Escrow Agreement, the parties hereto hereby agree as follows:
1. CERTAIN DEFINED TERMS. As used in this Escrow Agreement, the
following terms shall have the meanings provided therefor below in this Section
1:
"Consideration Shares" means the shares of Cubist Common Stock and
Exchangeable Shares for which the Company Shares are exchanged pursuant to the
Acquisition Agreement and the Plan of Arrangement.
"Escrow Agent" means State Street Bank and Trust Company or any of its
successors appointed pursuant to Section 9 hereof, in each case in the capacity
of escrow agent hereunder.
"Escrowed Securities" means (i) the Escrowed Shares and (ii) any
securities received in respect thereof (whether by dividend or subdivision, upon
conversion, exchange, redemption or otherwise), including, without limitation,
any shares of Cubist Common Stock issued upon exchange of Exchangeable Shares
held in escrow pursuant to this Escrow Agreement.
"Escrowed Shares" means those Consideration Shares that are delivered
to the Escrow Agent pursuant to Section 3 hereof.
"Escrow Fund" means (i) the Escrowed Securities, (ii) any cash
dividends, distributions or income earned thereon and (iii) any other accessions
thereto, in each case to the extent held in escrow hereunder as of the relevant
time of reference.
2. APPOINTMENT OF ESCROW AGENT. Cubist and the Shareholders'
Representative hereby appoint State Street Bank and Trust Company to act as
Escrow Agent hereunder, and State Street Bank and Trust Company hereby accepts
such appointment and agrees to serve in such capacity subject to the terms and
conditions set forth herein.
3. ESCROW FUND.
(a) ESTABLISHMENT OF ESCROW FUND. At the Effective Time, (i) Cubist
shall deliver directly to the Escrow Agent a certificate registered in the
name of the Escrow Agent's nominee, "Embassy & Co.", representing 33,488
shares of Cubist Common Stock to be held in escrow by the Escrow Agent
pursuant to the terms of this Escrow Agreement; and (ii) Acquisition Sub
shall deliver directly to the Escrow Agent a certificate registered in the
name of the Escrow Agent's nominee, "Embassy & Co.", representing 17,840
Exchangeable Shares to be held in escrow by the Escrow Agent pursuant to the
terms of this Escrow Agreement. The Escrow Agent shall have no responsibility
for the genuineness, validity, market value, title or sufficiency for any
intended purpose of the Escrowed Securities. Pursuant to the Acquisition
Agreement and the provisions thereof incorporated by reference into the
Shareholders' Agreement, the Shareholders have consented to: (i) the
establishment of this escrow to secure any payment required to be paid
pursuant to the Shareholders' indemnification obligations contained in the
Shareholders' Agreement or pursuant to this Escrow Agreement, (ii) the
appointment of the Shareholders' Representative as their representative for
purposes of this Escrow Agreement and as attorney-in-fact and agent for and
on behalf of each Shareholder, and the taking by the Shareholders'
Representative of any and all actions and the making of any decisions
required or permitted to be taken or made by them under this Escrow Agreement
and (iii) all of the other terms, conditions and limitations of this Escrow
Agreement.
(b) DIVIDENDS, ETC. ON ESCROWED SECURITIES. The Escrow Agent shall be
under no obligation to preserve, protect or exercise rights in the Escrowed
Securities, and shall be responsible only to maintain the physical safekeeping
thereof, as provided herein, and otherwise for the performance and observance of
its duties expressly set forth in this Escrow Agreement; except that it shall,
at the written request of the Shareholders' Representative given to the Escrow
Agent at least three business days prior to the date on which the Escrow Agent
is requested therein to take any action, deliver to the Shareholders'
Representative a proxy or other instrument in the form supplied to it by the
Shareholders' Representative for voting or otherwise exercising any right of
consent with respect to any of the Escrowed Securities held by it hereunder, to
authorize therein the Shareholders' Representative to exercise such voting or
consent authority in respect of the Escrowed Securities. The Escrow Agent shall
not be responsible for forwarding to any party, notifying any party with respect
to, or taking any action with respect to, any notice, solicitation or other
document or information, written or otherwise, received from an issuer or other
person with respect to the Escrowed Securities, including but not limited to,
proxy material, tenders, options, the pendency of calls and maturities and
expiration of rights. Any dividends or other distributions in respect of
Escrowed Securities, and any securities issued upon the conversion, redemption,
or exchange of the Escrowed Securities, will be deposited with the Escrow Agent
in escrow hereunder immediately upon payment or issuance, accompanied by written
notice to the Escrow Agent identifying such deposit of dividends or other
distributions, and added to the Escrow Fund.
(c) TAX LIABILITIES. The Shareholders shall be responsible for any tax
liability and tax reporting obligations attributable to (i) the placement of the
Escrowed Securities in the escrow contemplated hereby, (ii) the payment of any
dividends or other amounts payable (including interest or other income earned
but not distributed in any tax year) with respect to the Escrow Fund, and (iii)
any exchange of Exchangeable Shares or other activity with respect to the
Escrowed Securities or other assets of the Escrow Fund. Each of the Shareholders
shall provide the Escrow Agent with an executed IRS Form W-9 or W-8, as
applicable.
(d) TAX INDEMNIFICATION BY THE SHAREHOLDERS. With respect to any
payment, exchange or distribution of Escrowed Securities or other assets of the
Escrow Fund to or on behalf of any Shareholder, such Shareholder agrees (i) to
assume any and all obligations imposed now or hereafter by any applicable tax
law with respect to such payment, exchange or distribution of Escrowed
Securities or other assets of the Escrow Fund to such Shareholder or with
respect to the performance of other activities under this Escrow Agreement to
the extent that such activities pertain to such Shareholder, and (ii) to
instruct the Escrow Agent in writing, upon receipt of a written request from the
Escrow Agent, with respect to the Escrow Agent's responsibility for withholding
and other taxes, assessments or other governmental charges pertaining to such
Shareholder, and to instruct the Escrow Agent, upon receipt of a written request
from the Escrow Agent, with respect to any certifications and governmental
reporting that may be required under any laws or regulations that may be
applicable with respect to such Shareholder in connection with the performance
by the Escrow Agent of its duties and responsibilities under this Escrow
Agreement. Each Shareholder, severally but not jointly, agrees to indemnify and
hold the Escrow Agent harmless from any liability or obligation on account of
taxes, assessments, additions for late payment, interest, penalties, expenses
and other governmental charges that may be assessed or asserted against the
Escrow Agent in connection with or relating to any payment made to such
Shareholder or other activities performed under the terms of this Escrow
Agreement with respect to such Shareholder, including without limitation any
liability for the withholding or deduction of (or the failure to withhold or
deduct) the same, and any liability for failure to obtain proper certifications
or to report properly to governmental authorities in connection with this Escrow
Agreement, including costs and expenses (including
reasonable legal fees and expenses), interest and penalties. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Escrow Agreement.
(e) TAX INDEMNIFICATION BY CUBIST. With respect to any payment or
distribution of the Escrow Fund to Cubist, Cubist agrees (i) to assume any and
all obligations imposed now or hereafter by any applicable tax law with respect
to any payment, exchange or distribution of Escrowed Securities or other assets
of the Escrow Fund to or on behalf of Cubist or with respect to the performance
of other activities under this Escrow Agreement to the extent that such
activities pertain to Cubist, and (ii) to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
taxes, assessments or other governmental charges pertaining to Cubist, and to
instruct the Escrow Agent with respect to any certifications and governmental
reporting that may be required under any laws or regulations that may be
applicable with respect to Cubist in connection with the performance by the
Escrow Agent of its duties and responsibilities under this Escrow Agreement.
Cubist agrees to indemnify and hold the Escrow Agent harmless from any liability
or obligation on account of taxes, assessments, additions for late payment,
interest, penalties, expenses and other governmental charges that may be
assessed or asserted against the Escrow Agent in connection with or relating to
any payment made to Cubist or other activities performed under the terms of this
Escrow Agreement with respect to Cubist, including without limitation any
liability for the withholding or deduction of (or the failure to withhold or
deduct) the same, and any liability for failure to obtain proper certifications
or to report properly to governmental authorities in connection with this Escrow
Agreement, including costs and expenses (including reasonable legal fees and
expenses), interest and penalties. The foregoing indemnification and agreement
to hold harmless shall survive the termination of this Escrow Agreement.
4. CLAIMS AGAINST ESCROW FUND.
(a) NOTICE OF CLAIM. Cubist will give the Escrow Agent and the
Shareholders' Representative written notice (a "Notice of Claim") of any claim
for indemnification under the Shareholders' Agreement to be paid from the Escrow
Fund (a "Claim"), indicating the amount of indemnification sought and specifying
in reasonable detail the factual basis therefor. If the Damages for which
indemnification is sought are liquidated, Cubist's Notice of Claim will so state
and a charge in such amount will be deemed asserted against the Escrow Fund. If
such Damages are not liquidated, Cubist's Notice of Claim will so state and will
contain its good-faith estimate of the maximum amount of such Claim, and in such
event, a charge in such amount will be deemed asserted against the Escrow Fund.
Cubist will not be entitled to give any Notice of Claim after the date on which
all of the Escrow Fund is released from the escrow hereunder pursuant to, and in
accordance with, the provisions of Section 5(a) hereof. If a Notice of Claim
indicates that the Claim to which such Notice of Claim pertains is a Claim under
Section 4.2(b) of the Shareholders' Agreement (a "Section 4.2(b) Claim"), the
Shareholders' Representative shall promptly upon receipt send a copy of such
Notice of Claim to the applicable Shareholder against whom such Section 4.2(b)
Claim is being made.
(b) OBJECTION TO CLAIM. If within thirty (30) days after the date a
Notice of Claim is delivered to the Escrow Agent and the Shareholders'
Representative in accordance with Section 4(a), the Shareholders' Representative
advises the Escrow Agent in writing that it objects to such
Notice of Claim (or a portion thereof), stating in reasonable detail the basis
of its objection, then unless and until the Shareholders' Representative
withdraws such objection in writing, the Claim ( or the portion thereof so
disputed, as the case may be) to which such Notice of Claim relates will be
deemed to be a "Disputed Claim"; otherwise, such Claim (or portion thereof not
so disputed, as the case may be) will be deemed to be an "Allowed Claim."
(c) PAYMENT OF ALLOWED CLAIMS. As promptly as is practicable, and in
any event within fifteen (15) days, after a Claim (or a portion thereof) is
determined to be an Allowed Claim, or if at the time a Notice of Claim with
respect to such Claim (or portion thereof) was given in accordance with Section
4(a), such Claim was not liquidated in amount, then as promptly as practicable
after the later to occur of (i) such Claim (or portion thereof) becoming an
Allowed Claim in accordance with the provisions of Section 4(b) above and (ii)
such Claim (or portion thereof) becoming liquidated and written notice thereof
is given by Cubist to the Escrow Agent and the Shareholders' Representative, the
Escrow Agent will, FIRST, release from escrow and deliver to Cubist a number of
Escrowed Securities (to the extent Escrowed Securities remain available),
registered to Cubist, and, SECOND, the amount of cash (to the extent cash is
available) in the Escrow Fund, sufficient to satisfy such Claim (or portion
thereof). Notwithstanding the foregoing provisions of this Section 4(c), no
payment shall be made to Cubist under this Section 4(c) with respect to any
Section 4.2(b) Claim until the later of (i) the business day immediately
following the Cut-Off Date (as defined in Section 5(a) below), (ii) the date on
which there are no Disputed Claims arising under Section 4.2(a) of the
Shareholders' Agreement, or (iii) if such Section 4.2(b) Claim is a Disputed
Claim, the date on which such Section 4.2(b) Claim is required to be paid
pursuant to Section 5(b) or Section 5(c) hereof, whereupon the Escrow Agent
shall, FIRST, release from escrow and deliver to Cubist a number of Escrowed
Securities (to the extent that Escrowed Securities remain available) sufficient
to satisfy such Section 4.2(b) Claim (but in no event shall the number of such
Escrowed Securities released be greater than the PRO RATA interest (determined
in accordance with the respective percentage interests in the Escrow Fund of the
Shareholders as set forth on SCHEDULE 1 attached hereto) in the Escrowed
Securities that remain available at such time of the Shareholder against whom
such Section 4.2(b) Claim is made), and SECOND, release from escrow and deliver
to Cubist an amount of cash (to the extent that cash is available) sufficient to
satisfy such Section 4.2(b) Claim (but in no event shall the amount of cash
released be greater than the PRO RATA interest (determined in accordance with
the respective percentage interests in the Escrow Fund of the Shareholders as
set forth on SCHEDULE 1 attached hereto) in such cash available at such time of
the Shareholder against whom such Section 4.2(b) Claim is made). For purposes of
calculating the number of Escrowed Securities to be delivered to Cubist pursuant
to this Section 4(c), the cash value of each share of Cubist Common Stock and
each Exchangeable Share shall be conclusively deemed to equal $47.66 per share
(such dollar figure to be proportionately adjusted to reflect stock splits,
stock dividends, reverse stock splits, and other recapitalizations,
reorganizations and similar events affecting Cubist Common Stock and occurring
after the date of this Escrow Agreement, notice of which having been given to
the Escrow Agent).
(d) NO PAYMENT OF DISPUTED CLAIMS. Except as otherwise expressly
provided herein (including, without limitation, as provided in Section 5(b)
hereof), the Escrow Agent will not release from escrow or deliver any part of
the Escrow Fund in respect of any Disputed Claim.
(e) INVESTMENT PROVISIONS. The Escrow Agent shall invest any cash
portion of the Escrow Fund at, and pursuant to, the joint written direction of
Cubist and the Shareholders' Representative in Eligible Investments and shall
not be responsible for or liable for any loss accruing from any investment made
in accordance herewith. "Eligible Investments" shall mean (i) obligations issued
or guaranteed by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof); (ii) obligations (including certificates of
deposit and banker's acceptances) of any domestic commercial bank having capital
and surplus in excess of $500,000,000; (iii) repurchase obligations for
underlying securities of the type described in clause (i); (iv) shares of money
market funds at least 95% of the assets of which constitute obligations of the
type described in clause (i) above. No investment shall have a term of more than
ninety (90) days. If otherwise qualified, obligations of the Escrow Agent shall
qualify as Eligible Investments. Absent its timely receipt of such specific
written investment instructions from Cubist and the Shareholders'
Representative, the Escrow Agent shall have no obligation or duty to invest (or
otherwise pay interest on) the Escrow Fund. All earnings received from the
investment of the Escrow Fund shall be credited to, and shall become a part of,
the Escrow Fund (and any losses on such investments shall be debited to the
Escrow Fund). The Escrow Agent shall have no liability for any investment
losses, including any losses on any investment required to be liquidated prior
to maturity in order to make a payment required hereunder.
5. RELEASE AND DELIVERY OF ESCROW FUND.
(a) ON CUT-OFF DATE. If Cubist has not delivered a Notice of Claim to
the Escrow Agent and the Shareholders' Representative on or prior to October
23September 29], 2001 (the "Cut-Off Date"), the Escrow Agent will release all of
the remaining Escrow Fund from escrow promptly thereafter, and deliver it to the
Shareholders PRO RATA in accordance with their respective percentage interest in
the Escrow Fund as set forth on SCHEDULE 1. If Cubist has delivered a Notice of
Claim to the Escrow Agent and the Shareholders' Representative on or prior to
the Cut-Off Date, and such Notice of Claim is received by the Escrow Agent on or
prior to such date, then the Escrow Agent will release all of the then remaining
Escrow Fund from escrow on the Cut-Off Date and deliver it to the Shareholders
PRO RATA in accordance with their respective percentage interest in the Escrow
Fund as set forth on SCHEDULE 1, PROVIDED, that the Escrow Agent will retain and
continue to hold in escrow such portion, if any, of the Escrow Fund with respect
to which Cubist has asserted any Claim(s) in accordance with this Escrow
Agreement which have not been resolved (it being understood that such portion,
if any, of the Escrow Fund will continue to be subject to the escrow
contemplated under this Escrow Agreement and will be released from such escrow
only in accordance with the provisions of Section 4(c), Section 5(b) or Section
5(c) hereof), and PROVIDED, FURTHER, that appropriate and equitable adjustments
shall be made to the PRO RATA portion of the Escrow Fund to which each
Shareholder would otherwise be entitled to receive pursuant to this Section 5(a)
so as to take into account any portion of the Escrow Fund that must continue to
be held in escrow pursuant to this Escrow Agreement or must be paid to Cubist,
in either case in connection with any Section 4.2(b) Claim against any
Shareholder (it being understood that such appropriate and equitable adjustments
will be implemented so that each Shareholder against whom a Section 4.2(b) Claim
has not been made receives the PRO RATA portion of the Escrow Fund remaining on
the Cut-Off
Date to which such Shareholder would be entitled under this Section 5(a) if no
Section 4.2(b) Claims had been made against any Shareholder).
(b) AS DIRECTED BY A COURT. Except as otherwise specifically provided
herein, the Escrow Agent will retain the portion of the Escrow Fund representing
Disputed Claims until such time or times as it receives notice that a judgment,
order, or decree has been entered or made by any court with respect to the
disposition of the Escrow Fund (or any portion thereof) that, in the opinion of
legal counsel chosen by the Escrow Agent, is binding upon the Escrow Agent and
not subject to further appeal or modification before compliance is required
therewith, in which case the Escrow Agent will comply with such judgment, order,
or decree.
(c) AS DIRECTED BY THE PARTIES. Notwithstanding any other provision of
this Escrow Agreement, the Escrow Agent will release all or any part of the
Escrow Fund and deliver it in accordance with written instructions duly executed
(in counterparts or otherwise) by both Cubist and the Shareholders'
Representative.
6. LIABILITY OF ESCROW AGENT. This Escrow Agreement is entered into by
the Escrow Agent as an accommodation to, and solely for the benefit of, Cubist
and the Shareholders; and no other person will have any right to enforce or
receive the benefits of this Escrow Agreement other than enforcement hereof by
the Shareholders' Representative on behalf of the Shareholders. The Escrow Agent
will be obligated to perform only such duties as are expressly set forth in this
Escrow Agreement on its part to be performed, each of which is ministerial (and
shall not be construed to be fiduciary) in nature, and no implied duties or
obligations of any kind shall be read into this Escrow Agreement against or on
the part of the Escrow Agent, and will not be liable to any person or entity
whatsoever, except for actual damages caused by its own gross negligence, bad
faith or willful misconduct, and in any event will not be liable for any
punitive incidental or consequential damages, including without limitation lost
profits. Each Interested Party acknowledges and agrees that the Escrow Agent
shall not be responsible for the Acquisition Agreement or the Plan of
Arrangement or for determining or compelling compliance therewith and shall not
be obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with acceptable indemnification. The Escrow Agent shall have
no more or less responsibility or liability on account of any action or omission
of any book-entry depository, securities intermediary or other subescrow agent
employed by the Escrow Agent than any such book-entry depository, securities
intermediary or other subescrow agent has to the Escrow Agent, except to the
extent that such action or omission of any book-entry depository, securities
intermediary or other subescrow agent was caused by the Escrow Agent's own
negligence, bad faith or willful misconduct in breach of this Escrow Agreement.
7. INDEMNIFICATION OF ESCROW AGENT. Each of Cubist and the
Shareholders, severally and not jointly, will indemnify, defend, and hold
harmless the Escrow Agent (and its respective officers, directors, shareholders,
partners, employees, agents, and other representatives) from and against all
damages, losses, costs and expenses (including, without limitation, reasonable
attorney's fees and other defense costs and expenses ) related to or arising,
directly or indirectly, out of any claim made by any Interested Party, any
Shareholder or any third party against the Escrow Agent in connection with this
Escrow Agreement or with the
administration by the Escrow Agent of its duties hereunder, excepting only such
damages, losses, costs and expenses (including, without limitation, attorney's
fees and other defense costs and expenses ) as may be finally determined by a
court of competent jurisdiction to have been caused directly by the Escrow
Agent's gross negligence, bad faith or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Escrow Agreement. In the event that Cubist, on the one hand, or the
Shareholders, on the other hand, are required to indemnify the Escrow Agent
pursuant to this Section 7, then, without altering or limiting the liability of
any of the Shareholders or Cubist to the Escrow Agent hereunder, Cubist or the
Shareholders, as the case may be, may seek indemnification for such payment
against the Shareholders or Cubist, respectively, if and only to the extent that
Cubist or the Shareholders, as the case may be, are entitled to indemnification
therefor in accordance with the provisions of the Shareholders' Agreement. In
the event that any of Cubist or the Shareholders shall be obligated or required
to indemnify the Escrow Agent pursuant to this Section 7, then, without limiting
the generality of the immediately preceding sentence if and to the extent
applicable, such indemnifying person shall have the right to seek contribution
from Cubist and/or any Shareholder, as applicable, if and to the extent that
Cubist and/or such Shareholder, as applicable, are also responsible for the
facts and circumstances that gave rise to the indemnification obligation to the
Escrow Agent. The amount of any such contribution obligation or liability among
Cubist and/or the Shareholders shall be equitably determined taking into account
the degree of fault of Cubist and/or the Shareholders.
8. RELIANCE BY ESCROW AGENT. In the absence of gross negligence, bad
faith or willful misconduct, the Escrow Agent will not incur any liability for
(a) acting or failing to act in good-faith reliance upon any written instruction
(including, without limitation, wire transfer instructions, whether incorporated
herein or provided in a separate written instruction), notice, or other document
required or permitted under this Escrow Agreement and believed by it to be
genuine and to have been signed by the proper person(s), without any obligation
on its part to make any additional inquiry or investigation, and (b) acting or
failing to act in good-faith reliance upon the advice of legal counsel.
9. RESIGNATION OR REMOVAL OF ESCROW AGENT. The Escrow Agent will have
the right to resign as Escrow Agent hereunder at any time, upon 30 days prior
written notice to Cubist and the Shareholders' Representative; and the Escrow
Agent may be removed by written agreement of Cubist and the Shareholders'
Representative delivered to the Escrow Agent, which removal will be effective
not earlier than 30 days after such delivery to the Escrow Agent, unless the
Escrow Agent consents in writing to an earlier effective time. Before the
effectiveness of any such resignation or removal, Cubist and the Shareholders'
Representative will jointly appoint another person, reasonably acceptable to
both of them, to act in the resigning or removed Escrow Agent's stead hereunder.
If Cubist and the Shareholders' Representative fail to agree upon and appoint
such successor Escrow Agent before the effectiveness of any such resignation or
removal, then unless otherwise instructed by written notice duly executed by
Cubist and the Shareholders' Representative, the resigning or removed Escrow
Agent will deposit the Escrow Fund with a court of competent jurisdiction and
will institute an interpleader proceeding against Cubist and the Shareholders'
Representative on behalf of the Shareholders, upon which such Escrow Agent will
be relieved of all future obligations hereunder.
10. TERMINATION, AMENDMENT, AND MODIFICATION. This Escrow Agreement
will terminate when the entire Escrow Fund has been distributed in accordance
with the terms hereof. Prior to such time, this Escrow Agreement may be
terminated, amended, or modified only by a written agreement (in counterparts or
otherwise) duly executed and delivered by Cubist, the Shareholders'
Representative and the Escrow Agent.
11. DISPUTES. In the event that there arises any dispute with respect
to this Escrow Agreement or any transaction or matter in connection with this
Escrow Agreement, including without limitation the respective rights of Cubist
and the Shareholders to the release or return of all or any part of the Escrow
Fund, the Escrow Agent is authorized (but will not be required) (a) to retain
possession of all or any part of the Escrow Fund until such dispute is finally
resolved, including without limitation, resolution by mutual agreement of the
disputants or by the final judgment, order, or decree of a court of competent
jurisdiction after the time for appeal has expired and without any rights of
appeal having been perfected; and/or (b) to deposit all or any part of the
Escrow Fund with a court of competent jurisdiction and institute an interpleader
proceeding against Cubist and the Shareholders' Representative on behalf of the
Shareholders, upon which the Escrow Agent's future obligations under this Escrow
Agreement will immediately terminate. The Escrow Agent is authorized (but will
not be required) to institute, prosecute, intervene in, and/or defend any such
proceedings.
12. NOTICES. All notices, requests, payments, instructions, or other
documents to be given hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have furnished to the sending party for the purpose pursuant to this section):
(i) If to Cubist, to:
Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, MA 02139
Attention: President and Chief Executive Officer
Telecopier No. 617-234-5150
with a copy sent at the same time and by the same means to:
Julio E. Vega, Esq.
Matthew J. Cushing, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier No. (617) 951-8736
(ii) If to any of the Shareholders and/or the Shareholders'
Representative, to the Shareholders' Representative at:
MDS Capital Corp.
100 International Boulevard
Toronto, Ontario M9W 6J6
Attn: Legal Department
Telecopier No.: 416-213-4232
with a copy sent at the same time and by the same means to:
MDS Capital Corp.
555 West 8th Avenue
Suite 305
Vancouver, BC V5Z 1C6
Attn: Mr. Darrell Elliott
Telecopier No.: 604-872-2977
(iii) If to Escrow Agent:
by first class mail, to:
State Street Bank and Trust Company
Global Investors Services Group
Corporate Trust Department
2 Avenue de LaFayette
Boston, Massachusetts 02102-0778
Attention: Cubist/TerraGen Escrow
if by fax, addressed as
above and sent to
the following telecopy
number:
Fax: 617-662-5374
if by hand, certified or
registered mail or overnight
courier or delivery, to:
State Street Bank and Trust Company
Global Investors Services Group
Corporate Trust Department
2 Avenue DeLafayette
Boston, Massachusetts 02111-1724
Attention: Cubist/TerraGen Escrow
13. GOVERNING LAW. This Escrow Agreement will be governed by and
interpreted and construed in accordance with the internal laws of The
Commonwealth of Massachusetts, as applied to contracts under seal made, and
entirely to be performed, within The Commonwealth of Massachusetts, and without
reference to principles of conflicts or choice of laws.
14. COUNTERPARTS. This Escrow Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered will be
an original, but all of which together will constitute one and the same
agreement. In pleading or proving this Escrow Agreement, it will not be
necessary to produce or account for more than one such counterpart.
15. ENTIRE AGREEMENT. This Escrow Agreement, together with the
Acquisition Agreement, the Plan of Arrangement and the Shareholders Agreement,
contains the entire understanding and agreement among the parties, and
supersedes any prior understandings or agreements among them, or between or
among any of them, with respect to the subject matter hereof.
16. CAPTIONS. The captions of sections or subsections of this Escrow
Agreement are for reference only and will not affect the interpretation or
construction of this Escrow Agreement.
17. FEES AND EXPENSES. Cubist agrees: (i) to pay or reimburse the
Escrow Agent for its reasonable attorney's fees and expenses incurred in
connection with the preparation of this Escrow Agreement and (ii) to pay the
Escrow Agent's compensation for its normal services hereunder in accordance with
the fee schedule attached hereto as SCHEDULE 2, which may be subject to change
hereafter on an annual basis. Cubist agrees to reimburse the Escrow Agent on
demand for all costs and expenses incurred in connection with the administration
of this Escrow Agreement or the escrow created hereby or the performance or
observance of its duties hereunder which are in excess of its compensation for
normal services hereunder, including without limitation, payment of any
reasonable legal fees and expenses incurred by the Escrow Agent in connection
with the resolution of any claim by any party hereunder.
18. BENEFITS OF AGREEMENT; NO ASSIGNMENTS; NO THIRD-PARTY
BENEFICIARIES.
(a) This Escrow Agreement will bind and inure to the benefit of the
parties hereto and their respective heirs, successors, and permitted assigns.
(b) No party will assign any rights or delegate any obligations
hereunder without the consent of the other parties, other than in the case of
Cubist, in connection with a (i) acquisition or consolidation of Cubist or (ii)
sale of the assets to which this transaction relates (provided that, in the
event of such sale of assets, the buyer agrees in writing with the Shareholders'
Representative to be bound by the obligations of Cubist under the Acquisition
Documents) and any attempt to do so will be void.
(c) Nothing in this Escrow Agreement is intended to or will confer any
rights or remedies on any person other than the parties hereto and their
respective heirs, successors, and permitted assigns.
19. EQUITABLE RELIEF. Each of the parties hereby acknowledges that any
breach by him or it of his or its obligations under this Escrow Agreement would
cause substantial and irreparable damage to the parties, and that money damages
would be an inadequate remedy therefor, and accordingly, acknowledges and agrees
that each other party will be entitled to equitable relief to prevent the breach
of such obligations.
20. CONSTRUCTION. The language used in this Escrow Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction will be applied against any party.
21. WAIVERS. No waiver of any breach or default hereunder will be valid
unless in a writing signed by the waiving party. No failure or other delay by
any party exercising any right, power, or privilege hereunder will be or operate
as a waiver thereof, nor will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege.
22. CONSENT TO JURISDICTION AND SERVICE. Each of the parties hereto
hereby absolutely and irrevocably consents and submits to the jurisdiction of
the courts in The Commonwealth of Massachusetts and of any Federal court located
in said Commonwealth in connection with any actions or proceedings brought
against any of the parties hereto (or each of them) arising out of or relating
to this Escrow Agreement. In any such action or proceeding, each party hereto
hereby absolutely and irrevocably (i) waives any objection to jurisdiction or
venue, (ii) waives personal service of any summons, complaint, declaration or
other process, and (iii) agrees that the service thereof may be made by
certified or registered first-class mail directed to such party, as the case may
be, at its address in accordance with Section 12 hereof.
23. FORCE MAJEURE. The Escrow Agent shall not be responsible for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots, acts
of war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
24. REPRODUCTION OF DOCUMENTS. This Escrow Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was
made by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Escrow Agreement has been executed and
delivered under seal as of the date first above written.
CUBIST PHARMACEUTICALS, INC.
By /S/ SCOTT M. ROCKLAGE
---------------------------------------------
Name: Scott M. Rocklage
Title: Chairman of the Board, Chief Executive
Officer and President
STATE STREET BANK AND TRUST
COMPANY, Escrow Agent
By /S/ CHI C. MA
---------------------------------------------
Name: Chi C. Ma
Title: Vice President
/S/ DARRELL ELLIOTT
------------------------------------------------
Name: Darrell Elliott, in his capacity as a
Shareholders' Representative
SCHEDULE 1
SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
CUBIST SHARES TO EXCHANGEABLE SHARES % INTEREST IN TOTAL
STOCKHOLDER ESCROW TO ESCROW ESCROW SHARES
- --------------------------------------------------------------------------------------------------------------
Canadian Medical Discoveries Fund Inc. 12,936 25.2%
- --------------------------------------------------------------------------------------------------------------
Brant Investments Limited 476 0.92%
- --------------------------------------------------------------------------------------------------------------
MDS Ventures Pacific Inc. 3,179 6.19%
- --------------------------------------------------------------------------------------------------------------
S.R. One, Limited 8,457 16.48%
- --------------------------------------------------------------------------------------------------------------
3I Bioscience Investment Trust PLC 7,807 15.21%
- --------------------------------------------------------------------------------------------------------------
Business Development Bank of Canada 5,441 10.6%
- --------------------------------------------------------------------------------------------------------------
Technology Fund Pte Ltd 3,583 6.98%
- --------------------------------------------------------------------------------------------------------------
University of British Columbia 999 1.94%
- --------------------------------------------------------------------------------------------------------------
ChromaXome Corporation 1,823 3.55%
- --------------------------------------------------------------------------------------------------------------
Xenova Discovery Limited 3,038 5.92%
- --------------------------------------------------------------------------------------------------------------
David Wood 198 0.39%
- --------------------------------------------------------------------------------------------------------------
Brian McGowan 60 0.12%
- --------------------------------------------------------------------------------------------------------------
Daniel Vapnek 60 0.12%
- --------------------------------------------------------------------------------------------------------------
GATX/MM Ventures 2,278 4.44%
- --------------------------------------------------------------------------------------------------------------
Julian Davies 533 1.04%
- --------------------------------------------------------------------------------------------------------------
Joseph McDermott 127 0.24%
- --------------------------------------------------------------------------------------------------------------
Barbara Waters 74 0.14%
- --------------------------------------------------------------------------------------------------------------
Vivian Miao 53 0.10%
- --------------------------------------------------------------------------------------------------------------
Geeta Saxena 42 0.08%
- --------------------------------------------------------------------------------------------------------------
Wai Ho Yap 42 0.08%
- --------------------------------------------------------------------------------------------------------------
Kah Tong Seow 42 0.08%
- --------------------------------------------------------------------------------------------------------------
Xiang Li 27 0.05%
- --------------------------------------------------------------------------------------------------------------
Tuck Wah Soong 17 0.03%
- --------------------------------------------------------------------------------------------------------------
Christopher Radomski 14 0.03%
- --------------------------------------------------------------------------------------------------------------
Karen Lu 10 0.02%
- --------------------------------------------------------------------------------------------------------------
Rosario Bauzon 4 0.01%
- --------------------------------------------------------------------------------------------------------------
Yue Wang 2 0.01%
- --------------------------------------------------------------------------------------------------------------
Anja Rabenau 2 0.01%
- --------------------------------------------------------------------------------------------------------------
Vera Webb 2 0.01%
- --------------------------------------------------------------------------------------------------------------
Robert How 2 0.01%
- --------------------------------------------------------------------------------------------------------------
SCHEDULE 2
FEES
ACCEPTANCE FEE: Waived
ANNUAL FEE: $3,500.00 per year or part thereof,
$35.00 per holder
WIRE FEE: $20.00 per wire
INVESTMENT FEE: $65.00 per buy/sell
direct investments in treasuries,
CD's, CP, Repo's, etc. or
SWEEP FEE: 40 basis points per annum of
(SSgA or selected other Money the average daily net assets
Market Funds)
OUT-OF-POCKET EXPENSES: At Cost
LEGAL FEE: At Cost
(State Street will use Rob Coughlin of Peabody & Arnold as Counsel)