Document:

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES ACT OF 1934, AS
AMENDED.

                                                                   Exhibit 10.23

                 MASTER SOFTWARE LICENSE AND SERVICES AGREEMENT

      This Software License Agreement ("Agreement") is made by and between
eSoft, Inc., with offices at 295 Interlocken Boulevard, Suite 500, Broomfield,
Colorado 80021 ("eSoft"), and Gateway, Inc., with offices at 4545 Towne Centre
Court, San Diego, CA, 92121 ("Gateway"). eSoft and Gateway are each referred to
below as a "Party," and collectively as the "Parties." This Agreement becomes
effective on February 22, 2000 ("Effective Date").

RECITALS

A.    Gateway develops and markets a wide variety of computer hardware and
      software products and computer-related services in various market
      segments.

B.    eSoft provides a family of Linux-based Internet software, appliances and
      services that enable small to medium-sized businesses to reliably connect
      with and take advantage of the Internet.

C.    The Parties now wish to set forth the terms and conditions under which
      Gateway and eSoft enter into certain licensing and other business
      arrangements, as described in more detail below.

AGREEMENT

NOW, THEREFORE, in consideration of and conditioned on the Recitals set forth
above and incorporated in this Agreement, the covenants stated herein, and for
other good and valuable consideration, the receipt and sufficiency of which the
Parties hereby acknowledge, the Parties agree as follows:

1.    DEFINITIONS

      1.1   "Affiliate" means any legal entity that is a brother or sister
            company, i.e., a Subsidiary of the same parent entity.

      1.2   "Confidential Information" shall have the meaning ascribed in that
            certain Confidential Disclosure Agreement between eSoft and Gateway,
            dated June 1, 1999 (the "CDA").

      1.3   "Derivative Works" means any work that would be deemed a Derivative
            Work under the Copyright Act, Title 17 of the U.S. Code. In
            addition, Derivative Works also include any modifications that might
            be covered by trade secret or patent law.

      1.4   "Distributors" means resellers, distributors, original equipment
            manufacturers ("OEMs"), value-added resellers ("VARs"), system
            integrators, dealers, agents, and subdistributors.

      1.5   "eSoft Deliverables" means the deliverables associated with
            Project(s), if applicable.

      1.6   "eSoft Intellectual Property Rights" means eSoft's rights (including
            under licenses from third parties), now or hereafter existing, in
            any (i) patents and patent applications that would, but for the
            license grant to Gateway hereunder, be infringed by using,
            distributing, or sublicensing the eSoft Software or Managed Services
            in the manner permitted under the license grants hereof, (ii)
            copyrights in the eSoft Software or Managed Services, and (iii)
            trade secrets in or necessary to the eSoft Software or Managed
            Services.

      1.7   "eSoft Software" means the computer program(s) in Object Code form,
            referred to as "TEAM Internet" (including but not limited to those
            models currently referred to by the following numerical
            designations: 100, 200 and 300), and any other software as further
            described in Exhibit A of this Agreement, and all Enhancements,
            Upgrades, Major Releases, Translations, and all Derivative Works
            created therefrom.
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      1.8   "eSoft Technical Information" means the technical information and
            associated documentation specified in Exhibit A.

      1.9   "Enhancement" means, with respect to the eSoft Software, any support
            or bug fixes, error corrections, patches, workarounds, minor
            modifications and releases, added or modified drivers, APIs, and
            tools for publishing in Object Code form, including any updated
            technical notes, Technical Documentation.

      1.10  "Independent Development" means any engineering efforts undertaken
            by or on behalf of either party, but specifically excluding those
            efforts undertaken by a party on behalf of the other party in
            consideration for payment by the party receiving such services
            (including, without limitation, services provided pursuant to a
            Statement of Work, and consulting services provided herein).

      1.11  "Gateway" means Gateway, Inc., and any worldwide Gateway Subsidiary
            or Affiliate.

      1.12  "Gateway Deliverable" means all software programs, Source Code and
            Object Code, files, tapes, disks, and related user documentation,
            originally developed or adapted for Gateway under a Statement of
            Work.

      1.13  "Gateway Intellectual Property Rights" means Gateway's rights
            (including under licenses from third parties), now or hereafter
            existing, in any (i) patents and patent applications that would, but
            for the licenses grant to eSoft hereunder, be infringed by using,
            distributing, or sublicensing any Gateway Product or Gateway
            Deliverable in the manner permitted under the license grants hereof,
            (ii) copyrights in any Gateway Products or Gateway Deliverable, and
            (iii) trade secrets in or necessary to the Gateway Products or
            Gateway Deliverable.

      1.14  "Gateway Products" means any or all current and future hardware or
            software products and/or services that are developed, provided,
            rendered, manufactured, marketed, distributed, licensed, or sold by
            or for Gateway and/or its Distributors, including products
            manufactured by Gateway's Distributors under license from Gateway.

      1.15  "Licensed Product" means the eSoft Software, eSoft Technical
            Information, Technical Documentation, and eSoft Deliverables
            licensed to Gateway under this Agreement.

      1.16  "Major Release" means a significantly enhanced or revised release of
            the eSoft Software, as customarily signified in the software
            industry by a change in the digits which appear immediately to the
            left of the decimal point in the version number, or pursuant to
            eSoft's customary manner of designation.

      1.17  "Managed Services" means those remote management services provided
            through the wide area network (WAN) interface provided by eSoft as
            described on Exhibit A, that are marketed and sold by Gateway to
            Distributors, and end users.

      1.18  "Object Code" means software, including all computer programming
            code in binary form, that is directly executable by a computer after
            suitable processing but without the intervening steps of compilation
            or assembly, and all help, message, overlay files and all
            documentation related thereto, whether in electronic or hard copy
            form.

      1.19  "OEM" or "Original Equipment Manufacturer" means any Party that
            licenses a software product and then re-labels that product or
            packages that product with other products for distribution.

                                                                               2
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      1.20  "Phase" means any of the various segments or portions into which a
            Project is divided, as described in a Statement of Work, if
            applicable.

      1.21  "Product Acceptance" means the process governing Gateway's
            evaluation and acceptance of the eSoft Deliverables, as that Product
            Acceptance process is set forth herein.

      1.22  "Project" means the development effort described in a Statement of
            Work, through and including acceptance by Gateway.

      1.23  "Source Code" means the software code from which Object Code is
            compiled. Source Code includes the commented software source code
            and design documentation for the relevant software, as well as other
            materials, in both machine readable and hard-copy form, that are
            used to develop or test the software. Source Code includes, for
            example, relevant electronically readable source documentation,
            design documents, data models, help materials, tutorial programs and
            any information or programs necessary to compile the Source Code
            into executable, fully-functioning Object Code.

      1.24  "Statement of Work" means a document agreed upon and executed by the
            Parties that sets for the terms and conditions related to certain
            development work or other consulting services provided by eSoft to
            Gateway hereunder.

      1.25  "Subsidiary" means any legal entity, more than fifty percent (50%)
            of whose outstanding shares or securities representing the right to
            vote for the election of directors or other managing authority are,
            now or hereafter, owned or controlled, directly or indirectly, by a
            Party (but only so long as such conditions exist).

      1.26  "Support" means the ongoing support and maintenance obligations for
            the eSoft Software described herein, which services eSoft will
            provide to Gateway.

      1.27  "Technical Documentation" means any engineering and interface
            documentation in connection with eSoft Software or Managed Services,
            including any Translations and Derivative Works therefrom.

      1.28  "Territory" means those geographic markets into which the Gateway
            may market and license the eSoft Software and Managed Services.

      1.29  "Translations" means any translations of the eSoft Software from one
            language or dialect into another.

      1.30  "Upgrade" means products, features and developments (including Major
            Releases) which enhance or complement the functionality of the eSoft
            Software, which result from the Independent Development activities
            of or on behalf of eSoft.

2.    OWNERSHIP

      2.1   Ownership of eSoft Software. As between the parties, Gateway
            acknowledges and agrees that nothing in this Agreement grants any
            ownership right to Gateway in or to the eSoft Software. All right,
            title and interest in the eSoft Software shall be deemed to vest in
            eSoft.

      2.2   Ownership of the Gateway Product(s). As between the parties, eSoft
            acknowledges and agrees that nothing in this Agreement grants any
            ownership right to eSoft in or to the Gateway Product(s).
            Accordingly, eSoft acknowledges and agrees that Gateway owns

                                                                               3
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            and shall own all right, title, and interest in and to all Gateway
            Products, whether now existing or hereafter created.

3.    LICENSES

      3.1   eSoft Software. Subject to the terms and conditions of this
            Agreement, including, but not limited to the distribution provisions
            in Section 4 below, eSoft hereby grants to Gateway a nonexclusive,
            royalty-bearing, irrevocable (except for material breach),
            perpetual, transferable license under eSoft's Intellectual Property
            Rights in the eSoft Software (as defined in Exhibit A) and
            Enhancements, to make, use, copy, translate, perform, display, and
            to distribute the eSoft Software, Enhancements, or Derivative Works
            therefrom (directly or indirectly) in Object Code form, as installed
            upon or sold as a [...***...] Gateway Products; and to make, use,
            sell, offer for sale, import and export Gateway Products that
            include a pre-installed version of the Licensed Products, and to
            sublicense any of the foregoing rights with the right to grant
            further sublicenses in the Territory set forth in Exhibit A. The
            foregoing notwithstanding, Gateway agrees that it shall not have the
            right to distribute the eSoft Software on a [...***...] basis,
            except that: (i) Gateway shall have the right to distribute
            Enhancements, Upgrades, and Major Releases on a stand-alone basis to
            its Distributors and end-users for use on a Gateway Product that was
            initially purchased as a bundle that included a Licensed Product;
            and (ii) Gateway may distribute on a stand-alone basis media
            containing a Licensed Product to its Distributors or end-users as a
            backup copy or a replacement for defective media initially received
            by such Distributors or end-users.

      3.2   eSoft Technical Information and Technical Documentation. Subject to
            the terms and conditions of this Agreement, eSoft hereby grants to
            Gateway a nonexclusive, irrevocable (except for material breach),
            non-royalty bearing, perpetual, transferable license under eSoft's
            Intellectual Property Rights to make, use, copy, perform, display
            and create Derivative Works from the eSoft Technical Information and
            Technical Documentation and to sell and distribute the Technical
            Documentation and Derivative Works therefrom, whether directly or
            indirectly, and to sublicense any of the foregoing rights with the
            right to grant further sublicenses.

      3.3   License to Gateway for Managed Services. eSoft agrees to grant to
            Gateway a nonexclusive, transferable, license under eSoft
            Intellectual Property Rights to use, market and sell the Managed
            Services as described in Exhibit A.

      3.4   No Trademark Licenses. Nothing in this Agreement grants to either
            Party any express or implied license or obligation to use any of the
            other Party's trademarks, service marks, trade names, logos, or any
            other corporate or product identifier of the other Party without the
            other Party's express prior written permission. The Parties will
            negotiate in good faith and complete within a reasonable time after
            the execution of this Agreement, a mutually agreeable trademark
            license agreement.

      3.5   Reservation of Rights. All rights not expressly granted in this
            Agreement are reserved to the owner, and no other licenses are
            granted by implication, estoppel, or otherwise.

      3.6   Restriction on Manner, Market Segment, Territory, or Media. Gateway
            may distribute and have distributed Licensed Products (a) directly
            to any end-user or indirectly through Gateway's Distributors; (b) in
            the Territory specified in Exhibit A, (c) for use with any operating
            system, microprocessor architecture or platform and (d) in or
            through any and all media or manner of delivery, whether now
            existing or hereafter devised, including but not limited to
            diskette, CD-ROM, DVD, or other fixed storage media or via the
            Internet or any variation to or successor thereof, or any intranet,
            extranet or computer network of any kind.

***CONFIDENTIAL TREATMENT REQUESTED
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4.    COMPENSATION. Subject to eSoft's compliance with the terms and conditions
      of this Agreement, and subject to Section 8 below, in consideration for
      the rights and licenses granted by eSoft and the obligations assumed
      hereunder, Gateway will compensate eSoft as follows:

      4.1   Software License and Royalty Fees. The license fee royalties
            applicable to the license grants set forth in Sections 3.1 and 3.2
            above shall be payable on a quarterly basis in arrears and shall be
            paid in accordance with the License Fee schedule set forth on
            Exhibit A attached hereto for each Gateway end-user that pays a
            [...***...] subscription fee that includes a license to the eSoft
            Software. Gateway shall submit a quarterly report indicating the
            number of end-users who paid a [...***...] subscription fee that
            includes licenses to the eSoft Software during the prior quarter.
            Each quarterly report shall specify by Module ID the number of
            licenses included in such [...***...] subscription fees. Payments
            shall be received by eSoft no later than [...***...] days following
            the end of each calendar quarter (e.g. no later than [...***...]).

      4.2   Managed Services Fees. Gateway shall pay on a quarterly basis in
            arrears the Managed Services fees as set forth on Exhibit A attached
            hereto. Such payment shall accompany the License Fee report
            described in 4.1 above.

      4.3   Time and Materials/Consulting Services. Any time and materials or
            consulting services provided under a Statement of Work shall be
            compensated at the rates set forth in Exhibit A attached hereto.
            Such payments shall be made in full within sixty (60) days of
            Gateway's receipt of an invoice from eSoft. Each invoice shall set
            forth the fees specified in Appendix A for the consulting services
            provided, the date such services are rendered, a description of the
            services rendered, the name of the individual consultant rendering
            the services, the dollar amount associated with such services, and
            the Project such services are attributable to. Any invoices received
            more than sixty (60) days after the completion of each Phase of a
            Project (or, if no Project is specified in the applicable Statement
            of Work, more than sixty (60) days after the completion of the
            services described in such invoices), shall not be due and payable.
            Gateway agrees to reimburse eSoft for any pre-approved travel and
            living expenses associated with such activities, using Gateway's
            corporate travel policy, a copy of which is attached hereto as
            Exhibit C.

5.    MOST FAVORED CUSTOMER

      5.1   eSoft agrees to treat Gateway as a most favored customer. eSoft
            represents that all of the license and consulting fees, prices,
            warranties, benefits and other terms set forth hereunder are
            equivalent to or no less favorable than the terms being offered by
            eSoft to its other customers and distributors who order similar or
            lower volumes of the Licensed Product(s). If, during the term of
            this Agreement or any renewal hereof, eSoft agrees to provide more
            favorable terms than are provided hereunder to a customer who orders
            similar or lower volumes of the Licensed Product(s), then this
            Agreement shall be deemed appropriately amended to provide such
            terms to Gateway on a going forward basis. Subject to its
            confidentiality obligations to such customer, eSoft will promptly
            notify Gateway in writing if, during the term of this Agreement, it
            agrees to provide more favorable terms to a customer who orders, or
            commits to order, higher volumes of the Licensed Product(s). Such
            notice will include the nature of the terms offered to such customer
            and the level of commitment made by the customer.

      5.2   eSoft's pertinent records may be examined by an independent third
            party at Gateway's expense under an obligation of confidentiality
            for the purpose of determining eSoft's compliance with this
            Agreement. Such examination shall be conducted during regular
            business hours at eSoft's facilities, with ten (10) days prior
            written notice, and shall be conducted so as not to interfere with
            eSoft's normal business activities. Such examinations will not occur
            more frequently than semi-annually. If any examination reveals that
            eSoft has not been in compliance with the preceding paragraph, eSoft
            shall

***CONFIDENTIAL TREATMENT REQUESTED
                                                                               5
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            promptly (i) provide Gateway with any refund or credits due as
            established during the examination; and (ii) reimburse Gateway for
            any reasonable and actual expenses incurred in connection with the
            examination. If such examination reveals that eSoft has been in
            compliance with the preceding paragraph, Gateway shall bear all
            costs of such examination.

      5.3   It is the intent of the Parties that they will work together in good
            faith, on a non-exclusive basis, to pursue the integration of third
            party, business-to-business application service provider ("ASP")
            software onto a Gateway Product that includes one or more Licensed
            Products. Subject to any confidentiality obligations to third
            parties, each Party will use commercially reasonable efforts to
            notify the other Party of opportunities for integration described in
            the preceding sentence. Without limiting the non-exclusive nature of
            the obligation described in this Section 5.3, eSoft acknowledges and
            agrees that Gateway may elect to pursue opportunities with ASPs on
            its own or with other third parties if Gateway decides, in its sole
            discretion, that it wishes to pursue a strategic relationship with
            such ASP or that the integration of an ASP's software with the eSoft
            Software is commercially or technically impracticable.

6.    SUPPORT AND UPDATES

      6.1   Software and Maintenance Support. During the term of this Agreement,
            in connection with the eSoft Software, eSoft shall provide
            maintenance and support to Gateway in accordance with the provisions
            of Exhibit B, Maintenance and Support Obligations.

      6.2   Quarterly Meetings. During the term of this Agreement, in connection
            with eSoft's maintenance and support obligations, as set forth in
            Exhibit B, eSoft's technical support contact shall meet with
            Gateway's engineering team on at least a quarterly basis to discuss
            possible feature enhancements to the eSoft Software.

      6.3   Error Notification; Upgrades; Major Releases. During the term of
            this Agreement, in connection with eSoft's maintenance and support
            obligations, as set forth in Exhibit B, eSoft shall immediately
            notify Gateway in writing of any bugs or errors it discovers in the
            eSoft Software and must make all reasonable efforts to correct any
            such bugs or errors in an expedient fashion. In addition, eSoft will
            also use reasonable efforts to continually increase the features and
            improve the quality, utility, efficiency and reliability of the
            eSoft Software via Upgrades. eSoft will provide all Enhancements to
            Gateway at no additional charge within a reasonable time after they
            are available, but in no event later than thirty (30) days before
            eSoft makes such Enhancements generally available. eSoft agrees to
            advise Gateway of any Upgrade or Major Release at least ninety (90)
            days prior to the scheduled release date of such Upgrade or Major
            Release. Unless eSoft distributes such Enhancement, Upgrade or Major
            Release through a software download or other electronic means, eSoft
            also agrees to provide Gateway, at no additional charge, with a
            golden master diskette, CD or DVD ROM of each Enhancement, Upgrade
            or Major Release at least sixty (60) days before eSoft releases it
            for general availability.

7.    TRAINING AND CONSULTING

      7.1   Training and Support Services. During the term of this Agreement, at
            Gateway's request, eSoft shall provide training services to Gateway
            in accordance with Exhibit B, Maintenance and Support Obligations.

      7.2   Consulting. To the extent that Gateway requires consulting services
            to be performed by eSoft, such consulting services shall be
            addressed in a Statement of Work. Each Statement of Work shall be
            numbered sequentially, such as "Statement of Work #1," "Statement of
            Work #2," etc.

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      7.3   Ownership of Work Product. Each Statement of Work shall specify
            whether each item of work product that is produced under such
            Statement of Work is a Gateway Deliverable or an eSoft Deliverable.
            Subject to the terms and conditions of this Agreement, eSoft hereby
            grants to Gateway a nonexclusive, royalty-bearing, irrevocable
            (except for material breach), perpetual, transferable license under
            eSoft's Intellectual Property Rights in the eSoft Deliverables to
            make, use, copy, translate, perform, display, and to distribute the
            eSoft Deliverables or Derivative Works created therefrom (directly
            or indirectly); and to make, use, sell, offer for sale, import and
            export Gateway Products that include a pre-installed version of any
            eSoft Deliverable; and to sublicense any of the foregoing rights
            with the right to grant further sublicenses in the Territory set
            forth in Exhibit A. Upon payment of all fees related to each Gateway
            Deliverable, Gateway shall own all right, title and interest in and
            to all Gateway Deliverables. All Gateway Deliverables shall be
            deemed "works made for hire," and shall be owned by Gateway for its
            own internal use. To the extent that any Gateway Deliverable may
            not, by operation of law, be deemed a "work made for hire," eSoft
            hereby assigns to Gateway all right, title and interest in and to
            all Gateway Deliverables, including all copyrights and other
            intellectual property rights inherent therein or related thereto.
            eSoft does not convey nor does Gateway obtain any right in any
            pre-existing materials proprietary to eSoft which eSoft may utilize
            or provide pursuant to the consulting services, or other materials
            [...***...] for, or [...***...] by, Gateway under this Agreement,
            except as otherwise agreed upon in writing by the Parties. eSoft
            shall be free to use its general knowledge, skills and experience
            and any ideas, concepts, know-how and techniques related to eSoft's
            general consulting services in the course of providing consulting
            services. The Parties will cooperate with each other to execute any
            documents necessary to achieve the objectives of this Section 7.3.

8.    PRODUCT ACCEPTANCE. With respect to the eSoft Software or eSoft
      Deliverables developed pursuant to the Statement of Work, the provisions
      governing acceptance of such eSoft Software or eSoft Deliverables are as
      follows:

      8.1   Initial Response. Upon receipt by Gateway of any eSoft Software or
            eSoft Deliverable, Gateway has [...***...] working days in which to
            reject or accept the eSoft Software or eSoft Deliverable. During
            this period, Gateway will evaluate the eSoft Software or eSoft
            Deliverable and test it against the relevant Statement of Work,
            warranty or specifications, as applicable. The foregoing
            notwithstanding, during such [...***...] day period, Gateway shall
            provide eSoft with sufficient constructive feedback to enable eSoft
            to assess the breadth of the issue identified by Gateway.

      8.2   Acceptance.

            8.2.1 Acceptance of eSoft Software. Gateway shall accept or reject
                  eSoft Software within the Initial Response time period defined
                  in 8.1 above using the absence of Fatal or Severe Impact
                  errors (as defined in Exhibit B) as the basis for Acceptance.
                  If no Fatal or Severe Impact errors exist as defined in
                  Exhibit B, the eSoft Software shall be declared Accepted.

            8.2.2 Acceptance of eSoft Deliverables. Gateway shall accept or
                  reject the eSoft Deliverables using the Acceptance Test plan
                  set forth in the applicable Statement of Work.

      8.3   Rejection. If Gateway determines that the eSoft Software and/or
            eSoft Deliverables do not meet the criteria defined in Section 8.2
            above, and Gateway rejects either the eSoft Software or eSoft
            Deliverable, Gateway will provide written notice to eSoft as to the
            issues precluding Acceptance, and shall specify the nature of the
            defect, and the terms and conditions set forth below shall apply to
            such rejection.

***CONFIDENTIAL TREATMENT REQUESTED
                                                                               7
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            8.3.1 Intent To Correct. If Gateway provides eSoft with written
                  notice of rejection, eSoft must respond to Gateway within
                  [...***...] working days of receiving that notice by
                  communicating its intent to correct the eSoft Deliverable.

            8.3.2 eSoft's Cure. After providing notice to Gateway of its intent
                  to correct the rejected eSoft Deliverable, eSoft has
                  [...***...] working days from the date of its receipt of
                  Gateway's notice of initial rejection, or such other period of
                  time agreed upon by Gateway, to correct the eSoft Deliverable
                  and to submit the corrected version to Gateway for acceptance
                  under the provisions set forth in this Section 8. Any
                  resubmission of an eSoft Deliverable by eSoft must be made in
                  good faith and must evidence substantial directed efforts to
                  correct Gateway's identified basis of the defect.

9.    TERM AND TERMINATION

      9.1   Term. The Agreement will be effective for five (5) years ("Initial
            Term") from the Effective Date of the Agreement. Thereafter, the
            Parties may mutually agree in writing to renew the Agreement for
            successive one (1) year terms at least thirty (30) days prior to the
            end of the Initial Term or any renewal terms thereof.

      9.2   Breach, Cure and Termination. If either Party breaches any material
            term or condition of this Agreement, including, but not limited to
            the failure of the eSoft Deliverables to satisfy eSoft's warranty
            obligations herein, the other Party may terminate this Agreement if
            any such breach remains uncured more than thirty (30) days following
            receipt of written notice of such breach by the non-breaching Party.
            However, if such breach cannot reasonably be cured within such
            thirty (30)-day period, upon notice by the breaching Party of such
            fact and demonstration by such Party of all diligent efforts to cure
            within that period, [...***...] for a period agreed upon by the
            non-breaching Party. Additionally, either Party may terminate this
            Agreement for cause immediately if the other Party (a) files or has
            filed against it a petition in bankruptcy, (b) has a receiver
            appointed to handle its assets or affairs, or (c) makes or attempts
            to make an assignment for the benefit of creditors.

10.   CONFIDENTIALITY AND NONDISCLOSURE

      10.1  Confidential Information. All Confidential Information disclosed by
            a Party under this Agreement shall be treated in accordance with the
            CDA, which agreement is hereby incorporated by reference into this
            Agreement. If the term of this Agreement exceeds the term of the
            CDA, the term of the CDA shall be extended such that the CDA is
            coterminous with this Agreement. Any breach of the CDA shall be
            deemed a breach of this Agreement.

      10.2  Announcement. Notwithstanding 10.1 above, the Parties agree to
            develop and announce a mutually-agreeable timely press release
            relating to this Agreement, and Gateway agrees that its name may be
            used in conjunction with eSoft's customer list. Other than such
            agreed upon press release and the scope of the contents of such
            press release, neither Party shall, without the prior written
            consent of the other Party, disclose the terms and conditions of
            this Agreement or advertise or release any publicity regarding the
            contents of this Agreement. This provision shall survive termination
            of this Agreement. Breach of this provision by eSoft shall be
            considered a material breach of this Agreement and Gateway may
            terminate this Agreement immediately upon delivery of notice to
            eSoft and without further liability to it.

      10.3  Privacy. eSoft acknowledges the importance Gateway places on
            protecting the privacy of its end users. Accordingly, eSoft shall
            use its best efforts to safeguard any individually identifiable data
            acquired from or about end users, including without limitation,
            names,

***CONFIDENTIAL TREATMENT REQUESTED

                                                                               8
<PAGE>

            addresses, or credit information, against unauthorized access or
            use. In addition, eSoft shall not, without Gateway's prior written
            consent, use, sell, license, lease or otherwise transfer such data
            to any third party, or export such data to any location outside of
            the country in which eSoft acquired such data. [...***...], eSoft
            shall: (i) allow each end user to access any data eSoft may have
            regarding such end user; (ii) allow each end user to correct any
            incorrect or incomplete data regarding such end user; (iii) comply
            with any request by an end user to remove such end user's name from
            the customer lists maintained by eSoft; and (iv) upon receipt of a
            request as described in clause (iii), [...***...]. Upon the
            expiration or earlier termination of this Agreement, eSoft shall
            return to Gateway all lists and other data regarding end users then
            in eSoft's possession. eSoft shall not retain any copies of such
            data in hard copy or electronic form. Gateway acknowledges that the
            eSoft Software uses an [...***...] mechanism through which eSoft
            will gather [...***...] data from Gateway's end users. Gateway
            agrees that the distribution to such end users [...***...] of
            Enhancements, Upgrades, or Major Releases as a result of the data
            gathered through this [...***...] mechanism is authorized under this
            Section 10.3; provided, however, that the [...***...] data eSoft
            gathers from such mechanism is subject to the restrictions set forth
            herein.

11.   REPRESENTATIONS AND WARRANTIES; DISCLAIMER

      11.1  Representations and Warranties of eSoft Ownership and Title. eSoft
            represents and warrants to Gateway that it: (a) owns and will own
            all right, title, and interest in and to, or has or will have the
            right to grant the licenses granted under this Agreement,
            specifically including, but not limited to the eSoft Software,
            Upgrades, Major Releases, Technical Documentation and eSoft
            Deliverables and (b) it has full legal right and authority to enter
            into this Agreement, to fulfill its obligations, and to grant the
            licenses and sublicenses under this Agreement.

      11.2  eSoft Limited Product Warranty. In addition to its representations
            and warranties in Section 11.1, eSoft represents and warrants as
            follows:

           11.2.1 Conformity. eSoft represents and warrants that the eSoft
                  Software will conform in all material respects with: (a) the
                  specifications listed in Exhibit A or other specifications
                  agreed upon by the Parties, (b) the Technical Documentation
                  for eSoft Deliverables, and (c) all warranties in this Section
                  11.

           11.2.2 Year 2000. eSoft represents and warrants that all eSoft
                  Software have been tested to be fully "Year 2000 capable." For
                  purposes of this Agreement, "Year 2000 capable" means that all
                  eSoft Software, Upgrades, and Major Releases supplied to
                  Gateway by under the terms and conditions of this Agreement
                  are designed and intended to be used prior to, during, and
                  after the calendar year 2000A.D. eSoft further represents and
                  warrants that all such products, individually and in
                  combination, will operate during each such time period without
                  error relating to date data, specifically including, but not
                  limited to, any error resulting from, relating to, or the
                  product of, date data which represents or references different
                  centuries or more than one century and any errors resulting
                  from or relating to calculations, processing or sequencing
                  employing date data. eSoft further represents and warrants
                  that none of the Licensed Products use proprietary table
                  calculations in resolving year 2000 date data values.

           11.2.3 Viruses and Nonfunctional Code. eSoft represents and warrants
                  that the eSoft Software will contain no viruses, worms or
                  other harmful code.

           11.2.4 Media. eSoft represents and warrants that the media upon
                  which the eSoft Software is furnished, if any, will be free
                  from defects in material and workmanship. If any of the media
                  are found to be defective, eSoft, at its option,

***CONFIDENTIAL TREATMENT REQUESTED
                                                                               9
<PAGE>

                  will replace or repair such media at no charge except as set
                  forth below, provided that Gateway delivers the defective
                  media to eSoft. eSoft may repair the defective media or
                  replace it with new media, and the returned defective media
                  will become eSoft's property. eSoft warrants that the repaired
                  or replaced covered media will be free from defects in
                  material and workmanship for a period of [...***...] days from
                  the return shipping date. This limited warranty does not cover
                  replacement of media damaged in the process of being installed
                  or by abuse, accident, misuse, neglect, alteration, repair,
                  disaster, improper installation or improper testing.

           11.2.5 Consulting Services. eSoft represents and warrants that all
                  consulting services shall be performed in a timely,
                  professional, and workmanlike manner in accordance with
                  applicable commercial standards and the best practices
                  generally observed in the industry for similar professional
                  services. eSoft further represents and warrants that all eSoft
                  Deliverables and Gateway Deliverables shall (i) conform with
                  all documentation related thereto and all specifications set
                  forth in the applicable Statement of Work.

           11.2.6 Compliance with Law. eSoft represents and warrants that all
                  eSoft Software, consulting services performed by eSoft
                  hereunder shall comply with any applicable law, rule or
                  regulation, and eSoft will have obtained all permits required
                  to comply with such laws and regulations.

      11.3  WARRANTY DISCLAIMER. THE ABOVE LIMITED WARRANTIES ARE IN LIEU OF ANY
            OTHER WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING,
            BUT NOT LIMITED TO, THOSE FOR MERCHANTABILITY, FITNESS FOR A
            PARTICULAR PURPOSE, OR ANY WARRANTY ARISING OUT OF ANY PROPOSAL,
            SPECIFICATION, OR SAMPLE.

12.   INDEMNIFICATION, LIMITATION OF LIABILITY AND LIABILITY CAP

      12.1  Indemnification for Claims Other than IP Claims. eSoft agrees to
            defend, indemnify, and hold Gateway harmless against any loss, cost,
            liability, and expense (including reasonable attorneys' fees and
            costs) relating to any action or claim brought or threatened against
            Gateway or its Distributors or customers arising from defects or
            alleged defects in the eSoft Software or eSoft Deliverables or any
            breach by eSoft of this Agreement, provided that Gateway shall: (i)
            provide eSoft with prompt written notice of such claim or action,
            (ii) have the opportunity to participate in the defense or
            settlement of such claim or action, specifically, eSoft shall not
            enter into any settlement without the prior written consent of
            Gateway, and (iii) provide reasonable information and assistance in
            the defense and/or settlement of any such claim or action. Gateway
            agrees that eSoft shall have the right to control the defense of
            such claims or litigation. The foregoing notwithstanding, eSoft's
            indemnification obligation hereunder shall specifically exclude
            [...***...], as set forth in the Statement of Work, which
            liabilities would not have arisen but for [...***...].

      12.2  Indemnification for IP Claims and Breach of Representation or
            Warranty.

           12.2.1 Indemnity. eSoft agrees to defend, indemnify, and hold
                  Gateway harmless against any loss, cost, liability, and
                  expense (including reasonable attorneys' fees and costs)
                  arising from any action or claim brought or threatened against
                  Gateway or its Distributors or customers: (i) alleging that
                  any Licensed Product, Gateway Deliverable or any Derivative
                  Work of any of the foregoing infringe any patent, copyright,
                  trademark, trade secret, or other intellectual property or
                  proprietary right of any third party, (ii) which occurs as a
                  result of a breach or alleged breach by eSoft of any
                  representation or warranty herein, or (iii) which

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              10
<PAGE>

                  occurs as a result of any negligence or willful misconduct by
                  eSoft, its employees, agents or contractors, or (iv) which
                  occurs as a result of any use by Gateway of any Licensed
                  Product or Gateway Deliverable, or any Derivative Works
                  thereof, provided that Gateway shall: (i) provide eSoft with
                  prompt written notice of such claim or action, (ii) have the
                  opportunity to participate in the defense or settlement of
                  such claim or action, specifically, eSoft shall not enter into
                  any settlement without the prior written consent of Gateway,
                  and (iii) provide reasonable information and assistance in the
                  defense and/or settlement of any such claim or action. Gateway
                  agrees that eSoft shall have the right to control the defense
                  of such claims or litigation. The foregoing notwithstanding,
                  eSoft's indemnification obligation hereunder shall
                  specifically exclude [...***...], as set forth in the
                  Statement of Work, which liabilities would not have arisen but
                  for [...***...].

           12.2.2 Remedy. In addition to and without limiting the rights set
                  forth herein, in the event that any Licensed Product or
                  Gateway Deliverables are held to constitute such an
                  infringement, eSoft, at its expense, will either (i) obtain
                  for Gateway or its Distributor or customer the right to
                  continue to use such Licensed Product or Gateway Deliverable
                  as contemplated herein, (ii) modify such Licensed Product or
                  Gateway Deliverable so that it becomes non-infringing, but
                  without materially altering its functionality, (iii) replace
                  such Licensed Product or Gateway Deliverable with a
                  functionally equivalent non-infringing Licensed Product or
                  Gateway Deliverable, or (iv) refund to Gateway all license
                  fees paid on a [...***...] schedule.

      12.3  LIMITATION OF LIABILITY. EXCEPT FOR ESOFT'S INDEMNIFICATION
            OBLIGATIONS HEREUNDER, AND THE REMEDY SET FORTH IN SECTION 12.2.2,
            LIABILITY ARISING UNDER THIS AGREEMENT WILL BE LIMITED TO
            [...***...] DAMAGES AND NEITHER PARTY WILL HAVE ANY LIABILITY FOR
            ANY [...***...] DAMAGES (INCLUDING, WITHOUT LIMITING THE FOREGOING,
            [...***...] DAMAGES), INCLUDING, BUT NOT LIMITED TO, [...***...],
            IRRESPECTIVE OF WHETHER THE PARTY HAS ADVANCE NOTICE OF THE
            POSSIBILITY OF ANY SUCH DAMAGES.

      12.4  [...***...]. EXCEPT FOR ESOFT'S INDEMNIFICATION OBLIGATIONS
            HEREUNDER, AND THE REMEDY SET FORTH IN SECTION 12.2.2, [...***...].

13.   INSURANCE

      13.1  Coverages. eSoft shall, and shall require its employees, agents and
            subcontractors, to secure and maintain at its own expense, the
            following insurance with companies satisfactory and acceptable to
            Gateway and shall furnish to Gateway certificates evidencing such
            insurance prior to commencing work at Gateway's premises and
            thereafter as required by Gateway. Such certificates shall contain a
            provision whereby the policy and/or policies shall not be canceled
            or altered without at least thirty (30) days' prior written notice
            to Gateway. eSoft will provide Gateway certificates evidencing such
            increased coverages within thirty (30) days of the effective date of
            the applicable policy.

           13.1.1 Workers' Compensation and Employer's Liability Insurance
                  covering Company Employees which shall fully comply with the
                  statutory requirements of all state laws as well as federal
                  laws which may be applicable.

           13.1.2 Comprehensive General Liability Insurance with a general
                  aggregate of [...***...].

           13.1.3 Automobile Liability Insurance covering all owned and
                  non-owned vehicles and equipment used by eSoft with a minimum
                  combined single limit of [...***...].

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              11
<PAGE>

           13.1.4 Umbrella Liability Insurance coverage with a minimum combined
                  single and aggregate limit of [...***...].

           13.1.5 Errors and Omissions Insurance with a minimum combined single
                  and aggregate limit of [...***...].

           13.1.6 Product Liability Insurance with a combined single and
                  aggregate limit of [...***...].

      13.2  Additional Insured. Every contract of insurance obtained by eSoft
            hereunder shall name Gateway as an additional insured therein.

14.   MISCELLANEOUS

      14.1  Governing Law. Any claim arising under or relating to this Agreement
            will be governed by the internal substantive laws of the State of
            New York, without regard to principles of conflict of laws.

      14.2  Dispute Resolution. All disputes arising directly under the express
            terms of this Agreement or the grounds for termination thereof will
            be resolved as follows: The senior management of both parties will
            meet to attempt to resolve such disputes. If the disputes cannot be
            resolved by the senior management, either Party may make a written
            demand for formal dispute resolution and specify therein the scope
            of the dispute. Within [...***...] days after such written
            notification, the parties agree to meet for one (1) day with an
            impartial mediator and consider dispute resolution alternatives
            other than litigation. If an alternative method of dispute
            resolution is not agreed upon within [...***...] days after the one
            (1) day mediation, either Party may begin litigation proceedings.
            This Section 14.2 shall not be construed to prevent a Party from
            instituting, and a Party is authorized to institute, formal
            proceedings earlier than indicated in the foregoing (i) to avoid the
            expiration of any applicable limitations period, (ii) to preserve a
            superior position with respect to other creditors, or (iii) seek
            injunctive relief to prevent an irreparable harm, including harm
            caused by a breach of confidentiality as set forth in Section 10.

      14.3  Entire Agreement. This document, including attachments, constitutes
            the entire agreement between the parties with respect to the subject
            matter hereof, and merges and supersedes all prior and
            contemporaneous negotiations and agreements. Neither of the parties
            shall be bound by any conditions, definitions, warranties,
            understandings, or representations with respect to the subject
            matter hereof other than as expressly provided herein. The section
            headings contained in this Agreement are for reference purposes only
            and shall not affect in any way the meaning or interpretation of
            this Agreement. No oral explanation or oral information by either
            party hereto shall alter the meaning or interpretation of this
            Agreement. No modification or amendment to this Agreement, nor any
            waiver of any rights, will be effective unless assented to in
            writing by both parties, and the waiver of any breach or default
            will not constitute a waiver of any other right hereunder or any
            subsequent breach or default. In the event of any conflict between
            the terms of the main text of this Agreement and the attached
            Exhibits, the terms of the main text will control.

      14.4  Assignment. [...***...] may assign its rights or delegate its
            obligations or any part thereof under this Agreement without prior
            consent from the other Party. In the event of any such assignment,
            the Parties shall ensure that the assignee agrees in writing to
            fully comply with the terms and conditions of this Agreement. Except
            as provided above, the terms and conditions of this Agreement shall
            bind and inure to each party's successors and assigns.

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              12
<PAGE>

      14.5  Force Majeure. Neither Party will be liable for any failure to
            perform due to unforeseen circumstances or causes beyond the
            parties' reasonable control, including, but not limited to, acts of
            God, war, riot, embargoes, acts of civil or military authorities,
            earthquakes, fire, flood, and accident. In the event of force
            majeure, the delayed party's time for delivery or other performance
            will be extended for a period equal to the duration of the delay
            caused thereby; provided, however, that if such inability to perform
            continues for more than fifteen (15) days, the other party may
            terminate this Agreement without penalty and without further notice.

      14.6  Independent Development. This Agreement does not preclude Gateway or
            eSoft from (i) evaluating or acquiring similar technologies or
            products from third parties not a party to this Agreement, (ii)
            independently developing similar technologies or products without
            access to or use of Confidential Information, (iii) distributing or
            marketing similar technologies or products, or making and entering
            into similar arrangements with other companies so long as such Party
            does not violate its confidentiality obligations hereunder, infringe
            or misappropriate any intellectual property rights of the other
            party, or affect either party's ability to comply with the
            obligations set forth in this Agreement. Neither party is obligated
            by this Agreement to make such products or technologies available to
            the other.

      14.7  Employment of Personnel. The parties agree that neither party shall
            hire employees of the other party who were directly involved in the
            Project for the duration of the Agreement, without the prior written
            consent of the other party. The foregoing notwithstanding,
            [...***...].

      14.8  Relationship of the Parties. Neither Party hereto will be deemed the
            agent or legal representative of the other for any purpose
            whatsoever and each Party will act as an independent contractor with
            regard to the other in its performance under this Agreement. Nothing
            herein will authorize either Party to create any obligation or
            responsibility whatsoever, express or implied, on behalf of the
            other or to bind the other in any manner, or to make any
            representation, commitment or warranty on behalf of the other.

      14.9  Notices. Any notice required or permitted to be given under this
            Agreement will be effective if it is in writing and sent by regular
            and certified mail, return receipt requested, to the appropriate
            Party hereto at the address set forth below and with the appropriate
            postage affixed. Either Party may change its address for receipt of
            notice by notice to the other Party in accordance with this section.
            Notices will be deemed given upon receipt if sent via facsimile or
            within five (5) days of mailing if sent via regular and certified
            mail, return receipt requested.

            If to eSoft:                      eSoft, Inc.
                                              295 Interlocken Boulevard
                                              Suite 500
                                              Broomfield, Colorado 80021
                                              Attn: General Counsel

            If to Gateway:                    Gateway, Inc.
                                              4545 Towne Centre Court
                                              San Diego, CA 92121
                                              Attn: General Counsel

      14.10 Export. Neither party will export, either directly or indirectly,
            any software or technical information, without first obtaining any
            required license or other approval from the U.S. Department of
            Commerce or any other agency or department of the United States
            Government. eSoft shall provide Gateway with the U.S. Export Control
            Classification Number ("ECCN") for each item that Gateway licenses
            or purchases from eSoft by

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              13
<PAGE>

            completing and returning to Gateway Exhibit D, attached hereto and
            incorporated herein by reference. Such information shall be provided
            prior to fulfillment of the first order for a given item. For any
            and all instances in which eSoft does not have the ECCN and cannot
            obtain it by reasonable efforts or by filing an ECCN classification
            request with the U.S. Department of Commerce, eSoft agrees to
            respond diligently to Gateway's requests for sufficient information
            to enable Gateway to determine the correct ECCN for the item. eSoft
            shall provide Gateway with written advance notice of changes to any
            of the information provided to Gateway pursuant to this clause.

      14.11 Survival. Unless otherwise provided herein, all of the provisions of
            Sections 1, 2, 3, 9, 10, 11, 12, and 14 and all other provisions
            that expressly survive will survive the expiration or termination of
            this Agreement.

      14.12 Interpretation. This Agreement, including all Exhibits, has been
            negotiated at arms length and between persons sophisticated and
            knowledgeable in the matters dealt with in this Agreement.
            Accordingly, any rule of law or legal decision that would require
            interpretation of any ambiguities in this Agreement against the
            Party that has drafted it is not applicable and is waived.

      14.13 Severability. All rights and remedies, whether conferred hereunder
            or by any other instrument or law, will be cumulative and may be
            exercised singularly or concurrently. The failure of any Party to
            enforce any of the provisions hereof will not be construed to be a
            waiver of the right of that Party thereafter to enforce such
            provisions or any other provisions hereof. The terms and conditions
            stated herein are declared to be severable. If any provision or
            provisions of this Agreement will be held to be invalid, illegal, or
            unenforceable, the validity, legality, and enforceability of the
            remaining provisions will not in any way be affected or impaired
            thereby.

      14.14 Counterparts. This Agreement may be executed in several
            counterparts, each of which will be deemed an original, but all of
            which together will constitute one and the same instrument.

AGREED TO AND ACCEPTED:

Gateway, Inc.                             eSoft, Inc.

By: /s/ Peter B. Ashkin                   By: /s/ Jeff Finn
    -------------------------                 ----------------------------

Printed Name: Peter B. Ashkin             Printed Name: Jeff Finn
              ---------------                           ------------------
Title: SVP                                Title: Pres. & CEO
       ----------------------                    -------------------------
Date: 2/22/2000                           Date: 2/22/00
      -----------------------                   --------------------------

                                                                              14
<PAGE>

                                    EXHIBIT A

                              License Fee Schedule

eSoft Software License Fees

The following schedule contains pricing and projected availability dates for the
standard eSoft Software modules. These prices reflect the license fees due and
payable by Gateway to eSoft. For any OEM customizations, local country/language
translations/localizations, or support for custom hardware features, eSoft will
develop a mutually agreed Statement of Work to define and estimate such
activities. The following schedule is subject to change from time to time due to
the availability and release of new software modules and functions.

--------------------------------------------------------------------------------
                                                                     Projected
                                             Required  [...***...]  Availability
 Module ID               Module Name          Modules  License Fee      Date
--------------------------------------------------------------------------------
[...***...]  [...***...]                       None    [...***...]    Q2 2000
--------------------------------------------------------------------------------
  Rph-EMS    Enhanced E-Mail Server           Rph-GW   [...***...]    Q2 2000
--------------------------------------------------------------------------------
  Rph-EFS    Enhanced Firewall                Rph-GW   [...***...]    Q2 2000
--------------------------------------------------------------------------------
  Rph-PPTP   Virtual Private Network - PPTP   Rph-GW   [...***...]    Q2 2000
--------------------------------------------------------------------------------
  Rph-VPN    Virtual Private Network - IPSec  Rph-GW   [...***...]    Q2 2000
--------------------------------------------------------------------------------
  Rph-WEB    Enhanced Web Server              Rph-GW   [...***...]    Q3 2000
--------------------------------------------------------------------------------

*The [...***...] License Fee for the [...***...] Module is based on a
[...***...] subscription fee charged to end users of [...***...] or less,
excluding DSL or other Internet access fees. If Gateway increases its
[...***...] subscription fee to end users above [...***...], then the
[...***...] License Fee payable to eSoft for the [...***...] Module shall
increase by an amount equal to [...***...] of the difference between the new end
user [...***...] subscription fee and [...***...].

Managed Service Fees

--------------------------------------------------------------------------------
                                                      Additional
                                                         User
                                          [...***...]     Fee
  Managed                                 Service Fee    (each      Projected
 Services                        Required  (up to 25   add'l 25    Availability
    ID          Description      Modules    users)      users)         Date
--------------------------------------------------------------------------------
 Rph-SF25   URL and content       Rph-GW  [...***...] [...***...]    Q2 2000
            filtering
--------------------------------------------------------------------------------
  Rph-MFS   Managed Firewall      Rph-GW  [...***...] [...***...]    Q3 2000
            Services - Basic     Rph-EFS
--------------------------------------------------------------------------------

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              15
<PAGE>

                                    EXHIBIT A

--------------------------------------------------------------------------------
 Rph-MVPN   Managed VPN           Rph-GW  [...***...] [...***...]    Q3 2000
            Services - Basic     Rph-VPN
--------------------------------------------------------------------------------

Territory

Gateway's territory shall be the following:

             Worldwide

Consulting Fees

The eSoft hourly rate for Consulting Services is set forth below:

--------------------------------------------------------------------------------
    Position/Description                                          Hourly Rate
--------------------------------------------------------------------------------
Senior Engineer                                                   [...***...]
--------------------------------------------------------------------------------
Engineer                                                          [...***...]
--------------------------------------------------------------------------------
Associate Engineer                                                [...***...]
--------------------------------------------------------------------------------
Senior QA Engineer                                                [...***...]
--------------------------------------------------------------------------------
QA Engineer                                                       [...***...]
--------------------------------------------------------------------------------
Senior Project Manager                                            [...***...]
--------------------------------------------------------------------------------
Project Manager                                                   [...***...]
--------------------------------------------------------------------------------
Project Assistant/Administrator                                   [...***...]
--------------------------------------------------------------------------------
User Interface Specialist                                         [...***...]
--------------------------------------------------------------------------------
Security/Encryption Specialist                                    [...***...]
--------------------------------------------------------------------------------
Development Manager                                               [...***...]
--------------------------------------------------------------------------------

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              16
<PAGE>

                                    EXHIBIT B

                       MAINTENANCE AND SUPPORT OBLIGATIONS

eSoft will have the following maintenance and support obligations during the
term of the Agreement:

1.    Training. eSoft shall provide, at no additional cost to Gateway, three
      "train the trainer" training sessions to Gateway personnel at eSoft's
      expense as requested by Gateway. Each training session, which may include
      up to fifteen (15) students, shall cover sales, technical support, and
      engineering issues related to the Licensed Products. Such training would
      be either at Gateway's facility or at eSoft's facility, at the sole
      discretion of Gateway. If at Gateway's location, Gateway would reimburse
      the travel and living expenses associated with the training session, using
      Gateway's contractor travel policy and pre-approved travel. Training dates
      and locations will be mutually agreed to between the Parties prior to
      training. eSoft grants Gateway permission to videotape any and all
      training sessions for use at its facilities worldwide. Thereafter, eSoft
      agrees to provide reasonable training for Upgrades and Major Releases.
      Additional training shall be subject to payment of eSoft's standard fees
      for said training, plus any incidental expenses.

2.    Maintenance and Routine Support. During the term of this Agreement, for
      Licensed Products marketed and distributed by Gateway, eSoft will provide,
      at no additional cost to Gateway, reasonable maintenance and support as
      described in this paragraph 2. eSoft shall supply Gateway with its support
      documentation necessary to enable Gateway to provide first level support
      to Gateway's customers. In addition, eSoft shall permit Gateway on-line
      and other access to the internal buglist for the Licensed Products or an
      equivalent database for the Licensed Products. eSoft shall make
      [...***...] efforts to supply Gateway with second level support for the
      Licensed Products. eSoft shall provide support only to Gateway authorized
      personnel. eSoft will provide telephone responses to Gateway within four
      hours of receipt of Gateway's telephone support questions. eSoft will be
      available to take Gateway's support questions from [...***...] Mountain
      Time (Standard or Daylight during the appropriate season). In addition, an
      eSoft technician will available by pager to provide support on a 24 x 7
      basis. eSoft will provide the contact information for such support to
      Gateway within a reasonable time following the execution of this
      Agreement. eSoft plans to begin offering full technical support on a 24 x7
      basis during the Year 2000 and, when it does so, support will be available
      to Gateway throughout the Territory an a 24 x7 basis at no additional
      charge. If Gateway, in its sole judgment and discretion, determines it
      cannot efficiently or effectively remedy a problem with the Licensed
      Product and/or eSoft Deliverables in supporting its customers, Gateway
      shall furnish eSoft a problem report which shall identify and describe the
      problem using the priority descriptions set forth in the table below. Upon
      receiving a problem report from Gateway and unless the parties otherwise
      agree in writing, eSoft shall respond and correct the problem in
      accordance with the following table.

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              17
<PAGE>

                                    EXHIBIT B

--------------------------------------------------------------------------------
Priority      Description           Written         Patch, work     Formal fix,
                                acknowledgement  around, temporary  update fix,
                                   of problem     fix, bug fix, or  upgrade, or
                                     report        update release   enhancement
                                  delivered to
                                    Gateway
--------------------------------------------------------------------------------
Fatal         Condition which   Within           Constant effort       Within
              precludes all     [...***...]      by highly          [...***...]
              useful work from  from receipt of  qualified eSoft      calendar
              being done        initial notice.  personnel until        days
                                                 relief is
                                                 provided, but not
                                                 more than
                                                 [...***...] from
                                                 receipt of
                                                 initial notice.
--------------------------------------------------------------------------------
Severe Impact Condition which   [...***...]      Constant effort       Within
              precludes one or                   by highly          [...***...]
              more major                         qualified eSoft      calendar
              functions from                     personnel until        days
              being performed                    relief is
                                                 provided, but not
                                                 more than
                                                 [...***...] from
                                                 receipt of
                                                 initial notice.
--------------------------------------------------------------------------------
Degradation   Condition which   [...***...]      [...***...] days      Within
              disables one or                                       [...***...]
              more                                                      days
              non-essential
              functions from
              being performed
--------------------------------------------------------------------------------
Minimal       Any other         [...***...]      [...***...] days      Within
Impact        condition                                             [...***...]
              requiring                                                 days
              correction
--------------------------------------------------------------------------------

3.    Gateway's Obligations. To assist eSoft in providing the most effective
      responsiveness to trouble reporting and solution, within a reasonable time
      following the execution of this Agreement, Gateway will provide access
      (which at Gateway's option, may be on-site at a designated Gateway
      facility) to [...***...] Gateway systems in which the problems can be
      reproduced (if eSoft does not have such systems available), and access to
      Gateway's hardware and software debugging resources, if eSoft so requests.
      The Parties will mutually agree upon the provision of access to any
      additional Gateway Products during the term of this Agreement,

4.    Bug Fixes. If eSoft discovers any bugs in the technology delivered to
      Gateway hereunder, eSoft shall immediately report same in writing to
      Gateway. If eSoft creates a bug fix or maintenance release of the related
      technology, eSoft shall make the bug fix available to Gateway no later
      than it is made available to any other third party.

***CONFIDENTIAL TREATMENT REQUESTED
                                                                              18
<PAGE>

                                    EXHIBIT C

                              GATEWAY TRAVEL POLICY
                           Effective February 1, 2000

All business travel is to be conducted on the most cost effective basis,
consistent with the business requirements of the specific circumstances. It is
the policy of Gateway's to reimburse on a timely basis those actual expenses
that are:

      1.)   Reasonable and necessary
      2.)   Related to the conduct of business for Gateway
      3.)   Properly authorized, and
      4.)   Properly documented

Business travel must be approved by the Project Manager responsible for the
Gateway consulting job.

Gateway reserves the right to change this policy at any time.

eSoft is required to make their own travel arrangements. eSoft must select the
flight and carrier offering the lowest available airfare based upon the
following criteria: a) business needs of the traveler; b) availability of
nonstop flights; c) lowest priced airport in multiple-airport cities when
practical; and d) routings with the shortest amount of travel time. No business
class or first class travel is permitted on domestic flights (which includes
flights solely within the borders of any country), although travelers may
upgrade at their own expense or through the use of frequent flyer points.
Whenever possible, airline tickets should be purchased 7 - 14 days in advance of
the scheduled travel date to take advantage of discounts. For both domestic and
international flights, prepaid tickets waiting at the airline's check-in counter
are not permitted, except in emergency situations.

AIR TRAVEL - INTERNATIONAL

For all international travel, eSoft must make their own travel arrangements.
eSoft must select the flight and carrier based on the same criteria established
for US travel. All international flights will be coach class unless the cost
differential between coach and business is less than $1,500, and the flying time
between locations is more than four hours. First class travel will not be
reimbursed. Individuals may upgrade at their own expense or through the use of
frequent flyer points. Whenever possible, international airline tickets should
be purchased 21 days in advance of the scheduled travel date to take advantage
of discounts.

LODGING

eSoft should ask the Gateway location they are visiting if they have a preferred
hotel and corporate rate. A consultant is pre-approved for a standard
single-room accommodation. Any upgrades in a room accommodation will be at
consultant's expense. For lodging longer than fifteen (15) consecutive days,
changes in room accommodations will be approved on a case-by-case basis,

The following is a list of preferred hotels which offer corporate rates to
Gateway:

<TABLE>
<CAPTION>
Domestic Gateway Location   Phone Number   Address
--------------------------------------------------------------------------------------
<S>                         <C>            <C>
North Sioux City, SD
Comfort Inn                 605/232-3366   115 Streeter Dr, North Sioux City, SD 57049
Country Suites              605/232-3500   201 Tower Rd, North Sioux City, SD 57049
Marina Inn                  402/494-4000   4th & B Sts, South Sioux City, NE 68776
Riverboat Inn               712/277-9400   701 Gordon Dr, Sioux City, IA 51 1 01
Kansas City, MO
Marriott Downtown           816/421-6800   200 W 12th St, Kansas City, MO 64106
Radisson Suite Hotel        816/221-7000   106 W 12th St, Kansas City, MO 64106
</TABLE>

                                                                              19
<PAGE>

                                    EXHIBIT C

<TABLE>
<S>                         <C>            <C>
Hampton. VA
Holiday Inn                 804/838-0200   1815 W Mercury Blvd, Hampton, VA 23666
Sioux Falls, SD
Best Western Ramkota Inn    605/336-0650   2400 N Louise Ave, Sioux Falls, SD
Comfort Suites              605/362-9711   3208 Carolyn Ave, Sioux Falls, SD
Fairfield Inn by Marriott   605/361-2211   4501 W Empire Place, Sioux Falls, SD
San Diego, CA
Hyatt Regency LaJolla       858/552-1234   3777 LaJolla Village Drive, San Diego, CA
Marriott LaJolla            858/587-1414   4240 LaJolla Village Drive, San Diego, CA
Embassy Suites LaJolla      858/453-0400   4550 LaJolla Village Drive, San Diego, CA

Orange County, CA
Candlewood Suites                          Lake Forest
Embassy Suites                             Irvine
Residence Inn                              Irvine
Hampton Inn
Hyatt Regency                              Irvine

<CAPTION>
Int'l. Gateway Location     Phone Number   Address
------------------------------------------------------------------------------------------------
<S>                         <C>            <C>
Dublin, Ireland
Conrad International Dublin 35316765555    Earlsfort Terrace, Dublin, Ireland

Sydney, Australia
Stamford North Ryde         6128881077     Epping and Herring Road, Box 368, North Ryde
                                           Sydney, NSW Australia 2113

Singapore
Pan Pacific Singapore       653368111      Marina Square 7 Raffles Blvd., 0103 Singapore SG

Tokyo, Japan
Shinagawa Prince Hotel      0334401111     10-30 Takanawa 4 Chome, Minato-ku Tokyo 108 Japan

Melaka, Malaysia
Riviera Bay Resort MA       063151111      10 KM JLN Tanjung Kling, Malacca 76400 Malaysia
</TABLE>

It is understood that exceptions, approved by the Project Manager responsible
for the Gateway consulting, may be made for a consultant.

RENTAL CARS

Gateway's preferred rental car companies are National (800-CAR-RENT) ID #
5765874 and Hertz Car Rental (619/220-5222) ID# 348179. These rental car
companies should be used by consultant whenever possible under the Gateway
corporate rate. A consultant must refuel the rental vehicle prior to its return.
Refueling by the rental car company is not a reimbursable expense. Gateway will
not reimburse travelers for any traffic or parking violations he/she may incur.
Insurance offered by the car rental agencies is not a reimbursable expense. It
is the responsibility of consultant's company to ensure the consultant has
sufficient insurance coverage for business purposes.

The size of the rental car is based on the amount of travelers. 1 to 4
consultants traveling together may rent a mid-size model; 5 to 6 consultants
traveling together may rent a full-size model; and more than 6 consultants
traveling together may rent a mini-van or 2 mid-size models. Consultants
traveling outside

                                                                              20
<PAGE>

                                    EXHIBIT C

the United States should consider alternate modes of transportation prior to
requesting a rental car. Often times, trains, taxis or buses will be more
efficient and less cost prohibitive.

TRAVEL BY PERSONAL AUTOMOBILE

In the event travel by personal automobile is more cost-effective than another
mode of transportation and is approved by the Project Manager responsible for
the Gateway consulting job, a mileage allowance of $0.31 per mile will be used
to reimburse the consultant for the use of their personal car. This allowance
rate covers all out-of-pocket operating expenses as well as any wear and tear on
the vehicle. Distance will be the actual mileage incurred and indicated on the
consultant's expense report. Gateway will reimburse for travel to/from Gateway's
place of business, but not for personal travel or travel for entertainment.

MEAL EXPENSES

For domestic business, meals will be reimbursed on an actual and reasonable
basis up to the IRS guideline of $36 per day. The current maximum federal per
diem rates for meals and incidental expenses (including laundry expenses, fees
and tips) for Gateway International locations are:

            Sydney, Australia                                   $ 77
            Dublin, Ireland                                     $ 83
            Tokyo, Japan                                        $111
            Yokohama, Japan                                     $107
            Kuala Lumpur, Malaysia                              $ 65
            Melaka, Malaysia                                    $ 49
            Singapore                                           $ 76

When submitting a meal expense for more than 1 person, the names of all
individuals, amounts of the meals and receipts must accompany the invoice,

TELEPHONE

Consultants should be sensitive to the costs associated with making personal
calls and try to limit the calls to less than 15 minutes per day while on
domestic or international business. When practical, phone calls should be made
from the Gateway location. Consultants should not use hotel room phones unless
necessary, as many hotels add a surcharge. Likewise, all business-related faxes
and photocopies should be made at Gateway's facility unless otherwise necessary.

SUPPORTING DOCUMENTATION AND REIMBURSEMENT

Each consultant will provide Gateway with receipts for all reimbursable expenses
submitted for payment in accordance with this policy.

EXAMPLES OF ADDITIONAL REIMBURSABLE EXPENSES

      o     Air freight/Overnight delivery for business purposes
      o     Currency conversion fees
      o     Ground/Air transportation
      o     Laundry/dry cleaning for trips exceeding 7 days only
      o     Parking (with regard to airline flights, consultants should use
            long-term parking at all airport locations for their personal
            automobile or another mode of transportation to get to the airport,
            whichever is more cost effective)
      o     Tips (limited to 15% or an amount that is generally acceptable by
            local custom)
      o     Tolls/Airport fees
      o     Visa/Passport/Consulate fees (Visa fees should be for the length of
            the project only)
      o     Business required inoculations

                                                                              21
<PAGE>

                                    EXHIBIT C

EXAMPLES OF NON REIMBURSABLE EXPENSES

      o     Airline club memberships
      o     Clothing
      o     Personal Expenses (vacation, books, magazine, barbers, toiletries,
            etc.)
      o     Movies, including hotel pay-per-view
      o     No show charges for hotels (situations with extenuating circumstance
            will be reviewed on an individual basis)
      o     Personal entertainment
      o     Traffic and parking fines
      o     Billable hours while traveling (applies to both domestic and
            international travel)
      o     Upgrades of any type (domestic airline tickets, hotel suites, car
            rentals, etc.)
      o     Loss of personal property (responsibility of airline)
      o     Alcoholic beverages
      o     Cost of personal meals before departing on a business trip or after
            returning
      o     All expenses for personal activities that are in conjunction with
            business travel (i.e. stopovers or side trips)

                                                                              22
<PAGE>

                                    EXHIBIT D

                                    ECCN Form

                      INTERNATIONAL TRADE INFORMATION FORM

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                          SUPPLIER SECTION
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                                   <C>                   <C>
General Information
-----------------------------------------------------------------------------------------------------------------------------------
1.   Product                          Redphish gateway software              2.   Model/          Rph-GW
     (Hardware/Software):                                                    Version:
-----------------------------------------------------------------------------------------------------------------------------------
3.   Gateway Part #:

-----------------------------------------------------------------------------------------------------------------------------------
4.   Product Description:  Internet gateway software for use in conjunction with Gateway hardware.  Used at customer premise to
     provide shared Internet and email connectivity to local area network users.
-----------------------------------------------------------------------------------------------------------------------------------
5.   Manufacturer/ Supplier           Address:

eSoft, Inc.                           295 Interlocken Blvd., Suite 500, Broomfield, CO 80021
-----------------------------------------------------------------------------------------------------------------------------------
Primary Trade Information
-----------------------------------------------------------------------------------------------------------------------------------
6.   What is the country(ies) of origin?
     [List all countries of origin if product will be sourced from or
     manufactured in multiple locations] United States of America
-----------------------------------------------------------------------------------------------------------------------------------
7.   If country of origin is United States, Mexico, or Canada, is the item NAFTA Qualified?
     (Yes or No)
     [If yes, attach NAFTA Certificate of Origin]  We should be qualified for software only
-----------------------------------------------------------------------------------------------------------------------------------
8.   HTS #:                                                       9.   ECCN #:
                                                                       [Include paragraph/subparagraph if possible]
-----------------------------------------------------------------------------------------------------------------------------------
Hardware Product Information
-----------------------------------------------------------------------------------------------------------------------------------
10.  Processor Type & Speed:                                      10A. Processor CTP
                                                                       Rating in MTOPS:
-----------------------------------------------------------------------------------------------------------------------------------
11.  Supplier FCC ID # and Grantee's Address:                     12.  Supplier FDA/Accession # and Grantee's Address:

     [If Applicable]                                                   [Laser printer, CRT monitor, CD ROM Drives]
-----------------------------------------------------------------------------------------------------------------------------------
Software Product Information
-----------------------------------------------------------------------------------------------------------------------------------
13.  Does software qualify for Mass Market Treatment?  (Yes or No)  Yes

-----------------------------------------------------------------------------------------------------------------------------------
14.  Does software contain encryption?  (Yes or No)  Yes with VPN module only
     [If yes continue to question 15; if no skip to Supplier Sign Off]
-----------------------------------------------------------------------------------------------------------------------------------
15.  What is the length (DES) of the encryption?  (40-bit, 56-bit, 128 bit, [If 56-bit or less
     continue to question 16; if not skip to Supplier Sign Off]
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              23
<PAGE>

                                    EXHIBIT D

<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>
16.  If 56-bit or less, has software been reviewed and approved by the U.S. Department of
     Commerce?  Yes, 56-bit version has been approved.
-----------------------------------------------------------------------------------------------------------------------------------
Supplier Source of Information and Approval
-----------------------------------------------------------------------------------------------------------------------------------
Completed by:                                                          Phone #:
-----------------------------------------------------------------------------------------------------------------------------------
Title:                                                                 Date:
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              24
<PAGE>

                                    EXHIBIT D

Purpose of Form: The products and/or software which Gateway is purchasing or may
purchase could be the subject of an import and/or export transaction. Certain
information is required in order for Gateway to be able to conduct such
transactions in the most efficient/cost effective manner possible and in full
compliance with all applicable laws and regulations.

Reliance: Gateway will be relying on the accuracy of the signed form. Therefore,
any temporary or permanent changes in the information provided must be
immediately communicated in writing to the appropriate Gateway contact.

Definitions:

Box #4 - Product Description: This box should include a general description of
what the item is, how it operates, important measures, and strength relative to
other similar products.

Box #6 - Country of Origin: Place where the article was manufactured (not the
place where the shipment originated). If the article has been processed in more
than one country, the country of origin is the last country in which the article
underwent a "substantial transformation." In other words, further work or
material added to an article in another country must effect a "substantial
transformation" in order to render such other country as the country of origin.
A substantial transformation occurs when articles lose their identity and become
new and different articles of commerce, having a new name, character or use.

Box #8 - HTS (Harmonized Tariff Schedule) Number: A 10 digit classification that
is used by the various Customs services to classify product for import/export on
a worldwide basis. Should you require assistance in determining the
classification for your product, you may access U.S. Custom's web site at
www.customs.untreas.gov, or contact your local Customs office or broker.

Box #9 - Export Control Classification Number ("ECCN"): A 5 digit classification
used to identity applicable export licensing requirements. NOTE: ECCN is not the
same as a HTS classification or a Schedule B classification. Within each ECCN a
given item will defined under a particular paragraph or subparagraph. For a
complete description of each ECCN's composition, see Section 738.2(c) of the
Export Administration Regulations (15 CFR Part 738). Should you require
assistance in determining the classification for your product, you may contact
the Bureau of Export Administration's Export Counseling Division at (202)
482-4811 or (202) 482-3617, or at "http//www.bxa.doc.gov".

Box #s 10 & 10A - Processor Type, Speed and CTP Rating in MTOPS: For purposes of
this field, "processor" means a monolithic integrated circuit or multi-chip
integrated circuit containing an arithmetic logic unit (ALU) capable of
executing a series of general purpose instructions from in external storage. It
normally does not contain user-accessible storage, although storage present
on-the-chip may be used in performing its logic function. The definition
includes chip sets that are designed to operate together to provide the function
of a processor.

Box #11 - U.S. Federal Communication Commission ("FCC") ID Number: The
manufacturer (or importer for an imported device) is required to ensure that the
measurements necessary to determine compliance with the technical standards are
performed. A copy of the measurement report showing compliance with FCC
standards must be retained by the manufacturer and, if requested, be submitted
to the Commission. U.S. importers are required to submit an FCC form with their
import shipments.

Box #12 - U.S. Food and Drug Administration ("FDA")/Accession Number: Section
536(a) of the Electronic Product Radiation Control provisions of the Federal
Food, Drug, and Cosmetic Act (the Radiation Control for Health and Safety Act of
1968) requires that all imported electronic products, for which applicable
radiation performance standards exist, shall comply with the standards and shall
bear certification of such compliance. U.S. importers are required to submit an
FDA form with their import shipments.

Box #13 - "Mass Market" Treatment: This treatment is available for software that
is generally available to the public by being: 1) sold from stock at retail
selling points, without restriction, by means of over the counter transactions,
mail order transactions, telephone call transactions, or Internet transactions;
and 2) designed for installation by the user without further substantial support
by the supplier (See 15 CFR Section 740.13). Note: "Mass market" treatment is
not available for encryption software unless the length of the encryption string
is 56 bits or less and the software has undergone a one time review by the U.S.
Department of Commerce (See 15 CFR Sections 742.15(b)(1), Supplement No. 6 to
Part 742 and 748.3(b)(3)).

Box #14 - Encryption Software: Computer programs that provide capability of
encryption/decryption functions or confidentiality of information or information
systems. Such software includes source code, object code, applications software,
or system software.

Box #16 - One Time Review by the U.S. Department of Commerce: Refer to 15 CFR
Section 742.15 and Supplement No. 6 to Part 742.

Box #21 - Packing Costs: This means the cost of all containers (exclusive of
international shipping containers) and coverings of whatever nature and of
packing used in placing merchandise in condition, packed ready for shipment.

Box #22 - Selling Commission: Any commission paid to an agent who is related to,
controlled by, or works for or on behalf of the manufacturer or seller.

Box #23 - Assist: An "assist" is a cost which must necessarily he incurred to
produce an imported article. Whenever Gateway as importer donates an item to the
manufacturer at no cost or token value, and that item is essential to the
production of the final article, it is usually an "assist" and is part of
dutiable value. The test for an assist is whether the final imported article
could not be produced by the manufacturer without the item provided. Any of the
following, if supplied by Gateway to the manufacturer free of charge or at a
reduced cost, would constitute an assist: 1) materials, components, parts, and
similar items incorporated in the imported merchandise.

                                                                              25
<PAGE>

                       FIRST AMENDMENT TO MASTER SOFTWARE
                         LICENSE AND SERVICES AGREEMENT

      This FIRST AMENDMENT TO MASTER SOFTWARE LICENSE AND SERVICES AGREEMENT
("Amendment") is made by and between eSoft, Inc., with offices at 295
Interlocken Boulevard, Suite 500, Broomfield. Colorado 80021("eSoft"), and
Gateway, Inc., with offices at 4545 Towne Centre Court, San Diego, CA, 92121
("Gateway"). eSoft and Gateway are each referred to below as a "Party," and
collectively as the "Parties". This Amendment becomes effective on September 15,
2000 ("Effective Date").

                                    RECITALS

A.    Gateway develops and markets a wide variety of computer hardware and
      software products and computer-related services in various market
      segments.

B.    eSoft provides a family of Linux-based Internet software, appliances and
      services that enable small to medium-sized businesses to reliably connect
      with and take advantage of the Internet.

C.    The Parties entered into a Master Software License and Services Agreement
      effective February 22, 2000 (the "Agreement").

D.    The Parties entered into a Statement of Work pursuant to the Agreement on
      or about April 12, 2000 (as subsequently amended by mutual agreement of
      the Parties, the "Statement of Work").

E.    The Parties now wish to set forth additional terms and conditions under
      which Gateway and eSoft will perform their respective obligations under
      the Agreement, as described in more detail below.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of and conditioned on the Recitals set
forth above and incorporated in this Agreement, the covenants stated herein, and
for other good and valuable consideration, the receipt and sufficiency of which
the Parties hereby acknowledge, the Parties agree as follows:

1. PRODUCT LAUNCH. Subject to the Parties' respective compliance with the
product timelines and functionality set forth in the Statement of Work, Gateway
will introduce the products described in the Agreement and the Statement of Work
into the United States market on or before October 31, 2000.

2. PRODUCT COMMITMENT.

      2.1 Subscriber Commitment. Subject to the provisions of this Section 2,
Gateway will register a cumulative total of [...***...] subscribers for a
bundled ISP/server program, or in the aggregate for all bundled ISP server
programs, implementing eSoft's software on Gateway's hardware (such as the
"Basic Package" referred to in Section 4.1.1 of the Statement of Work), or any
modifications, enhancements or alterations thereof) (the "Products") at market
prices [...***...]. Such subscribers will be registered by Gateway no later than
the dates set forth below:

***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

    Date                                          Gross Number of Subscribers
                                                       Registered to Date

[...***...]                                               [...***...]
[...***...]                                               [...***...]
[...***...]                                               [...***...]
[...***...]                                               [...***...]
[...***...]                                               [...***...]

      2.2 Pricing. Gateway shall have the ultimate discretion in setting the
price at which Gateway sells the Products to Gateway's subscribers.

      2.3 Failure to Achieve Subscriber Commitment. If Gateway does not register
the required number of subscribers by the dates set forth above, Gateway shall
nonetheless be required to pay to eSoft [...***...] the [...***...] revenues
received by eSoft from actual Gateway subscribers for the Products (if any) and
the [...***...] revenues that eSoft would have received had Gateway met its
subscriber commitment until such time as Gateway [...***...] its subscriber
commitment. If Gateway achieves registration of the required number of
subscribers within a particular [...***...], the amount owed by Gateway will be
adjusted pro rata to the number of days in which Gateway did not have the
required number of subscribers. Amounts owing to eSoft pursuant to this Section
2.3 shall be paid by Gateway to eSoft on a quarterly basis in arrears. As part
of Gateway's quarterly report submitted to eSoft pursuant to Section 4.1 of the
Agreement, Gateway shall indicate whether it achieved registration of the
required number of subscribers (including the number of gross additions and
subscriber terminations during the quarterly period) and, if Gateway has not
achieved such registration, Gateway shall set forth its calculation of the
amounts owing to eSoft pursuant to this Section 2.3. Amounts owing by Gateway
pursuant to this Section 2.3 shall be received by eSoft no later than
[...***...] following the end of each calendar quarter (e.g. no later than
[...***...]).

      2.4 Gateway's Obligations in Registering Subscribers. The subscriber
commitments set forth in Section 2.1 require Gateway to register a cumulative
total number of subscribers by certain dates, and do not require Gateway to have
registered on a certain date a net number of subscribers. To protect eSoft
against arbitrary actions by Gateway that may have the effect of frustrating the
purpose of the subscriber commitments set forth in Section 2.1, until June 30,
2002, Gateway shall not take unilateral action to terminate the subscriptions of
registered subscribers other than for cause, such as the failure of a subscriber
to pay any subscription fees then payable to Gateway. A subscriber's non-renewal
of a subscription shall not be considered to be unilateral action by Gateway.

      2.5 Limitation on Gateway's Obligations Relating to the Subscriber
Commitment. Gateway's obligations pursuant to this Section 2 shall be subject to
eSoft's compliance with its obligations under the Agreement (as modified by this
Amendment) and the Statement of Work, as well as eSoft's continued development
and enhancement of the Products.

      2.6 License Fee. eSoft and Gateway acknowledge that the license fees set
forth in Exhibit A to the Agreement are subject to change based upon market
conditions. Any change to the license fees set forth in Exhibit A to the
Agreement shall be mutually agreed by eSoft and Gateway and shall take into
account [...***...] to Gateway and [...***...] to Gateway's subscribers of the
components that make up the subscription offering.

***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

3. MISCELLANEOUS.

      3.1 Source Code Escrow Agreement. eSoft and Gateway shall enter into the
source code escrow agreement in the form attached hereto as Exhibit A, and
[...***...] shall pay [...***...] associated with such escrow.

      3.2 Continuation of the Agreement. Except as amended hereby, the Agreement
shall remain in full force and effect.

      3.3 Entire Agreement. This Amendment, together with the Agreement and the
Statement of Work, including attachments, constitutes the entire agreement
between the parties with respect to the subject matter hereof, and merges and
supersedes all prior and contemporaneous negotiations and agreements. Neither of
the parties shall be bound by any conditions, definitions, warranties,
understandings, or representations with respect to the subject matter hereof
other than as expressly provided herein. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. No oral explanation or oral
information by either party hereto shall alter the meaning or interpretation of
this Agreement. No modification or amendment to this Agreement, nor any waiver
of any rights, will be effective unless assented to in writing by both parties,
and the waiver of any breach or default will not constitute a waiver of any
other right hereunder or any subsequent breach or default.

      3.4 Interpretation. This Amendment has been negotiated at arms length and
between persons sophisticated and knowledgeable in the matters dealt with in
this Amendment. Accordingly, any rule of law or legal decision that would
require interpretation of any ambiguities in this Agreement against the Party
that has drafted it is not applicable and is waived.

      3.5 Severability. All rights and remedies, whether conferred hereunder or
by any other instrument or law, will be cumulative and may be exercised
singularly or concurrently. The failure of any Party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of that
Party thereafter to enforce such provisions or any other provisions hereof. The
terms and conditions stated herein are declared to be severable. If any
provision or provisions of this Amendment will be held to be invalid, illegal,
or unenforceable, the validity, legality, and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.

      3.6 Counterparts. This Amendment may be executed in several counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.

***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

AGREED TO AND ACCEPTED:

Gateway, Inc.                          eSoft, Inc.

By: /s/ William M. Elliott             By: /s/ Jeff Finn
    ---------------------------            ---------------------------

Printed Name: William M. Elliot        Printed Name: Jeff Finn
              -----------------                      -----------------
Title: Senior Vice President           Title: President
       ------------------------               ------------------------
Date: 9/15/00                          Date: 9/14/00
      -------------------------              -------------------------
<PAGE>

                           PREFERRED ESCROW AGREEMENT

                      Account Number ______________________

This Agreement is effective September 15, 2000 among DSI Technology Escrow
Services, Inc. ("DSI"), eSoft, Inc. ("Depositor") and Gateway, Inc. ("Preferred
Beneficiary"), who collectively may be referred to in this Agreement as "the
parties."

A. Depositor and Preferred Beneficiary have entered or will enter into a license
agreement, development agreement, and/or other agreement regarding certain
proprietary technology of Depositor (referred to in this Agreement as "the
License Agreement").

B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.

C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.

D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI to
provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.

E. The parties desire this Agreement to be supplementary to the License
Agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).

ARTICLE 1 -- DEPOSITS

1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
parties, Depositor shall deliver to DSI the proprietary technology and other
materials ("Deposit Materials") required to be deposited by the License
Agreement or, if the License Agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Beneficiary. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.

1.2 Identification of Tangible Media. Prior to the delivery of the Deposit
Materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the Deposit
Materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed by
Depositor and delivered to DSI with the Deposit Materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.

1.3 Deposit Inspection. When DSI receives the Deposit Materials and the Exhibit
B, DSI will conduct a deposit inspection by visually matching the labeling of
the tangible media containing the Deposit Materials to the item descriptions and
quantity listed on the Exhibit B. In

<PAGE>

addition to the deposit inspection, Preferred Beneficiary may elect to cause a
verification of the Deposit Materials in accordance with Section 1.6 below.

1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted; and (c) mail a copy of the Exhibit B to
Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs upon
the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the Deposit
Materials have been received and accepted by DSI.

1.5 Depositor's Representations. Depositor represents as follows:

      a.    Depositor lawfully possesses all of the Deposit Materials deposited
            with DSI;

      b.    With respect to all of the Deposit Materials, Depositor has the
            right and authority to grant to DSI and Preferred Beneficiary the
            rights as provided in this Agreement;

      c.    The Deposit Materials are not subject to any lien or other
            encumbrance;

      d.    The Deposit Materials consist of the proprietary technology and
            other materials identified either in the License Agreement or
            Exhibit A, as the case may be; and

      e.    The Deposit Materials are readable and useable in their current form
            or, if any portion of the Deposit Materials are encrypted, the
            decryption tools and decryption keys have also been deposited.

1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
Beneficiary's expense, to cause a verification of any Deposit Materials.
Preferred Beneficiary shall notify Depositor and DSI of Preferred Beneficiary's
request for verification. Depositor shall have the right to be present at the
verification. A verification determines, in different levels of detail, the
accuracy, completeness, sufficiency and quality of the Deposit Materials. If a
verification is elected after the Deposit Materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.

1.7 Deposit Updates. Unless otherwise provided by the License Agreement,
Depositor shall update the Deposit Materials within 60 days of each release of a
new version of the product which is subject to the License Agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
Each Exhibit B will be held and maintained separately within the escrow account.
An independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All references in this Agreement to the Deposit
Materials shall include the initial Deposit Materials and any updates.

Page 2
<PAGE>

1.8 Removal of Deposit Materials. The Deposit Materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.

ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING

2.1 Confidentiality. DSI shall maintain the Deposit Materials in a secure,
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the Deposit Materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the Deposit Materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the Deposit Materials, DSI will
immediately notify the parties to this Agreement unless prohibited by law. It
shall be the responsibility of Depositor and/or Preferred Beneficiary to
challenge any such order; provided, however, that DSI does not waive its rights
to present its position with respect to any such order. DSI will not be required
to disobey any court or other judicial tribunal order. (See Section 7.5 below
for notices of requested orders.)

2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.

2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.

ARTICLE 3 -- GRANT OF RIGHTS TO DSI

3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
upon which the proprietary technology and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
technology and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.

3.2 Right to Make Copies. DSI shall have the right to make copies of the Deposit
Materials as reasonably necessary to perform this Agreement. DSI shall copy all
copyright, nondisclosure, and other proprietary notices and titles contained on
the Deposit Materials onto any copies made by DSI. With all Deposit Materials
submitted to DSI, Depositor shall provide any and all instructions as may be
necessary to duplicate the Deposit Materials including but not limited to the
hardware and/or software needed.

3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
transfer the Deposit Materials to Preferred Beneficiary upon any release of the
Deposit Materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the Deposit Materials.

ARTICLE 4 -- RELEASE OF DEPOSIT

Page 3
<PAGE>

4.1 Release Conditions. As used in this Agreement, "Release Condition" shall
mean the following:

      a.    Depositor's failure to carry out obligations imposed on it pursuant
            to the license agreement; or

      b.    Depositor's failure to continue to do business in the ordinary
            course.

4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the Deposit Materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor by commercial express mail.

4.3 Contrary Instructions. From the date DSI mails the notice requesting release
of the Deposit Materials, Depositor shall have ten business days to deliver to
DSI contrary instructions. "Contrary Instructions" shall mean the written
representation by Depositor that a Release Condition has not occurred or has
been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by commercial express mail. Additionally, DSI shall notify
both Depositor and Preferred Beneficiary that there is a dispute to be resolved
pursuant to the Dispute Resolution section (Section 7.3) of this Agreement.
Subject to Section 5.2, DSI will continue to store the Deposit Materials without
release pending (a) joint instructions from Depositor and Preferred Beneficiary;
(b) resolution pursuant to the Dispute Resolution provisions; or (c) order of a
court.

4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
Depositor, DSI is authorized to release the Deposit Materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the Deposit Materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. Any
copying expense in excess of $300 will be chargeable to Preferred Beneficiary.
This Agreement will terminate upon the release of the Deposit Materials held by
DSI.

4.5 Right to Use Following Release. Unless otherwise provided in the License
Agreement, upon release of the Deposit Materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the Deposit Materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the License Agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released Deposit Materials.

ARTICLE 5 -- TERM AND TERMINATION

5.1 Term of Agreement. The initial term of this Agreement is for a period of one
year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing
that the Agreement is terminated; or (b) the Agreement is terminated by DSI for
nonpayment in accordance with Section 5.2. If the Deposit Materials are subject
to another escrow agreement with DSI, DSI reserves the right, after the initial
one year term, to adjust the anniversary date of this Agreement to match the
then prevailing anniversary date of such other escrow arrangements.

5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this

Page 4
<PAGE>

Agreement shall have the right to make the payment to DSI to cure the default.
If the past due payment is not received in full by DSI within one month of the
date of such notice, then DSI shall have the right to terminate this Agreement
at any time thereafter by sending written notice of termination to all parties.
DSI shall have no obligation to take any action under this Agreement so long as
any payment due to DSI remains unpaid.

5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
Agreement, DSI shall destroy, return, or otherwise deliver the Deposit Materials
in accordance with Depositor's instructions. If there are no instructions, DSI
may, at its sole discretion, destroy the Deposit Materials or return them to
Depositor. DSI shall have no obligation to return or destroy the Deposit
Materials if the Deposit Materials are subject to another escrow agreement with
DSI.

5.4 Survival of Terms Following Termination. Upon termination of this Agreement,
the following provisions of this Agreement shall survive:

      a.    Depositor's Representations (Section 1.5);

      b.    The obligations of confidentiality with respect to the Deposit
            Materials;

      c.    The rights granted in the sections entitled Right to Transfer Upon
            Release (Section 3.3) and Right to Use Following Release (Section
            4.5), if a release of the Deposit Materials has occurred prior to
            termination;

      d.    The obligation to pay DSI any fees and expenses due;

      e.    The provisions of Article 7; and

      f.    Any provisions in this Agreement which specifically state they
            survive the termination or expiration of this Agreement.

ARTICLE 6 -- DSI'S FEES

6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
applicable to the services provided. DSI shall notify the party responsible for
payment of DSI's fees at least 60 days prior to any increase in fees. For any
service not listed on DSI's standard fee schedule, DSI will provide a quote
prior to rendering the service, if requested.

6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI are paid in
full. Fees are due upon receipt of a signed contract or receipt of the Deposit
Materials whichever is earliest. If invoiced fees are not paid, DSI may
terminate this Agreement in accordance with Section 5.2. Late fees on past due
amounts shall accrue interest at the rate of one and one-half percent per month
(18% per annum) from the date of the invoice.

ARTICLE 7 -- LIABILITY AND DISPUTES

7.1 Right to Rely on Instructions. DSI may act in reliance upon any instruction,
instrument, or signature reasonably believed by DSI to be genuine. DSI may
assume that any employee of a

Page 5
<PAGE>

party to this Agreement who gives any written notice, request, or instruction
has the authority to do so. DSI will not be required to inquire into the truth
or evaluate the merit of any statement or representation contained in any notice
or document. DSI shall not be responsible for failure to act as a result of
causes beyond the reasonable control of DSI.

7.2 Indemnification. Depositor and Preferred Beneficiary each agree to
indemnify, defend and hold harmless DSI from any and all claims, actions,
damages, arbitration fees and expenses, costs, attorney's fees and other
liabilities ("Liabilities") incurred by DSI relating in any way to this escrow
arrangement unless such Liabilities were caused solely by the negligence or
willful misconduct of DSI.

7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Three arbitrators shall be selected. The Depositor and
Preferred Beneficiary shall each select one arbitrator and the two chosen
arbitrators shall select the third arbitrator, or failing agreement on the
selection of the third arbitrator, the American Arbitration Association shall
select the third arbitrator. However, if DSI is a party to the arbitration, DSI
shall select the third arbitrator. Unless otherwise agreed by Depositor and
Preferred Beneficiary, arbitration will take place in San Diego, California,
U.S.A. Any court having jurisdiction over the matter may enter judgment on the
award of the arbitrator(s). Service of a petition to confirm the arbitration
award may be made by First Class mail or by commercial express mail, to the
attorney for the party or, if unrepresented, to the party at the last known
business address.

7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the State of California, without regard to its
conflict of law provisions.

7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:

      a.    Give DSI at least two business days' prior notice of the hearing;

      b.    Include in any such order that, as a precondition to DSI's
            obligation, DSI be paid in full for any past due fees and be paid
            for the reasonable value of the services to be rendered pursuant to
            such order; and

      c.    Ensure that DSI not be required to deliver the original (as opposed
            to a copy) of the Deposit Materials if DSI may need to retain the
            original in its possession to fulfill any of its other duties.

Page 6
<PAGE>

ARTICLE 8 -- GENERAL PROVISIONS

8.1 Entire Agreement. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. DSI is not a party to the License
Agreement between Depositor and Preferred Beneficiary and has no knowledge of
any of the terms or provisions of any such License Agreement. DSI's only
obligations to Depositor or Preferred Beneficiary are as set forth in this
Agreement. No amendment or modification of this Agreement shall be valid or
binding unless signed by all the parties hereto, except that Exhibit A need not
be signed by DSI, Exhibit B need not be signed by Preferred Beneficiary and
Exhibit C need not be signed.

8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify each
other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.

8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.

8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have no
obligation in performing this Agreement to recognize any successor or assign of
Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.

Page 7
<PAGE>

8.5 Regulations. Depositor and Preferred Beneficiary are responsible for and
warrant compliance with all applicable laws, rules and regulations, including
but not limited to customs laws, import, export, and re-export laws and
government regulations of any country from or to which the Deposit Materials may
be delivered in accordance with the provisions of this Agreement.

            eSoft                                     Gateway, Inc.
--------------------------------------    --------------------------------------
Depositor                                 Preferred Beneficiary

By: /s/ Jeff Finn                         By: /s/ William M. Elliott
   -----------------------------------       -----------------------------------

Name:   Jeff Finn                         Name:   William M. Elliott
     ---------------------------------         ---------------------------------

Title:  President                         Title:  Senior Vice President
      --------------------------------          --------------------------------

Date:   9-14-00                           Date:   9-15-00
     ---------------------------------         ---------------------------------

                  DSI Technology Escrow Services, Inc.

                  By:
                     -----------------------------------

                  Name:
                       ---------------------------------

                  Title:
                        --------------------------------

                  Date:
                       ---------------------------------

Page 8
<PAGE>

                                                                       EXHIBIT A

                            MATERIALS TO BE DEPOSITED

                      Account Number ______________________

Depositor represents to Preferred Beneficiary that Deposit Materials delivered
to DSI shall consist of the following:

1.    All source code relating to the licensed modules outlined in Exhibit A of
      the Master Software Licensing and Services Agreement including:

      Module Name                                           Module ID
      ---------------------------------------------------------------
      Gateway                                               Rph-GW
      Enhanced E-Mail Server                                Rph-EMS
      Enhanced Firewall                                     Rph-EFS
      Virtual Private Network- PPTP                         Rph-PPTP
      Virtual Private Network- IPSec                        Rph-VPN
      Enhanced Web Server                                   Rph-Web
      URL and Content Filtering                             Rph-SF25
      Managed Firewall Services- Basic                      Rph-MFS

2.    All source code relating to the Statement of Work executed by the parties.
      For example the source code necessary to support the deliverables outlined
      in Statement of Work 001 including the Gateway User Interface, ISP
      Configuration and Installation and Gateway Redphish Features and
      Functionality Specification Changes

3.    All source code for the open source software modules necessary to
      facilitate the functionality of the licensed modules and software
      modifications made under a Statement of Work including but not limited the
      following:

        -----------------------------------------------------------------------
        Package name
        -----------------------------------------------------------------------
        Modified by ESoft
        -----------------------------------------------------------------------
        apache                  jove                      qpopper
        -----------------------------------------------------------------------
        autorpm                 kernel                    samba
        -----------------------------------------------------------------------
        diald                   libjavascript             squid
        -----------------------------------------------------------------------
        exim                    lm_sensors2               sudo
        -----------------------------------------------------------------------
        fetchmail               openldap                  frontpage
        -----------------------------------------------------------------------
        i2c                     Openldap-servers          ESoft created
        -----------------------------------------------------------------------
        ipfwd                   Pb_driver                 libapexx
        -----------------------------------------------------------------------
        ipmasqadm               Perl-Mail-Sendmail        Ti-GTW_PEABODY
        -----------------------------------------------------------------------
        jesred                  Perl-libnet               Ti-GTW_PEABODY-LnF
        -----------------------------------------------------------------------

The Depositor agrees to maintain escrow for all Enhancements Upgrades, and Major
Releases licensed to the Preferred Beneficiary by Contract, Addendum or
Statement of Work.

Page 9
<PAGE>

               eSoft                                Gateway,Inc
-------------------------------------    ---------------------------------------
Depositor                                Preferred Beneficiary

By: /s/ Jeff Finn                        By: /s/ William M.Elliott
    ---------------------------------        -----------------------------------

Name: Jeff Finn                          Name: William M. Elliot
      -------------------------------          ---------------------------------

Title: President                         Title: Senior Vice President
       ------------------------------           --------------------------------

Date: 9-14-2000                          Date: 9/15/00
      -------------------------------          ---------------------------------

Page 10
<PAGE>

                                                                       EXHIBIT B

                        DESCRIPTION OF DEPOSIT MATERIALS

Depositor Company Name _______________________________________________________

Account Number _______________________________________________________________

Product Name__________________________________________Version_________________
(Product Name will appear as the Exhibit B Name on Account History report)

DEPOSIT MATERIAL DESCRIPTION:

Quantity    Media Type & Size            Label Description of Each Separate Item

______      Disk 3.5" or ____

______      DAT tape ____mm

______      CD-ROM
______      Data cartridge tape ____

______      TK 70 or ____ tape

______      Magnetic tape ____

______      Documentation

______      Other ______________________

PRODUCT DESCRIPTION:

Environment___________________________________________________________________

DEPOSIT MATERIAL INFORMATION:

Is the media encrypted? Yes / No If yes, please include any passwords and the
decryption tools.

Encryption tool name____________________________________Version_______________
Hardware required_____________________________________________________________
Software required_____________________________________________________________
Other required information____________________________________________________

I certify for Depositor that the above described_______________________DSI has
inspected and accepted the above Deposit Materials have been transmitted to
DSI:________________________materials (any exceptions are noted above):

Signature________________________         Signature___________________________
Print Name_______________________         Print Name__________________________
Date_____________________________         Date Accepted_______________________
                                          Exhibit B#__________________________

Send materials to: DSI, 9265 Sky Park Ct., Suite 202, San Diego, CA 92123
                                                                  (858) 499-1600

Page 11
<PAGE>

                                                                       EXHIBIT C

                               DESIGNATED CONTACT

                      Account Number ______________________

<TABLE>
<S>                                               <C>
Notices, deposit material returns and             Invoices to Depositor should be
communications to Depositor                       Addressed to:
should be addressed to:
                                                  Company Name: eSoft, Inc.
Company Name: eSoft, Inc.                         Address: 295 Interlocken Blvd., # 500
Address: 295 Interlocken Blvd., # 500                      Broomfield, Colorado 80021
         Broomfield, Colorado 80021
                                                  Contact: Joan Morgan
Designated Contact: Joan Morgan                   ________________________________________
Telephone: (303) 444-1600                         P.O.#, if required:_____________________
Facsimile: (303) 444-1640
                                                  Invoices to Preferred Beneficiary
Notices and communications to                     should be addressed to:
Preferred Beneficiary should be addressed to:
                                                  Company Name: Gateway, Inc.
Company Name: Gateway, Inc.                       Address: Accounts Payable, Mail Drop W-37
Address: 4545 Towne Centre Court                           610 Gateway Drive
         San Diego, California 92121                       North Sioux City, SD  57049
                                                  Contact: Susan Terminesi
Designated Contact: General Counsel               ________________________________________
Telephone: (858) 799-3401                         P.O.#, if required:_____________________
Facsimile: (858) 799-3413
</TABLE>

Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.

<TABLE>
<S>                                               <C>
Contracts, Deposit Materials and notices to       Invoice inquiries and fee remittances
DSI should be addressed to:                       to DSI should be addressed to:

DSI Technology Escrow Services, Inc.              DSI Technology Escrow Services, Inc.
Contract Administration                           Accounts Receivable
9265 Sky Park Court, Suite 202                    PO Box 45156
San Diego, CA 92123                               San Francisco, CA 94145-0156

Telephone: (858) 499-1600                         (858) 499-1636
Facsimile: (858) 694-1919                         (858) 499-1637
</TABLE>

Date:  September 15, 2000

Page 12Prepared by MERRILL CORPORATION

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Exhibit 10.42  

 MARKETING, DISTRIBUTION AND DEVELOPMENT AGREEMENT  

 BY AND BETWEEN  

 GILEAD SCIENCES, INC.  

 AND  

 CUBIST PHARMACEUTICALS, INC.  

 January 6, 2001  

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  

   TABLE OF CONTENTS  

	 
	 	 
	 	PAGE

	ARTICLE 1	 	DEFINITIONS	 	1
	 	1.1	 	"Affiliate"	 	1
	 	1.2	 	"Bacteremia"	 	1
	 	1.3	 	"CAP"	 	1
	 	1.4	 	"Change in Control"	 	1
	 	1.5	 	"Clinical Transfer Price"	 	1
	 	1.6	 	"Commercial Launch"	 	1
	 	1.7	 	"Commercialize"	 	1
	 	1.8	 	"Commercially Reasonable Efforts"	 	2
	 	1.9	 	"Compulsory License"	 	2
	 	1.10	 	"Confidential Information"	 	2
	 	1.11	 	"Control"	 	2
	 	1.12	 	"Core IV Products"	 	2
	 	1.13	 	"Core Licensed Products"	 	2
	 	1.14	 	"Core Trials"	 	2
	 	1.15	 	"CPMP"	 	2
	 	1.16	 	"cSST"	 	2
	 	1.17	 	"Cubist Development Plan"	 	2
	 	1.18	 	"Cubist Diligence Obligation"	 	2
	 	1.19	 	"Cubist Know-How"	 	2
	 	1.20	 	"Cubist Marks"	 	2
	 	1.21	 	"Cubist Patent"	 	2
	 	1.22	 	"Cubist Technology"	 	2
	 	1.23	 	"cUTI"	 	2
	 	1.24	 	"Daptomycin"	 	3
	 	1.25	 	"Daptomycin Product"	 	3
	 	1.26	 	"Daptomycin-Derived Product"	 	3
	 	1.27	 	"Development Subcommittee"	 	3
	 	1.28	 	"Diligence Obligation"	 	3
	 	1.29	 	"Directly Competitive Product"	 	3
	 	1.30	 	"Dollar"	 	3
	 	1.31	 	"Drug Approval Application"	 	3
	 	1.32	 	"EC"	 	3
	 	1.33	 	"EMEA"	 	3
	 	1.34	 	"Endocarditis"	 	3
	 	1.35	 	"Enterococcal Infection"	 	3
	 	1.36	 	"FDA"	 	3
	 	1.37	 	"Force Majeure	 	3
	 	1.38	 	"Free Sales Certificate"	 	3
	 	1.39	 	"Gilead Development Plan"	 	4
	 	1.40	 	'Gilead Diligence Obligation"	 	4
	 	1.41	 	"Gilead Indemnifiable Technology"	 	4
	 	1.42	 	"Gilead Indemnifiable Technology Losses"	 	4
	 	1.43	 	"Gilead Marks"	 	4
	 	1.44	 	"Gilead Project Know-How"	 	4
	 	1.45	 	"Gilead Project Patent"	 	4
	 	1.46	 	"Gilead Project Technology"	 	4

i

 

	 	1.47	 	"Gilead Territory"	 	4
	 	1.48	 	"HAP"	 	4
	 	1.49	 	"Incremental Product Development Costs"	 	4
	 	1.50	 	"IND"	 	4
	 	1.51	 	"Information"	 	4
	 	1.52	 	"Infringement"	 	4
	 	1.53	 	"IV Product"	 	4
	 	1.54	 	"Joint Invention"	 	5
	 	1.55	 	"Joint Patent"	 	5
	 	1.56	 	"Licensed Product"	 	5
	 	1.57	 	"Lilly"	 	5
	 	1.58	 	"Lilly License"	 	5
	 	1.59	 	"Loss"	 	5
	 	1.60	 	"MAA"	 	5
	 	1.61	 	"Marketing Subcommittee"	 	5
	 	1.62	 	"MSL"	 	5
	 	1.63	 	"NDA"	 	5
	 	1.64	 	"Necessary"	 	5
	 	1.65	 	"Net Sales"	 	5
	 	1.66	 	"Oral Product"	 	6
	 	1.67	 	"Oral Product Fee"	 	6
	 	1.68	 	"Other Licensee"	 	6
	 	1.69	 	"Patent"	 	6
	 	1.70	 	"Permitted Sublicense"	 	6
	 	1.71	 	"Phase I Clinical Trial"	 	6
	 	1.72	 	"Phase II Clinical Trial"	 	6
	 	1.73	 	"Phase III Clinical Trials"	 	6
	 	1.74	 	"Phase IIIB Clinical Trials"	 	6
	 	1.75	 	"Phase IV Clinical Trials"	 	6
	 	1.76	 	"Price Approval"	 	7
	 	1.77	 	"Primary Endpoint"	 	7
	 	1.78	 	"Refund Event"	 	7
	 	1.79	 	"Regulatory Approval"	 	7
	 	1.80	 	"Regulatory Authority"	 	7
	 	1.81	 	"Related Gilead Know-How"	 	7
	 	1.82	 	"Related Gilead Project Patent"	 	7
	 	1.83	 	"Related Gilead Technology"	 	7
	 	1.84	 	"ROFR Territory"	 	7
	 	1.85	 	"Steering Committee"	 	7
	 	1.86	 	"Supply Agreement"	 	7
	 	1.87	 	"Term"	 	7
	 	1.88	 	"Third Party Royalties"	 	7
	 	1.89	 	"Third Party"	 	7
	 	1.90	 	"Transfer Price"	 	7
	 	1.91	 	"Valid Claim"	 	7
	ARTICLE 2	 	MANAGEMENT	 	8
	 	2.1	 	General	 	8
	 	2.2	 	Steering Committee	 	8
	 	2.3	 	Formation of Subcommittees	 	9
	 	2.4	 	Project Coordinators	 	11

ii

 

	 	2.5	 	Collaboration Guidelines	 	11
	 	2.6	 	Accounting	 	11
	ARTICLE 3	 	DEVELOPMENT	 	11
	 	3.1	 	Cubist Development, Development Plan, and Diligence Obligation	 	11
	 	3.2	 	Gilead Development Plan	 	13
	 	3.3	 	Responsibilities of the Development Subcommittee during Development	 	13
	 	3.4	 	Modification of Clinical Trials; Incremental Product Development Costs	 	13
	 	3.5	 	Determination of Cubist Diligence	 	14
	ARTICLE 4	 	REGULATORY	 	15
	 	4.1	 	General	 	15
	 	4.2	 	Free Sales Certificates; Ownership of Regulatory Approvals	 	15
	 	4.3	 	Gilead Access to Cubist and Other Licensee Information	 	16
	 	4.4	 	Cubist and Other Licensee Access to Gilead Information	 	17
	 	4.5	 	Adverse Event Reporting	 	17
	 	4.6	 	Communications	 	17
	 	4.7	 	Applications for Regulatory Exclusivity	 	17
	 	4.8	 	Recalls and Voluntary Withdrawals	 	17
	 	4.9	 	Label	 	18
	ARTICLE 5	 	COMMERCIALIZATION; DILIGENCE	 	19
	 	5.1	 	Right	 	19
	 	5.2	 	Responsibilities of the Marketing Subcommittee during Commercialization	 	19
	 	5.3	 	Marketing Plan	 	19
	 	5.4	 	Activities by MSLs in Gilead Territory	 	19
	 	5.5	 	Diligence Obligation	 	20
	 	5.6	 	Determination of Gilead's Diligence	 	21
	 	5.7	 	Diversion of Resources for Directly Competitive Product	 	21
	 	5.8	 	Discounting	 	22
	 	5.9	 	Gilead Compliance	 	22
	ARTICLE 6	 	LICENSE; RIGHTS OF FIRST REFUSAL; EXCLUSIVITY	 	22
	 	6.1	 	Patent Licenses to Gilead	 	22
	 	6.2	 	Patent Licenses to Cubist	 	22
	 	6.3	 	Nonexclusive Know-How License to Gilead	 	23
	 	6.4	 	Nonexclusive Know-How License to Cubist	 	23
	 	6.5	 	Rights of First Refusal and Negotiation	 	23
	 	6.6	 	Exclusivity	 	24
	 	6.7	 	Trademark License	 	24
	 	6.8	 	Third Party Technology	 	25
	 	 	(a) Required	 	25
	 	 	(b) Desirable	 	25
	 	6.9	 	Sublicensed Technology	 	25
	 	6.10	 	Related Gilead Technology.	 	26
	 	6.11	 	Sublicensing	 	26
	 	6.12	 	Use of Patents and Know-How	 	26
	 	6.13	 	Field	 	26
	ARTICLE 7	 	MANUFACTURE AND SUPPLY	 	26
	 	7.1	 	Supply by Cubist	 	26
	 	7.2	 	Transfer Price	 	27
	ARTICLE 8	 	COMPENSATION	 	28
	 	8.1	 	License Fee	 	28
	 	8.2	 	Milestone Payments	 	28

iii

 

	 	8.3	 	Royalties	 	29
	 	8.4	 	Term of Royalties	 	30
	 	8.5	 	Third Party Royalties and Other Payments	 	30
	 	8.6	 	Royalty Payments and Reports	 	30
	 	8.7	 	Taxes	 	30
	 	8.8	 	Blocked Currency	 	30
	 	8.9	 	Foreign Exchange	 	30
	 	8.10	 	Payments to or Reports by Affiliates	 	31
	 	8.11	 	Late Payments.	 	31
	ARTICLE 9	 	INTELLECTUAL PROPERTY	 	31
	 	9.1	 	Ownership of Inventions	 	31
	 	9.2	 	Prosecution of Patents	 	31
	 	9.3	 	Patent Term Extensions.	 	32
	 	9.4	 	Non-Patent Regulatory Exclusivity	 	32
	 	9.5	 	Infringement of Patents by Third Parties	 	32
	 	9.6	 	Infringement of Third Party Rights	 	34
	 	9.7	 	Royalty Reduction	 	35
	 	9.8	 	Patent Marking	 	35
	 	9.9	 	Selection and Registration of Product Trademarks	 	35
	 	9.10	 	Infringement of Trademarks by Third Parties	 	36
	 	9.11	 	Patent Oppositions	 	36
	 	 	(a) Third Party Patent Rights	 	36
	 	 	(b) Parties' Patent Rights	 	36
	 	 	(c) Noncontravention	 	36
	 	9.12	 	Lilly License	 	36
	ARTICLE 10	 	REPRESENTATIONS AND WARRANTIES	 	36
	 	10.1	 	Mutual Representations and Warranties	 	36
	 	10.2	 	Cubist	 	37
	 	10.3	 	Disclaimer	 	38
	 	10.4	 	No Other Representations	 	38
	ARTICLE 11	 	INDEMNIFICATION	 	38
	 	11.1	 	Indemnification by Cubist	 	38
	 	11.2	 	Indemnification by Gilead	 	38
	 	11.3	 	Procedure	 	38
	 	11.4	 	Insurance	 	39
	 	11.5	 	No Application to Third Party Infringement Claims	 	39
	 	11.6	 	Limitation of Liability	 	39
	ARTICLE 12	 	RECORDS; PUBLICATIONS	 	39
	 	12.1	 	Records	 	39
	 	12.2	 	Publications	 	40
	ARTICLE 13	 	CONFIDENTIALITY	 	40
	 	13.1	 	Treatment of Confidential Information	 	40
	 	13.2	 	Authorized Disclosure	 	41
	 	13.3	 	Publicity	 	41
	ARTICLE 14	 	TERM AND TERMINATION	 	41
	 	14.1	 	Term	 	41
	 	14.2	 	Termination by Gilead	 	41
	 	14.3	 	Termination for Breach	 	42
	 	14.4	 	Cubist Rights upon Certain Terminations of the Agreement or as to Certain Licensed Products	 	42

iv

 

	 	14.5	 	Gilead Rights upon Certain Terminations	 	43
	 	14.6	 	Survival	 	43
	 	14.7	 	Clarification with respect to Supply Agreement.	 	43
	 	14.8	 	Repurchase of Inventory	 	43
	ARTICLE 15	 	DISPUTE RESOLUTION	 	44
	 	15.1	 	Disputes	 	44
	 	15.2	 	Governing Law; Judicial Resolution	 	44
	 	15.3	 	Patent and Trademark Dispute Resolution	 	44
	 	15.4	 	[*] Resolution of Certain Disputes	 	44
	ARTICLE 16	 	MISCELLANEOUS	 	45
	 	16.1	 	Entire Agreement; Amendment	 	45
	 	16.2	 	Force Majeure	 	45
	 	16.3	 	Notices	 	45
	 	16.4	 	Maintenance of Records	 	46
	 	16.5	 	No Strict Construction	 	46
	 	16.6	 	Assignment	 	46
	 	16.7	 	Performance by Affiliates	 	46
	 	16.8	 	Counterparts	 	47
	 	16.9	 	Further Actions	 	47
	 	16.10	 	Severability	 	47
	 	16.11	 	Headings	 	47
	 	16.12	 	No Waiver	 	47

v

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  

 MARKETING, DISTRIBUTION AND DEVELOPMENT AGREEMENT  

    THIS MARKETING, DISTRIBUTION AND DEVELOPMENT AGREEMENT (the "Agreement") is made effective as of the 6th day of
January, 2001 (the "Effective Date") by and between GILEAD SCIENCES, INC., a Delaware corporation having its principal place of business at 333
Lakeside Drive, Foster City, CA 94404 ("Gilead"), and CUBIST PHARMACEUTICALS, INC., a Delaware corporation having its principal place of business
at 24 Emily Street, Cambridge, Massachusetts 02139 ("Cubist"). Cubist and Gilead are sometimes referred to herein individually as a "Party" and collectively as the "Parties", and references to
"Gilead" and "Cubist" shall include their respective Affiliates. 

RECITALS  

    WHEREAS, Cubist has in-licensed and continues to develop a proprietary compound known under the
generic name of daptomycin; 

    WHEREAS, Cubist is currently conducting clinical trials of an intravenous formulation of daptomycin for the treatment of various
gram-positive bacterial infections in humans, and is evaluating an oral formulation of daptomycin in preclinical studies; 

    WHEREAS, Gilead possesses extensive capabilities in the development, promotion and marketing of anti-infective
pharmaceutical products in Europe and desires to seek regulatory approval for and market daptomycin in Europe; and 

    WHEREAS, Gilead desires to obtain the exclusive right to develop and commercialize daptomycin in the European Community and certain
additional countries, and Cubist desires to grant Gilead such rights in such countries all as set forth below; 

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

 
 

ARTICLE 1
  DEFINITIONS    
  

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

    1.1 "Affiliate" shall mean, except as provided below, an entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with Cubist or Gilead. 

    1.2 "Bacteremia" shall mean the treatment of a blood-borne infection caused by any bacteria. 

    1.3 "CAP" shall mean the treatment of community acquired pneumonia. 

    1.4 "Change in Control" shall mean that a Third Party shall have become the beneficial owner of securities representing  [*] or more of the aggregate voting power
of the then outstanding voting securities of Cubist, or any sale by Cubist of all or
substantially all of Cubist's assets. 

    1.5 "Clinical Transfer Price" shall have the meaning assigned such term in Section 7.2. 

    1.6 "Commercial Launch" shall mean the first sale of a Licensed Product to a Third Party in a given country. 

    1.7 "Commercialize" shall have the meaning assigned such term in Section 5.1 and "Commercialization" shall be
interpreted accordingly. 

 

    1.8 "Commercially Reasonable Efforts" shall mean, with respect to a Party's obligation under this Agreement to develop
or commercialize Licensed Product, the level of efforts required to carry out such obligation in sustained manner consistent with the efforts a similarly situated biopharmaceutical company devotes to
a product of similar market potential, profit potential or strategic value resulting from its own research efforts, based on conditions then prevailing. 

    1.9 "Compulsory License" shall mean a compulsory license under any Cubist Patent obtained by a Third Party through the
order, decree, or grant of a governmental authority of competent jurisdiction, authorizing such Third Party to manufacture, use, sell, offer for sale or import a product competitive with a Licensed
Product in one or more countries within the Gilead Territory. 

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

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

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

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

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

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

    1.11 "Control" shall mean possession of the ability to grant a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangement with any Third Party. 

    1.12 "Core IV Products" shall mean those IV Products whose primary therapeutic indication is CAP or cSST. 

    1.13 "Core Licensed Products" shall mean those Licensed Products whose primary therapeutic indication is CAP or cSST. 

    1.14 "Core Trials" shall mean the clinical trials listed on Exhibit A under the title "Core Trials." 

    1.15 "CPMP" shall mean the Committee for Proprietary Medicinal Products, which represents the medicine authorities of
the European Community member states. 

    1.16 "cSST" shall mean the treatment of complicated skin and soft tissue bacterial infection. 

    1.17 "Cubist Development Plan" shall have the meaning assigned such term in Section 3.1. 

    1.18 "Cubist Diligence Obligation" shall have the meaning assigned such term in Section 3.5. 

    1.19 "Cubist Know-How" shall mean all Information which is [*]. Notwithstanding
anything herein to the contrary, Cubist Know-How shall exclude Information [*]. 

    1.20 "Cubist Marks" shall mean (i) all [*] listed at Exhibit B; (ii) the
[*]; and (iii) any other [*] that the Parties may agree in writing to designate for [*]. 

    1.21 "Cubist Patent" shall mean any Patent which (i) covers [*]; and (ii) is
[*], including [*]. 

    1.22 "Cubist Technology" shall mean all Cubist Patents and Cubist Know-How. 

    1.23 "cUTI" shall mean the treatment of complicated urinary tract infections. 

2

 

    1.24 "Daptomycin" shall mean the compound set forth and identified as the primary daptomycin molecule on
Exhibit C, [*] of such compound, which [*], and all [*] of such primary daptomycin molecule, [*]. 

    1.25 "Daptomycin Product" shall mean any pharmaceutical composition containing Daptomycin, but only if such
pharmaceutical composition is formulated for use for oral delivery [*] or for delivery via injection [*], and that [*];  provided, however, that in any event, [*] is developing pursuant to its [*] for
development of
[*] shall be deemed to be a Licensed Product. 

    1.26 "Daptomycin-Derived Product" shall mean any pharmaceutical composition  
[*] and that [*], but excluding Daptomycin Products. 

    1.27 "Development Subcommittee" shall have the meaning assigned such term in Section 2.3(a). 

    1.28 "Diligence Obligation" shall mean the Gilead Diligence Obligation and/or the Cubist Diligence Obligation. 

    1.29 "Directly Competitive Product" shall mean any antibiotic in any formulation marketed and sold (i) primarily
for [*] (provided that this clause (i) shall apply solely for the purpose of determining whether a product is competitive
with [*] Licensed Product and shall not apply for the purpose of determining whether a product is competitive with any Licensed Product other than [*]),
(ii) primarily to [*] in humans, and (iii) for [*] approved by a Regulatory Authority in the Gilead Territory including, as the primary
indication for the product, an indication that is also included on the label approved by a Regulatory Authority in the Gilead Territory for any Licensed Product. The Parties shall, at the time Cubist
or Gilead commences Phase III Clinical Trials for an Oral Product that is a Licensed Product, modify this definition by mutual agreement to accommodate products competitive with such Oral Product,
considering the terms of this Section 1.29 as guiding principles (it being understood that [*] of such Oral Product may not necessarily be [*]).
If the Parties do not agree, the issue shall be submitted for resolution [*] as provided in Section 15.4. 

    1.30 "Dollar" shall mean a United States dollar, and "$" shall be interpreted accordingly. 

    1.31 "Drug Approval Application" shall mean an application for Regulatory Approval required before commercial sale or
use of a Licensed Product as a drug in a regulatory jurisdiction, including without limitation an NDA filed in the United States. 

    1.32 "EC" shall mean the European Community. 

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

    1.34 "Endocarditis" shall mean the treatment of inflammation of the heart and/or its valves resulting from a bacterial
infection. 

    1.35 "Enterococcal Infection" shall mean the treatment of enterococcal bacterial infections. 

    1.36 "FDA" shall mean the United States Food and Drug Administration, or any successor thereto. 

    1.37 "Force Majeure" shall mean any event beyond the control of the relevant Party, including, without limitation, fire,
flood, earthquakes, riots, strikes, epidemics, war (declared or undeclared and including the continuance, expansion or new outbreak of any war or conflict now in existence), embargoes and governmental
actions or decrees. 

    1.38 "Free Sales Certificate" shall mean market approval sufficient for the manufacture, distribution, use and sale of
Licensed Products outside of the United States which can be obtained primarily on the basis of U.S. FDA, EMEA or other European Regulatory Approval and without the conduct of additional clinical
trials, and shall include both market approvals referred to commonly as 

3

 

"free sales certificates" and similar market approvals or certificates referred to by other names, provided that such similar market approvals or certificates do not impose a substantially greater
burden on the applicant than those market approvals commonly referred to as "free sales certificates." 

    1.39 "Gilead Development Plan" shall have the meaning assigned such term in Section 3.2. 

    1.40 "Gilead Diligence Obligation" shall have the meaning assigned such term in Section 5.6. 

    1.41 "Gilead Indemnifiable Technology" shall have the meaning assigned such term in Section 9.6(d)(ii). 

    1.42 "Gilead Indemnifiable Technology Losses" shall have the meaning assigned such term in Section 9.6(d)(ii). 

    1.43 "Gilead Marks" shall mean (i) all [*] listed at Exhibit D as it may be
updated from time to time; (ii) any [*] in connection with Licensed Products in the Gilead Territory; and (iii) any other [*] that the
Parties may agree in writing to designate for [*]. 

    1.44 "Gilead Project Know-How" shall mean all Information that (i) Gilead
[*], (ii) covers the [*] and (iii) is [*]. Gilead Project Know-How shall exclude Information
[*]. Gilead Project Know-How shall include any [*] that the Parties agree in writing to include in the Gilead Project Know-How
[*]. 

    1.45 "Gilead Project Patent" shall mean any Patent that (i) claims [*] (ii) covers
the [*], (iii) is [*], and (iv) is [*]. Gilead Project Patents include Gilead's interest in
[*] that the Parties agree in writing to include in the Gilead Project Patents [*]. 

    1.46 "Gilead Project Technology" shall mean the Gilead Project Know-How and Gilead Project Patents. 

    1.47 "Gilead Territory" shall mean the countries listed in Exhibit E and any other country that is added to the
Gilead Territory pursuant to Section 6.5(a), and the possessions and territories of each such country. 

    1.48 "HAP" shall mean the treatment of hospital-acquired pneumonia. 

    1.49 "Incremental Product Development Costs" shall mean the costs attributed to the implementation of a Proposed
Modification, as determined by the Steering Committee pursuant to Section 3.4. 

    1.50 "IND" shall mean an Investigational New Drug Application as defined in the United States Food, Drug and Cosmetic
Act and applicable regulations promulgated thereunder by the FDA or the equivalent application to the equivalent agency in any other country or group of countries, the filing of which is necessary to
commence clinical testing of Licensed Product in humans in a particular jurisdiction. 

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

    1.52 "Infringement" shall have the meaning assigned in Section 9.5. 

    1.53 "IV Product" shall mean any Daptomycin Product formulated for intravenous delivery, including without limitation
the formulation described by the specifications set forth in a letter that Cubist has provided to Gilead prior to the Effective Date. 

4

 

    1.54 "Joint Invention" shall have the meaning assigned in Section 9.1. 

    1.55 "Joint Patent" shall have the meaning assigned such term in Section 9.2. 

    1.56 "Licensed Product" shall mean all Daptomycin Products, and all Daptomycin—Derived Products that become
Licensed Products pursuant to Section 6.5(b). 

    1.57 "Lilly" shall mean Eli Lilly and Company. 

    1.58 "Lilly License" shall mean that certain Licensing Agreement between Cubist and Lilly dated October 6, 2000,
which restated the prior agreement between such parties dated November 7, 1997, as amended. 

    1.59 "Loss" shall have the meaning assigned such term in Section 11.1. 

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

    1.61 "Marketing Subcommittee" shall have the meaning assigned such term in Section 2.3(b). 

    1.62 "MSL" shall mean a Cubist employee serving as a medical science liaison for commercialization of
Licensed Products, as provided in Section 5.4. 

    1.63 "NDA" shall mean a New Drug Application for Regulatory Approval filed in the United States. 

    1.64 "Necessary" shall have the meaning assigned such term in Section 6.8(a). 

    1.65 "Net Sales" shall mean, with respect to a particular time period, the amount billed by Gilead, its Affiliates and
Permitted Sublicensees for sales of Licensed Products made in such time period to a Third Party less: 

    (i)  discounts, including cash and quantity discounts, charge-back payments and rebates granted to managed
health care organizations or to federal, state and local governments, their agencies, purchasers and reimbursers or to trade customers; 

    (ii) credits or allowances actually granted upon claims, damaged goods, rejections or returns of such Licensed Products,
including recalls; 

    (iii) freight, postage, shipping, transportation and insurance charges actually allowed or paid for delivery of Licensed
Products; and 

    (iv) taxes (other than income taxes), duties or other governmental charges levied on, absorbed or otherwise imposed on
sale of such Licensed Products, including without limitation value-added taxes, or other governmental charges otherwise measured by the billing, as adjusted for rebates and refunds. 

    If
Gilead sells Licensed Products in the form of a combination product containing one or more active ingredients in addition to Daptomycin (which may be either combined in a single
formulation or packaged as separate formulations sold as a single package), Net Sales for such combination product will be calculated by multiplying actual Net Sales of such combination product by the
fraction A/(A+B) where A is the invoice price of the Licensed Product if sold separately, and B is the total invoice price of the other active ingredient or ingredients in the combination, if sold
separately. If, on a country-by-country basis, the other active ingredient or ingredients in the combination are not sold
separately in said country, Net Sales for the purpose of determining royalties of the combination product shall be calculated by multiplying actual Net Sales of such combination product by the
fraction A/C where A is the invoice price of the Licensed Product if sold separately, and C is the invoice price of the combination product. If, on a country-by-country basis,
the Licensed Product is not sold 

5

 

separately in said country, Net Sales for the purposes of determining royalties of the combination product shall be determined by the Steering Committee in good faith on the basis of the fair market
value of the Licensed Product. 

    Notwithstanding
the foregoing, amounts received by Gilead, its Affiliates or Permitted Sublicensees for the sale of Licensed Products among Gilead, its Affiliates and Permitted
Sublicensees for resale shall not be included in the computation of Net Sales hereunder. 

    For
purposes of this definition and the other provisions of this Agreement, no distributor of Gilead that sells a Licensed Product shall be deemed to be a Permitted Sublicensee of
Gilead unless expressly so agreed in writing by the Parties. If any distributor of Licensed Products makes any payment to Gilead, its Affiliates or Permitted Sublicensees in consideration of being a
distributor of any Licensed Product, which payment would not, but for the provisions of this sentence, be included in the definition of Net Sales, then the amount of such payment to Gilead, its
Affiliates or Permitted Sublicensees shall be included in Net Sales in the quarter in which Gilead, its Affiliates or Permitted Sublicensees received such payment for purposes of calculating the
royalty due to Cubist pursuant to Article 8. 

    1.66 "Oral Product" shall mean any Daptomycin Product formulated for oral delivery, [*]. 

    1.67 "Oral Product Fee" shall have the meaning assigned such term in Section 8.1(b). 

    1.68 "Other Licensee" shall mean any Third Party to whom Cubist has granted or grants a license and/or sublicense to
develop or commercialize a Licensed Product. 

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

    1.70 "Permitted Sublicense" shall have the meaning assigned such term in Section 6.11. 

    1.71 "Phase I Clinical Trial" shall mean those trials on sufficient numbers of normal volunteers and patients that are
designed to establish that a pharmaceutical product is safe for its intended use, and to support its continued testing in Phase II Clinical Trials. 

    1.72 "Phase II Clinical Trial" shall mean those trials on sufficient numbers of patients that are designed to establish
the safety, dosage and biological activity of a pharmaceutical product for its intended use, and to define warnings, precautions and adverse reactions that are associated with the pharmaceutical
product in the dosage range to be prescribed. 

    1.73 "Phase III Clinical Trials" means those trials on sufficient numbers of patients that are designed to establish
that a drug is safe and efficacious for its intended use, and to define warnings, precautions and adverse reactions that are associated with the drug in the dosage range to be prescribed, and
supporting Regulatory Approval of such drug or label expansion of such drug. 

    1.74 "Phase IIIB Clinical Trials" means product support clinical trials of a Licensed Product (i.e., a clinical trial
which is not required for receipt of Regulatory Approval but which may be useful in providing additional drug profile data) commenced before receipt of Regulatory Approval in the country where such
trial is being conducted. 

    1.75 "Phase IV Clinical Trials" means product support clinical trials of a Licensed Product commenced after receipt of
Regulatory Approval in the country where such trial is being conducted. 

6

 

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

    1.77 "Primary Endpoint" shall mean, with respect to a clinical trial, the point at which equivalence to the comparator
agent has been achieved with respect to a clinical or microbiological outcome as specified in the protocol for such trial as set forth in Exhibit A, unless otherwise agreed by the Parties in
writing. 

    1.78 "Refund Event" shall have the meaning assigned such term in Section 8.1(c). 

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

    1.80 "Regulatory Authority" shall mean a foreign counterpart of the FDA. 

    1.81 "Related Gilead Know-How" shall mean all Information [*] (i) which is
[*], (ii) is [*] and (iii) relates to [*]. 

    1.82 "Related Gilead Project Patent" shall mean any Patent other than a Gilead Project Patent which (i) covers
[*]; and (ii) is [*], including Gilead's interest in [* ]. 

    1.83 "Related Gilead Technology" shall mean the Related Gilead Know-How and Related Gilead Project Patents. 

    1.84 "ROFR Territory" shall mean those countries listed at Exhibit F and their territories and possessions. The
ROFR Territory shall also include [*], but shall exclude [*] and with respect to which [*]; provided,
however, that any such country that is not included in the ROFR Territory [* ] shall be included in the
ROFR Territory upon and from the date [*]. 

    1.85 "Steering Committee" shall mean the committee formed as described in Section 2.2. 

    1.86 "Supply Agreement" shall have the meaning assigned such term in Section 7.1. 

    1.87 "Term" shall mean the term of this Agreement. 

    1.88 "Third Party Royalties" shall mean royalties payable to any Third Party as a result of the manufacture, use or sale
of Licensed Products pursuant to, and in accordance with, the provisions of
this Agreement or the Supply Agreement, including without limitation royalties due under the Lilly License. 

    1.89 "Third Party" shall mean any entity other than Cubist or Gilead or an Affiliate of either of them. 

    1.90 "Transfer Price" shall mean the price to Gilead for supply of a unit of Licensed Product manufactured by or for
Cubist, which shall be determined annually in accordance with Section 7.2. 

    1.91 "Valid Claim" shall mean (i) an unexpired claim of an issued patent within Cubist Patents which has not been
found to be unpatentable, invalid or unenforceable by a court or other authority in the subject country, from which decision no appeal is taken or can be taken; or (ii) a claim of a pending
application within the Cubist Patents, which application claims a first priority no more than [* ] prior to the date upon which
pendency is determined. 

7

 
 
 

ARTICLE 2
  MANAGEMENT    
  

    2.1 General. The Parties desire to establish a committee that will oversee the Parties' activities under this Agreement,
and establish two (2) or more subcommittees to exchange information regarding, and to discuss the Parties' development and commercialization of, Licensed Products both within and outside of the
Gilead Territory. Such committee and subcommittees shall have the responsibilities and authority set forth in this Article 2 and in other provisions of this Agreement. 

    2.2 Steering Committee.

    (a) Formation. Within thirty (30) days after the Effective Date, Cubist and Gilead shall establish the Steering
Committee, which shall have overall responsibility for the success of the Parties' efforts under this Agreement. The purposes of the Steering Committee shall be (i) to coordinate the
[*], (ii) to coordinate the Parties' activities hereunder, (iii) to resolve issues that the subcommittees of the Steering Committee cannot resolve, and
(iv) to approve [*], all based on the principles of prompt and diligent development of the Licensed Products in the Gilead Territory consistent with good pharmaceutical
practices and the maximization of long-term profits derived from the sale of Licensed Products in the Gilead Territory. 

    (b) Membership. Cubist and Gilead each shall designate three (3) representatives with appropriate expertise to
serve as members of the Steering Committee. Each Party shall select one (1) person appointed by it to the Steering Committee to serve as co-chair. Either Party may designate
substitutes for its committee representatives to participate if one or more of such Party's designated representatives is unable to be present at a meeting. A Party may replace its representatives
serving on the Steering Committee from time to time by written notice to the other Party specifying the prior representative(s) to be replaced and the replacement(s) therefor. The Steering Committee
will have the power to form subcommittees in addition to the Development Subcommittee and the Marketing Subcommittee expressly provided for in this Agreement, or working groups with appropriate
representation from Cubist, Gilead, their Affiliates, and appropriate Third Parties. The co-chairpersons shall be responsible for calling meetings, preparing and circulating an agenda in
advance of each meeting, and preparing and issuing minutes of each meeting within [*] days thereafter. 

    (c) Meetings. The Steering Committee shall hold meetings at such times as it elects to do so, but in no event shall such
meetings be held less frequently than once every [*]. The Steering Committee shall meet alternately at Cubist's facilities in Cambridge, Massachusetts and Gilead's facilities
in Foster City, California, or at such locations as the Parties may otherwise agree. With the consent of the representatives of each Party serving on the Steering Committee, other representatives of
each Party or of Third Parties involved in the manufacture, development or commercialization of the Licensed Products may attend meetings of the Steering Committee as nonvoting participants. Meetings
of the Steering Committee may be held by audio or video teleconference with the consent of each Party, provided that at least one (1) meeting per year shall be held in person. Each Party shall
be responsible for all of its own expenses of participating in the Steering Committee. Meetings of the Steering Committee shall be effective only if at least two (2) representatives of each
Party are present or participating. The co-chairpersons will alternate responsibility for preparing minutes of each meeting of the Steering Committee, which minutes will not be finalized
until the co-chairperson that did not prepare such minutes reviews and confirms the accuracy of such minutes in writing. 

    (d) Specific Responsibilities. In addition to its overall responsibility for overseeing the Parties' activities under
this Agreement, the Steering Committee shall in particular: 

     (i) review and comment upon [*], and review and comment upon the [*  ]; 

8

 

    (ii) review strategies for [*]; 

   (iii) review [*] as it becomes available; 

    (iv) review and discuss the Parties' [*]; 

    (v) review the Parties' [*] with respect to Licensed Products; 

    (vi) approve the implementation of [*], and the allocation of [*] for
any approved [*]; 

   (vii) review and discuss the Parties' [*] relating to Licensed Products; and 

  (viii) perform such other functions as appropriate to further the purposes of this Agreement as determined by the
Parties, including the periodic evaluation of the Parties' performance under this Agreement. 

    (e) Limited Authority; Decision-Making.

    (i)  Except with respect to the matters set forth in Section 3.4, the role of the Steering Committee shall be
[*]. The Steering Committee shall serve as a forum for the sharing of information and for the purpose of preventing, or informally resolving, disputes between the Parties.
However, the Parties intend to operate [*] in developing and commercializing Licensed Products in their respective territories. The rights and responsibilities of each Party
shall be governed by this Agreement, including the exhibits hereto, and the Steering Committee shall not have [*]. 

    (ii) The Steering Committee shall operate by consensus. With respect to matters to be discussed by the Steering
Committee, the representatives of each Party shall present a unified position on behalf of such Party. In the absence of consensus of Steering Committee members with respect to any matter before the
Steering Committee, such matter shall be deemed not to have been approved by the Steering Committee, and the Parties shall be free to proceed independently as they see fit (subject always to
compliance by the Parties with their respective obligations under this Agreement). Specifically, in the absence of consensus of Steering Committee members for [*] that requires
Steering Committee approval, such approval shall be deemed not to have been granted, and the Parties shall have the rights to proceed independently with respect to [*]. 

    (f)  Meeting Agendas. Each Party will disclose to the other Party its final agenda items along with appropriate related
Information at least [*] in advance of each meeting of the Steering Committee. 

    2.3 Formation of Subcommittees.

    (a) Development Subcommittee. Within [*] after the Effective Date, the Parties shall
form a subcommittee of the Steering Committee to address development issues relating to Licensed Products as provided below in Article 3 (the "Development Subcommittee"). 

    (b) Marketing Subcommittee. At a time designated by the Steering Committee in advance of Commercial Launch, the Parties
shall form a subcommittee of the Steering Committee to address marketing issues relating to Licensed Products in the Gilead Territory (the "Marketing Subcommittee"). 

    (c) Additional Subcommittees. The Steering Committee may form such additional subcommittees of the Steering Committee as
it may deem to be desirable to address other aspects of Licensed Product development and commercialization. 

    (d) Membership. Cubist and Gilead each shall designate three (3) representatives with appropriate expertise to
serve as members of each of the subcommittees formed under this 

9

 

Section 2.3. One (1) of each Party's members of the Development Subcommittee shall also be one of such Party's members of the Marketing Subcommittee and shall have expertise in the area
of marketing pharmaceutical products. One of each Party's members of the Marketing Subcommittee shall also be one of such Party's members of the Development Subcommittee and shall have expertise in
the area of developing pharmaceutical products. Each Party shall select one (1) person appointed by it to each such subcommittee to serve as co-chair. Either Party may designate
substitutes for its committee representatives to participate if one or more of such Party's designated representatives is unable to be present at a meeting. A Party may replace its representatives
serving on a subcommittee from time to time by written notice to the other Party specifying the prior representative(s) to be replaced and the replacement(s) therefor. The co-chairpersons
shall be responsible for calling meetings, preparing and circulating an agenda in advance of each meeting, and preparing and issuing minutes of each meeting within [*]
thereafter. 

    (e) Meetings. Each subcommittee shall hold meetings at such times as it elects to do so, but in no event shall such
meetings be held less frequently than once every [*]. Each subcommittee shall meet alternately at Cubist's facilities in Cambridge, Massachusetts and Gilead's facilities in
Foster City, California, or at such locations as the Parties may otherwise agree. With the consent of the representatives of each Party serving on a subcommittee, other representatives of each Party
or of Third Parties involved in the manufacture, development or commercialization of Licensed Products may attend meetings of the Steering Committee as nonvoting participants. Meetings of each
subcommittee may be held by audio or
video teleconference with the consent of each Party, provided that at least [*] shall be held in person. Each Party shall be responsible for all of its own expenses of
participating in the subcommittees. Meetings of each subcommittee shall be effective only if at least two (2) representatives of each Party are present or participating. The
co-chairpersons will alternate responsibility for preparing minutes of each meeting of each subcommittee, which minutes will not be finalized until the co-chairperson that did
not prepare such minutes reviews and confirms the accuracy of such minutes in writing. 

    (f)  Specific Responsibilities of the Development Subcommittee. In addition to its overall responsibility for overseeing
the Parties' development activities under this Agreement, the Development Subcommittee shall in particular: 

    (i)  review and comment upon the [*], review and comment upon the [*],
discuss the requirements for [*] and review any [*]; 

    (ii) work to achieve [*] by coordinating efforts with the Marketing Subcommittee; 

    (iii) evaluate the Parties' [*] to provide for sufficient [*]; and 

    (iv) perform such other functions as appropriate to further the purposes of this Agreement as determined by the Steering
Committee. 

    (g) Specific Responsibilities of the Marketing Subcommittee. In addition to its overall responsibility for overseeing
the Parties' marketing and commercialization activities under this Agreement, the Marketing Subcommittee shall in particular: 

    (i)  consider and discuss [*]; 

    (ii) work to achieve a [*] by coordinating efforts with the Development Subcommittee, including
without limitation coordinating the Parties' efforts with respect to [*]; 

    (iii) evaluate the Parties' needs for [*]; 

    (iv) consider and discuss the Parties' efforts to [*]; and 

    (v) perform such other functions as appropriate to further the purposes of this Agreement as determined by the Steering
Committee. 

10

 

    (h) Limited Authority; Decision-Making.

    (i)  The role of each subcommittee shall be [*], with the goal of serving as
[*]. However, the parties intend to operate [*] in developing and commercializing Licensed Products in their respective territories. The rights and
responsibilities of each Party shall be governed by this Agreement, including the exhibits hereto, and no subcommittee shall have any power to amend, modify or waive compliance with this Agreement. 

    (ii) Each subcommittee shall operate by consensus. With respect to matters to be discussed by the subcommittee, the
representatives of each Party shall present a unified position on behalf of such Party. Any disagreement among the members of a subcommittee will be submitted for resolution by the Steering Committee. 

    (i)  Meeting Agendas. Each Party will disclose to the other Party its final agenda items along with appropriate related
Information at least [*] in advance of each meeting of each subcommittee. 

    2.4 Project Coordinators. Each Party will, promptly after the formation of each subcommittee pursuant to
Section 2.3, assign an appropriately expert and experienced individual to the other Party to facilitate communication and coordination of activities relating to the development and
commercialization of Licensed Products and to provide support and guidance to the subcommittee (the "Project Coordinator"). Each Project Coordinator shall be experienced in project management. 

    2.5 Collaboration Guidelines.

    (a) General. In all matters relating to this Agreement, the Parties shall seek to comply with good pharmaceutical and
environmental practices. 

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

    2.6 Accounting. Each Party shall determine Incremental Product Development Costs and all other costs and expenses that
may be shared with or reimbursed to a Party under this Agreement or the Supply Agreement (including without limitation the amounts Gilead shall pay to Cubist for supply of Licensed Products pursuant
to the Supply Agreement), if any, using its standard accounting procedures, consistently applied, to the maximum extent practical as if such Licensed Product were a solely owned product of the
determining Party, except as specifically provided in this Agreement. The Parties also recognize that such procedures may change from time to time and that any such changes may affect the definition
of Incremental Product Development Costs and such other costs and expenses. The Parties agree that, where such changes are economically material to either Party, adjustments shall be made to
compensate the affected Party in order to preserve the same economics as reflected under this Agreement under such Party's accounting procedures in effect as of the Effective Date. 

ARTICLE 3

DEVELOPMENT  

    3.1 Cubist Development, Development Plan, and Diligence Obligation.

    (a) Development Obligation. Subject to the limitations and other provisions set forth in this Section 3.1, the
Parties intend that during the Term, Cubist shall continue to develop Licensed Products by conducting the Core Trials to support Regulatory Approval of Core IV Products in the United States.
Additionally, subject to the limitations and other provisions set forth in this 

11

 

Section 3.1, Cubist shall use Commercially Reasonable Efforts to conduct (A) a [*] for the treatment of [*]; (B) a
[*] for the treatment of [*]; (C) [*] in such territories and for such indications [*], having
reasonably [*] of the Development Subcommittee; and (D) such additional clinical trials and preclinical studies for the IV Product and such additional formulations of
Licensed Products as Cubist determines to conduct, [*] having reasonably [*] that the Development Subcommittee may make. 

    (b) Development Plan. The development activities, including both preclinical and clinical development activities, that
Cubist will conduct for Licensed Products shall be covered by a development plan that
Cubist shall prepare and submit to the Development Subcommittee for review [*] after the Effective Date (such plan, the "Cubist Development Plan"). The Cubist Development Plan
shall include at least the [*] in clauses (A), (B) and (C) above in Section 3.1(a). The Cubist Development Plan shall [*]. Subject
to its overall diligence obligations contained in this Section 3.1, Cubist reserves the right to change or modify the Cubist Development Plan (except with respect to the
[*]) or any of the preclinical studies or clinical trials (other than the [*]) described in the Cubist Development Plan in response to
(i)   [*], (ii) [*], (iii) [*] or (iv) [*]. Cubist
additionally reserves the right to change or modify any Core Trial (1) [*] such trial in accordance with the then-current protocol therefor as a result of
[*], or (2) in response to any [*]; provided, however, that Cubist recognizes that Gilead's
efforts to [*] will depend upon [*] and further provided that the foregoing ability to change or modify a Core Trial shall not contravene Cubist's
obligations to provide [*]. Accordingly, if Cubist has the right to change or modify a Core Trial pursuant to the foregoing sentence, it shall so notify Gilead, the Parties
shall discuss any proposed modification to the Core Trial at issue or other alternative arrangement to address the reason giving rise to Cubist's right to change or modify the Core Trial while
providing for [*] from Cubist to [*], and Cubist shall implement any such proposed modification or alternative arrangement to which the Parties mutually
agree. Cubist shall modify the Cubist Development Plan from time to time to reflect timing or protocol changes to the Core Trials or any other trials, and to reflect additional trials that Cubist
conducts or trials Cubist terminates for any Licensed Product during the Term. Cubist shall also revise the Cubist Development Plan from time to time to reflect each new indication for or formulation
of Licensed Products that Cubist is developing or plans to develop. Additionally, [*], Cubist shall update the Cubist Development Plan no later [*] and
submit such plan to the Development Subcommittee for review and comment. Cubist acknowledges that [*]. Accordingly, Cubist shall use Commercially Reasonable Efforts to obtain
Regulatory Approval of Core IV Products in the United States. 

    (c) Conduct of Clinical Trials Described in Development Plan. Subject to the provisions of the next sentence and solely
with respect to clinical trials that are not Core Trials, Cubist shall use Commercially Reasonable Efforts to conduct, and to continue to conduct, if not already begun as of the Effective Date, all of
the clinical trials of Licensed Products described in the Cubist Development Plan. Gilead acknowledges that it may be consistent with Commercially Reasonable Efforts for Cubist to suspend or terminate
a clinical trial (other than a Core Trial) or activity referred to in the Cubist Development Plan [*] including without limitation [*]. 

    (d) Cubist Trials in Gilead Territory. Any clinical trials conducted by Cubist may be run at sites within the Gilead
Territory, provided that Cubist first confers with Gilead on the design of any such trials that begin after the Effective Date, and that the data
generated in any such trial shall be used by Cubist, its Affiliates and Other Licensees solely to support Regulatory Approval or marketing of Licensed Products outside of the Gilead Territory. 

    (e) Oral Product Development. Anything to the contrary in Section 3.1(b) and 3.1(c) notwithstanding, Cubist's
diligence obligation with respect to the development of Oral Products shall be as described in this Section 3.1(e). Until the Oral Product enters the clinical development phase, Cubist's
diligence obligation hereunder with respect to Oral Products shall be [*] with 

12

 

respect to the development of the Oral Product; and Cubist shall provide Gilead with [*] updates regarding its preclinical development of the Oral Product, whenever possible,
in advance of the Development Subcommittee meetings so that the Development Committee may discuss such updates. From the date, if ever, that Cubist decides to commence clinical development of an Oral
Product, Cubist's diligence obligation with respect to such Oral Product shall be to use Commercially Reasonable Efforts to clinically develop and seek Regulatory Approval for the Oral Product
[*] and to provide Gilead with a clinical data package sufficient to support Regulatory Approval of the Oral Product in the Gilead Territory. 

    (f)  Determination. Determination of whether Cubist has met its development diligence obligations pursuant to this
Section 3.1 shall be determined solely in accordance with Section 3.5. 

    3.2 Gilead Development Plan. Gilead may, but shall not be obligated to, conduct [*] for Licensed
Products, and such other development activities that Gilead, in its discretion, deems desirable to [*] for Licensed Products for which Regulatory Approval has been obtained.
Such studies may also include [*] on Licensed Products. Any development activities that Gilead may conduct for the Licensed Products shall be set forth in a development plan
which Gilead shall prepare and submit to the Steering Committee for review promptly after Gilead has designed such trial, but in no event later than the date provided in Section 3.4 for
submission of a protocol for consideration by the Steering Subcommittee (such plan, the "Gilead Development Plan"). Gilead shall modify the Gilead Development Plan from time to time to reflect changes
to the timing or protocol for the clinical trials described therein, or to reflect trials that Gilead determines, in its sole discretion, to conduct or terminate during the Term. Any clinical trials
that Gilead conducts under this Section 3.2 may be run at sites outside of the Gilead Territory, provided that Gilead confers with Cubist on the
design of any such trial, and that the data generated therein shall be used by Gilead, its Affiliates or Permitted Sublicensees solely to support Regulatory Approval in the Gilead Territory. Gilead
shall update the Gilead Development Plan [*] and submit such plan to the Development Subcommittee for review and comment. [*] shall
[*] in connection with any of the activities reflected in the Gilead Development Plan, except as otherwise provided in Section 3.4. 

    3.3 Responsibilities of the Development Subcommittee during Development. The Development Subcommittee will review the
overall strategy for and design of all programs under the Cubist Development Plan and the Gilead Development Plan. The Development Subcommittee shall review and make recommendations to the Steering
Committee whether to approve any proposals by one Party to modify clinical trials being planned by the other Party, as described in Section 3.4 and prepare initial estimates and budgets for
shared Incremental Product Development Costs as may be required under Section 3.4. 

    3.4 Modification of Clinical Trials; Incremental Product Development Costs.

    (a) Notice. Each Party shall have the right to propose modifications to a clinical trial for Licensed Products being
conducted by the other Party as provided in this Section 3.4. Each Party shall notify the other Party at least [*] days before commencing any clinical trial not
commenced prior to or on the Effective Date to support Regulatory Approval of a Licensed Product in such Party's territory (i.e., the
Gilead Territory for Gilead, and all countries outside the Gilead Territory for Cubist). If such Party giving notice with respect to a clinical trial it is planning to commence (the "Conducting
Party") has not previously disclosed in the Gilead Development Plan or Cubist Development Plan, as applicable, the protocol for such trial pursuant to Section 3.1 or 3.2, then such notice shall
be accompanied by such protocol. Thereafter, the Conducting Party shall, upon request by the other Party (the "Non-Conducting Party"), provide such relevant information as the
Non-Conducting Party may reasonably request within [*] days after receiving notice from the Conducting Party under this Section 3.4 to enable the
Non-Conducting Party to determine its 

13

 

interest in using data obtained in such clinical trial to support a filing for Regulatory Approval of or another regulatory filing for Licensed Products in the Non-Conducting Party's
territory. 

    (b) Response. If the Non-Conducting Party is interested in so using such data, and if the
Non-Conducting Party desires to propose a modification to a protocol for a clinical trial to be conducted by the Conducting Party, the Non-Conducting Party shall so notify the
Conducting Party and specify the proposed modification to such protocol (the "Proposed Modification") within [*] days of receiving all information the Conducting Party is
required to provide the Non-Conducting Party pursuant to the foregoing sentence. 

    (c) Steering Committee Role; Agreement. The Steering Committee shall confer regarding such Proposed Modification
promptly after the Conducting Party receives such notice, and the Steering Committee shall, within [*] after the Conducting Party receives such notice, meet to determine
whether implementation of such Proposed Modification is acceptable to the Parties, and the costs attributable to implementing the Proposed Modification (the "Incremental Product Development Costs").
The Steering Committee may request that the Development Subcommittee develop a budget for implementation of the Proposed Modification and total Incremental Product Development Costs therefor, and that
the Development Subcommittee make a recommendation of the allocation of such Incremental Product Development Costs between the Parties based upon [*], assuming a
[*] of such trial. The Development Subcommittee shall also evaluate the possibility of [* ]. If the
Steering Committee approves the Proposed Modification and agrees upon the appropriate allocation of Incremental Product Development Costs between the Parties, the Parties may enter into a written
agreement as to the details of the Proposed Modification and Incremental Product Development Costs associated with such Proposed Modification providing for the Conducting Party to modify the protocol
for the relevant clinical trial to incorporate the Proposed Modification and amend its development plan hereunder to reflect such change. If the Steering Committee does not approve the Proposed
Modification, or the Parties do not enter into such an agreement within [*] after the Steering Committee approves the Proposed Modification, then the Conducting Party shall
have no obligation to modify the protocol for the relevant clinical trial to incorporate the Proposed Modification and the Non-Conducting Party shall have no obligation to pay the
Incremental Product Development Costs if the Conducting Party does nonetheless implement the Proposed Modification. Any such agreement between the Parties may provide for the Steering Committee to, at
least [*], review the Incremental Product Development Costs actually incurred and to be incurred in connection with a relevant clinical trial and modify the budget for such
Incremental Product Development Costs as appropriate to reflect the Parties' progress with respect to such clinical trial. 

    (d) Oral Products. In accordance with the rest of this Section 3.4 above, the Parties recognize that Gilead may
request Proposed Modifications to clinical trials of Oral Products for the purpose of obtaining data to support Regulatory Approval therefor in the Gilead Territory, and the Parties may enter into an
agreement pursuant to Section 3.4(c). Any agreement between the Parties with respect to a Proposed Modification of an Oral Product clinical trial may include [*] with
respect to the Oral Product if [*] will be required [*] the Proposed Modification pursuant to such Agreement. 

    3.5 Determination of Cubist Diligence. If Gilead believes that Cubist is not meeting its diligence obligation pursuant
to Section 3.1 (such obligation, the "Cubist Diligence Obligation") with respect to any Licensed Product, Gilead shall notify Cubist. Cubist shall respond in writing to Gilead's notice as to
Cubist's activities that it believes meets the Cubist Diligence Obligation with respect to such Licensed Product as well as the circumstances surrounding Cubist's development of the Licensed Products
within [ *] of Cubist's receipt of such notice from Gilead. Gilead shall reply to Cubist within [*] after receiving such written response from Cubist
whether, in light of such response, Gilead continues to believe that Cubist has not met the Cubist Diligence Obligation with respect to such 

14

 

Licensed Product. If, after following the foregoing procedures in this Section 3.5, the Parties continue to disagree whether Cubist has met the Cubist Diligence Obligation with respect to such
Licensed Product, the Parties shall [*] to be convened within [*] of such reply from Cubist. [*] shall examine and discuss for
[ *] Cubist's efforts to develop such Licensed Product [*]. After such examinations and discussions: 

    (a) If the Parties are [*] the Cubist Diligence Obligation with respect to such Licensed
Product, then Cubist shall [*] its development of such Licensed Product [*]. 

    (b) If Cubist [*] to meet the Cubist Diligence Obligation with respect to such Licensed Product,
then Cubist shall [*] with respect to such Licensed Product as promptly as is reasonably practicable under the circumstances [*];  provided that if Gilead [*]. If, after following such procedure, the
Parties are in disagreement as to whether Cubist has met
the Cubist Diligence Obligation with respect to such Licensed Product, then Section 3.5(c) shall apply. 

    (c) If, after having followed the procedure set forth in Sections 3.5(a) and 3.5 (b), the Parties disagree as to whether
[*] describes [*] the Cubist Diligence Obligation with respect to a particular Licensed Product, then the Parties shall submit the issue of whether the
[*] is sufficient to meet the Cubist Diligence Obligation with respect to such Licensed Product to [*] by [*]. Such
[*] shall determine whether Cubist has met the Cubist Diligence Obligation with respect to such Licensed Product or whether a [*] is sufficient to
enable Cubist to meet the Cubist Diligence Obligations with respect to such Licensed Product. If such [*] determines that Cubist has met such Cubist Diligence Obligation, then
Cubist shall be free to proceed with the development of such Licensed Product [*]; otherwise, such [*] shall formulate
[*] to enable Cubist to meet such Cubist Diligence Obligation and Cubist shall use Commercially Reasonable Efforts to perform under such [*  ]. 

    (d) In no event shall Cubist be deemed to breach the Cubist Diligence Obligation with respect to any Licensed Product if
any delay, omission or action by Gilead has contributed to Cubist's delay or failure. 

 
 

ARTICLE 4
  REGULATORY    
  

    4.1 General. Gilead shall devote Commercially Reasonable Efforts to file for and obtain Regulatory Approval for those
Licensed Products in the Gilead Territory for which Cubist obtains Regulatory Approval in the United States and regarding which Cubist provides Gilead with clinical data sufficient to support
Regulatory Approval in the Gilead Territory. Notwithstanding anything in this Agreement to the contrary, Gilead shall not be required pursuant to this Agreement, but may elect, to
[*]. In recognition that Gilead's efforts to obtain Regulatory Approval for Licensed products in the Gilead Territory will depend upon its ability to use data relating to
Licensed Products generated by Cubist outside of the Gilead Territory in making regulatory filings within the Gilead Territory, Cubist shall devote Commercially Reasonable Efforts to obtain clinical
data to support, file for and obtain Regulatory Approval for Core Licensed Products outside the Gilead Territory in accordance with the provisions of Article 3. 

    4.2 Free Sales Certificates; Ownership of Regulatory Approvals. 

    (a) Cubist shall apply for and use Commercially Reasonable Efforts to obtain Free Sales Certificates for Licensed
Products in all countries within the Gilead Territory where such certificates are available and Gilead requests in writing that Cubist obtain them. Gilead shall cooperate in all such efforts
[*]. Gilead shall [*] in seeking such Free Sales Certificates. Once Cubist obtains any Free Sales Certificates for Licensed Products in the Gilead
Territory, to the extent permitted by law, Cubist shall transfer them to Gilead and Gilead shall thereafter assume all responsibility for communication with Regulatory Authorities and compliance with
law in each 

15

 

case in relation to the Free Sales Certificates. In any country in which transfer of a Free Sales Certificate to Gilead is not permitted by law, Cubist shall maintain such Free Sales Certificate and
reasonably cooperate with Gilead to effect communications with Regulatory Authorities in connection therewith to the extent desired and requested by Gilead. 

    (b) In all other countries of the Gilead Territory, Gilead shall [*] Drug Approval Applications
and Regulatory Approvals for Licensed Products, and shall be [* ] responsible for all communications with regulatory authorities
in such countries. 

    (c) Gilead shall apply for and use Commercially Reasonable Efforts to obtain Free Sales Certificates for Licensed
Products in all countries outside the Gilead Territory where such certificates are available and Cubist requests in writing that Gilead obtain them. Cubist shall cooperate in all such efforts
[*]. Cubist shall [*] in seeking such Free Sales Certificates. Once Gilead obtains any Free Sales Certificates for Licensed Products outside the Gilead
Territory, to the extent permitted by law, Gilead shall transfer them to Cubist and Cubist shall thereafter assume all responsibility for communication with regulatory authorities and compliance with
law in each case in relation to the Free Sales Certificates. In any country in which transfer of a Free Sales Certificate to Cubist is not permitted by law, Gilead shall maintain such Free Sales
Certificate and reasonably cooperate with Cubist to effect communications with Regulatory Authorities in connection therewith to the extent desired and requested by Cubist. 

    4.3 Gilead Access to Cubist and Other Licensee Information.

    (a) Regulatory Data as of the Effective Date. Cubist will, as soon as
possible after the Effective Date, provide Gilead copies of all regulatory filings, including without limitation the IND for the IV Product in the United States, and the results of all clinical and
non-clinical testing of IV Products performed by or on behalf of Cubist or Other Licensees (subject to applicable restrictions on disclosure of such Information) to the extent that such
filings or information existing prior to the Effective Date has not already been provided to Gilead prior to the Effective Date. 

    (b) Regulatory Data Generated After the Effective Date. During the Term,
Cubist will provide to Gilead for use in Gilead's development efforts relating to Licensed Products all Information owned or Controlled by Cubist regarding Licensed Products necessary or useful for
making regulatory filings for, or marketing of, Licensed Products in the Gilead Territory as such Information becomes available. 

    (c) Other Licensee Permission. Cubist shall attempt to obtain from any
Other Licensees permission for Cubist to provide to Gilead any information relating to Licensed Products that is necessary for Gilead to make regulatory filings for Licensed Products in the Gilead
Territory and that, if such information were owned or Controlled by Cubist, would be Information that Cubist must provide to Gilead pursuant to Section 4.3(a) or (b). Cubist shall require Other
Licensees to allow Cubist to disclose to Gilead all information relating to adverse events that Cubist must report pursuant to Section 4.5. Gilead shall not provide any Information it receives
from Cubist pursuant to this Article 4 (other than Information relating to adverse events provided by Cubist pursuant to Section 4.5) to any Permitted Sublicensee unless and until such
Permitted Sublicensee permits Gilead to provide to Cubist any and all information owned or Controlled by such Permitted Sublicensee that, if such information were owned or Controlled by Gilead, would
be Information that Gilead must provide to Cubist pursuant to Section 4.4. 

    (d) Gilead Use of Information. Gilead shall have a right of access, a
right of reference and the right to use and incorporate all information provided to it pursuant to this Section 4.3 in its Drug Approval Applications for Regulatory Approvals of Licensed
Products within the Gilead Territory. The Parties shall discuss, via their participation in the Steering Committee, the form in which the Parties shall exchange Information pursuant to this
Section 4.3 and Section 4.4. 

16

 

    4.4 Cubist and Other Licensee Access to Gilead Information.

    (a) Provision to Cubist. During the Term, Gilead will provide to Cubist
for use in Cubist's development efforts relating to Licensed Products all Information in Gilead's possession regarding Licensed Products necessary or useful for making regulatory filings for Licensed
Products outside the Gilead Territory as such Information becomes available. Cubist shall have a right of access, a right of reference and the right to use and incorporate all Information provided it
pursuant to the foregoing sentence in Drug Approval Applications in Licensed Products outside of the Gilead Territory. Such rights shall be transferable solely as provided in Section 4.4(b). 

    (b) Sublicensee Permission; Transferability to Sublicensees. Gilead
shall attempt to obtain from any Permitted Sublicensees permission for Gilead to provide to Cubist any information relating to Licensed Products that is necessary for Cubist to make regulatory filings
for Licensed Products in the Cubist Territory and that, if such information were owned or Controlled by Gilead, would be Information that Gilead must provide to Cubist pursuant to
Section 4.4(a). Gilead shall require its Permitted Sublicensees to allow Gilead to disclose to Cubist all information that Gilead must report pursuant to Section 4.5. Cubist shall not
provide any Information it receives from Gilead pursuant to this Article 4 (other than Information relating to adverse events provided by Gilead pursuant to Section 4.5) to any Other
Licensee unless and until such Other Licensee permits Cubist to provide to Gilead any and all information owned or Controlled by such Other Licensee that, if such information were owned or Controlled
by Cubist, would be Information that Cubist must provide to Gilead pursuant to Section 4.3. 

    4.5 Adverse Event Reporting. The Parties shall report, and take other actions in relation to, adverse events with
Licensed Products to each other in accordance with a reporting protocol that will be substantially in the form of the protocol used by Gilead under its relationship with [*]. 

    4.6 Communications. Except as may be required by law or as contemplated pursuant to Section 4.2, Cubist shall not
communicate regarding any Licensed Product with any Regulatory Authority having jurisdiction in the Gilead Territory unless requested to do so by Gilead. 

    4.7 Applications for Regulatory Exclusivity. The Parties recognize that exclusivity rights granted or provided for under
regulatory laws of the countries in the Gilead Territory are likely to be [*] to Licensed Products. To the extent permitted by law, Gilead shall have the exclusive right to
file for, request and maintain any regulatory exclusivity rights for Licensed Products in the Gilead Territory, including without limitation regulatory exclusivity rights based upon an orphan drug
designation of a Licensed Product, and to conduct and prosecute any proceedings or actions to enforce such regulatory exclusivity rights, and Cubist shall reasonably cooperate with Gilead in such
actions [* ]. In countries where Gilead is not entitled to take one or more of the actions described in the foregoing sentence,
then Cubist shall take such actions as instructed by Gilead and for the benefit of Gilead, [*]. Gilead shall own any regulatory exclusivity rights in the Gilead Territory where
permitted by law. Cubist hereby grants Gilead the exclusive right to market Licensed Products in the Gilead Territory under any regulatory exclusivity rights that must be granted directly to Cubist in
a given country in the Gilead Territory. 

    4.8 Recalls and Voluntary Withdrawals. The Parties shall exchange their internal standard operating procedures ("SOPs")
as to product recalls reasonably in advance of Commercial Launch of any Licensed Product in the Gilead Territory. If either Party becomes aware of information about any Licensed Product indicating
that it may not conform to the specifications for Licensed Product then in effect pursuant to the Supply Agreement, or that there are potential adulteration, misbranding and/or other issues regarding
safety or effectiveness, it shall promptly so notify the other Party. The Steering Committee shall meet to discuss such circumstances and to consider appropriate courses of action, which courses of
action with respect to each recall shall be consistent with the internal SOP of the Party having the right to control such recall pursuant to this Section 4.8. Gilead shall have the right to 

17

 

control, [*], a recall of the Licensed Product in the Gilead Territory, unless such recall is caused by a Manufacturing Defect (as defined by the Supply Agreement), in which
case [*] shall [*] associated with the recall. Cubist shall control, [*], all recalls of Licensed Product outside the Gilead
Territory. Gilead shall maintain complete and accurate records of any recall for such periods as may be required by legal requirements, but in any event for no less than [*  ]. 

    4.9 Label. To the extent permitted by law, Gilead shall identify Cubist as the manufacturer or licensor of each Licensed
Product on the outside of the packaging for such Licensed Product in each country of the Gilead Territory in a manner approved in advance in writing by Cubist, such consent not to be unreasonably
withheld. 

18

   ARTICLE 5

COMMERCIALIZATION; DILIGENCE  

    5.1 Right. Gilead shall have the exclusive right to market and commercialize, including, without limitation, by
conducting pre-marketing, advertising and promotion activities, and sponsoring medical education events, exhibits and symposia (collectively, "Commercialize") Licensed Products in all
countries of the Gilead Territory during the Term, for its own account (subject to the [*] under this Agreement), [*] and subject to the participation
of the Cubist MSLs as provided below in Section 5.4. 

    5.2 Responsibilities of the Marketing Subcommittee during Commercialization. The Marketing Subcommittee will review and
comment upon the overall strategy and design of Gilead's marketing efforts under its Marketing Plans. 

    5.3 Marketing Plan. No later than [*] before Gilead anticipates the first Commercial Launch of a
Licensed Product anywhere in the Gilead Territory, Gilead will submit a plan detailing Gilead's projected activities to commercialize Licensed Products in the Gilead Territory including anticipated
budgets (the "Marketing Plan"), to the Marketing Subcommittee. Thereafter, on or before each anniversary of the date of the first Commercial Launch of a Licensed Product, Gilead shall update, revise,
and present to the Marketing Subcommittee the Marketing Plan. The Marketing Plan shall include a description of any anticipated activities of the MSLs. Cubist may comment upon each version of the
Marketing Plan via its participation in the Marketing Subcommittee. Gilead reserves the right to modify its Marketing Plan at any time in response to (i) changes in [*  ], (ii) [*],
(iii) the feasibility of [*], (iv) changes in the
[*] or (v) any failure [*], subject only to [*]to comment upon such changes and [*]. 

    5.4 Activities by MSLs in Gilead Territory.

    (a) MSLs. During the [*] (as defined in Section 5.4(d)), Cubist shall have a limited
right to participate with Gilead in support of certain of Gilead's Commercialization activities for Licensed Products in the Gilead Territory, solely as described and permitted in this
Section 5.4. Cubist may provide up to [*] MSLs to participate in such activities throughout the Gilead Territory at any one time during the [*];  provided, however, that Cubist's rights to so
participate shall expire on a country-by-country basis as provided in
Section 5.4(d), and further provided that Gilead shall have the right, in its discretion, to allocate the MSLs to participate in such activities
in such country or countries of the Gilead Territory as Gilead may decide. Cubist shall notify Gilead on or before [*] of each calendar year during the
[*] how many
MSLs it will make available in the next calendar year, subject to the limitations set forth in this Section 5.4. Gilead shall provide to the Cubist MSLs access to particular facilities in the
Gilead Territory for the purposes of conducting meetings with Gilead representatives, but shall not be required to provide [*]. Such [*] by Cubist
[*] to Gilead in the Gilead Territory, and Cubist shall be [*], subject to and in accordance with the requirements of the country in which each Cubist
MSL is employed. Each Cubist MSL shall have language skills appropriate for conducting his or her responsibilities under this Section 5.4 in the country of the Gilead Territory in which Gilead
elects to place them, and other educational and professional training appropriate for the conduct of his or her responsibilities in such country. Gilead shall have the [*]
Cubist MSLs proposed by Cubist, and Cubist shall, upon Gilead's request, [*]. Each [*] shall execute [*] in the form provided by
[*]. 

    (b) Role of Cubist MSLs. The Cubist MSLs shall, [ *] relating to Licensed Products:
(i) to [*] of Licensed Products conducted by or on behalf of Gilead in the Gilead Territory; (ii) to [*] in the Gilead Territory, and
[*] in the Gilead Territory, to the extent consistent with the efforts of Gilead's MSLs providing [*] in such country; and (iii) to
[*], concerning the Licensed Products and their characteristics. During the [*], Gilead shall provide to each of the Cubist MSLs a more detailed
description of the scope of their [*], and may update such detailed description from time to time using its [*] judgment, provided that all activities
set forth in any such detailed description 

19

 

shall be consistent with this Section 5.4. Except to the extent Gilead specifically directs in the detailed description of permitted MSL activities provided pursuant to this
Section 5.4(b), Cubist MSLs shall not [*] of Licensed Products in the Gilead Territory, perform any activities in connection [*], provide any
[ *] with respect to Licensed Products, [*] in the Gilead [*] in connection with Licensed Products, or perform any
[*] or other activities in relation to Licensed Products in the Gilead Territory. Cubist shall not directly or indirectly [*] set forth therein. The
Cubist MSLs shall [*] conducted in connection with Licensed Products, [*] with respect to Licensed Products to a designated Cubist representative who
shall in turn provide reports of MSL activities to each of the Development Subcommittee and the Marketing Subcommittee, and provide to [*] of Licensed Products. Gilead shall
have the right to [*] from time to time upon [*] notice to Cubist. 

    (c) Payment. Gilead shall pay Cubist [*] per MSL [*] to Gilead in the
Gilead Territory during each calendar year during the [*]. Such amount shall be payable [*] each due within [*] after the end of
[*] during the [*], with the first such payment due within [ *] after the end of the [*] in which the
[*] commenced. For any MSL that Cubist provides pursuant to this Section 5.4 for less than an entire calendar year, Gilead shall pay Cubist a prorated portion of the
foregoing [*] amount to reflect the portion of such calendar year during which Cubist [*] such MSL to Gilead (the "Partial Year"), with such amounts
payable in [*] due at the end of [*] during which such MSL was [* ] to Gilead during such Partial Year. 

    (d) Termination of [*]. The "[*]" shall commence
[*] prior to the anticipated date (as determined by the Steering Committee) that the [*] in the Gilead Territory (the "Commencement Date") and shall
expire [*] after [*] in the Gilead Territory in which Gilead [*] of Licensed Product (the "Expiration Date");  provided, however, that the [*], and further provided that the
[*] shall terminate [*]. Additionally, during the [*], Cubist's right to provide MSLs to support Commercialization of Licensed
Products shall [*] of a Licensed
Product in the [*] in the Gilead Territory. Anything to the contrary in this Agreement notwithstanding, (i) Gilead shall [*] in Commercialization
of Licensed Products in each country in the Gilead Territory pursuant to this Section 5.4 [ *] and (ii) Gilead shall [*]. 

    5.5 Diligence Obligation. The Parties agree that the primary focus of their efforts to develop Licensed Products shall
be upon IV Products and Oral Products. Gilead shall use Commercially Reasonable Efforts to Commercialize in the Gilead Territory both the IV Product, and an Oral Product if Cubist obtains Regulatory
Approval for such a product in the United States and provides a clinical data package relating thereto that is sufficient to support Regulatory Approval in the Gilead Territory, in each case following
Regulatory Approval of such Licensed Products in the Gilead Territory. Gilead shall require its Permitted Sublicensees in the Gilead Territory to use Commercially Reasonable Efforts to Commercialize
such Licensed Products in the Gilead Territory following Regulatory Approval of such Licensed Products in the Gilead Territory. Whether Gilead is meeting such Diligence Obligation shall be determined
with respect to each Licensed Product based upon all relevant factors, which may include without limitation the following factors: 

    (a) the level of [*] of such Licensed Product in the [*] in a given
calendar year relative to (i) the level of [*] in the preceding calendar year for such Licensed Product, and (ii) the level of [*]; 

    (b) the [*] for such Licensed Product, including whether there is [*]; 

    (c) the [*] in the Gilead Territory for such Licensed Product; 

    (d) the [*] for such Licensed Product in the [*]; 

    (e) the level of [*] Licensed Product in the Gilead Territory relative to the level of
[*] Licensed Product outside the Gilead Territory, taking into account differences in Licensed Product [ 

20

 

* ], the incidence of [*] in such regions, as well as differences in [*] between the
different regions, and such other factors as may be appropriate under the circumstances; 

    (f)  whether [*] with respect to such Licensed Product; 

    (g) the [*] for such Licensed Product in a country [*]; and 

    (h) Gilead's efforts with respect to [*] in the Gilead Territory and each of the foregoing
factors with respect to the [*]. 

    In
no event shall Gilead's Diligence Obligation with respect to any Licensed Product be deemed to include a requirement that Gilead [*] in any country. 

    5.6 Determination of Gilead's Diligence. If Cubist believes that Gilead is not meeting its diligence obligation pursuant
to Section 5.5 (such obligation, the "Gilead Diligence Obligation") with respect to any Licensed Product, Cubist shall notify Gilead. The Parties shall then proceed as provided in Sections
5.6(a) through (d) to determine Gilead's diligence in Commercializing Licensed Products. Gilead shall [* ] to Cubist's
notice [*] with respect to such Licensed Product as well as [* ] of such Licensed Products within
[*] of Gilead's receipt of such notice from Cubist. Cubist shall [*] with respect to such Licensed Product. If, after following the foregoing procedures
in this Section 5.6, the Parties continue to disagree whether Gilead has met the Gilead Diligence Obligation with respect to such Licensed Product, the Parties shall [*  ] Gilead's efforts to
Commercialize such Licensed Product in the Gilead Territory (the "Discussion Period"). After such [*  ]: 

    (a) If the Parties are in agreement that Gilead is meeting the Gilead Diligence Obligation with respect to such Licensed
Product, then Gilead shall continue its Commercialization of the Licensed Product without being required to alter its approach. 

    (b) If Gilead [*] with respect to such Licensed Product, then [*] after
the end of the Discussion Period, and shall use [*]; provided that if [*] with respect to such Licensed
Product, then the Parties shall follow the procedure set forth in the first paragraph of this Section 5.6. If, after following such procedure, the Parties are in disagreement as to whether
Gilead has met the Gilead Diligence Obligation with respect to such Licensed Product, then Section 5.6(c) shall apply. 

    (c) If, after having followed the procedure set forth in Sections 5.6(a) and (b), the Parties
[*] with respect to such Licensed Product, then the Parties shall submit the issue of whether Gilead's plan is sufficient to meet such Diligence Obligation to dispute
resolution [*] pursuant to Section 15.4. Such [*] shall [*]. If such [*] determines that
[*] of such Licensed Product pursuant to its Marketing Plan; otherwise, such [*] shall [*]. 

    (d) In no event shall Gilead be deemed to breach the Gilead Diligence Obligation with respect to any Licensed Product if
any delay, omission or action by Cubist or any Cubist MSL has contributed to Gilead's delay or failure. 

    5.7 Diversion of Resources for Directly Competitive Product.

    (a) If Gilead Commercializes a Directly Competitive Product in the Gilead Territory (which Gilead
[*]), Gilead shall, within [*] of the commercial launch of such product, provide to Cubist a statement showing [*] of
[*] the date of the Commercial Launch of such Directly Competitive Product (the "First Statement"), and shall provide Cubist a statement on [*]
thereafter showing the amount of [*] (each such report a "Subsequent Statement"). 

    (b) If Cubist disputes the accuracy of the First Statement or any Subsequent Statement for Licensed Products, the
Parties shall confer to determine [*] for such First Statement or Subsequent Statement. If the Parties cannot agree on [*] for the relevant statement
within [*] after beginning to confer, the [*] for the purpose of making a determination hereunder. 

21

 

    (c) If any Subsequent Statement (including any statement that is modified by agreement between Gilead and Cubist, or any
that is modified [*] shows that Gilead has [*] from the First Statement, then Gilead shall [*] with respect to the relevant
Licensed Product(s) and Cubist shall [*] with respect to such Licensed Product(s), with such Licensed Product(s)  [*]. 

    (d) This Section 5.7 has been agreed upon solely to address Cubist's concern that Gilead may reduce its
commitment to Commercializing Licensed Product(s) if Gilead is also selling a Directly Competitive Product in the Territory. Accordingly, this Section 5.7 and its provisions, approach,
reasoning, terms, and percentages shall apply and have relevance only if Gilead is Commercializing a Directly Competitive Product in the Territory and may not be referred to or relied upon by either
Party, or any court or dispute resolution body, for purposes of interpreting Gilead's obligations under any other section of this Agreement, including, without limitation, for determining if Gilead
has met the Gilead Diligence Obligation in Section 5.6. 

    5.8 Discounting. Neither Gilead, its Affiliates nor Permitted Sublicensees shall discount the price of Licensed Products
in consideration of any price increase on, or the receipt of any payment in connection with, a product other than a Licensed Product, or shall enter into any agreement for such purpose. 

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

ARTICLE 6

LICENSE; RIGHTS OF FIRST REFUSAL; EXCLUSIVITY  

    6.1 Patent Licenses to Gilead. Subject to the terms and conditions of this Agreement, Cubist grants to Gilead an
exclusive (even as to Cubist except to the extent provided below) license under the Cubist Patents: (i) [*] Licensed Products on a worldwide basis for the
[*] Licensed Products in the Gilead Territory; (ii) to [*] Licensed Products in the Gilead Territory; and (iii) to develop (by conducting
preclinical and clinical studies) Licensed Products on a worldwide basis for the [*] of Licensed Products within the Gilead Territory; provided,
however, that Cubist shall retain the right, including the right to grant licenses and sublicenses, [*] Licensed Products on a worldwide basis for the
[*] of Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement, in the Gilead Territory, and to develop Licensed Products on a worldwide basis
for the [*] of Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement, in the Gilead Territory. Gilead may grant sublicenses under the
foregoing license under Cubist Patents (A) for the purpose of [*] Licensed Products on a worldwide basis for the [*] of Licensed Products in the
Gilead Territory, and (B) for such other purposes as Cubist may agree pursuant to Section 6.11. All such sublicenses are subject to the terms and conditions of this Agreement. In
addition to any rights expressly retained by Cubist in the foregoing provisions of this Section 6.1, Cubist shall retain any and all rights in and to the Cubist Patents that are not expressly
granted to Gilead pursuant to this Section 6.1. 

    6.2 Patent Licenses to Cubist. Subject to the terms and conditions of this Agreement, Gilead grants to Cubist a
non-exclusive license under the Gilead Project Patents: (i) to make and have made Licensed Products on a worldwide basis for the use, sale, offering for sale and importation of
Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement including without limitation the Supply Agreement, in the Gilead Territory; (ii) to use, sell, offer for
sale and import Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement including without limitation the Supply Agreement, in the Gilead Territory; and (iii) to
develop Licensed 

22

 

Products on a worldwide basis for the use, sale, offering for sale and importation of Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement including without
limitation the Supply Agreement, within the Gilead Territory. Cubist may grant sublicenses under the foregoing license under Gilead Project Patents. All such sublicenses are subject to the terms and
conditions of this Agreement. Gilead shall retain any and all rights in and to the Gilead Project Patents that are not expressly granted to Cubist pursuant to this Section 6.2. 

    6.3 Nonexclusive Know-How License to Gilead. Subject to the terms and conditions of this Agreement, Cubist
grants Gilead a [*] to use Cubist Know-How solely for the purposes of: (i) making and having made (solely as provided in Article 7 and the Supply
Agreement) Licensed Products on a worldwide basis for the use, sale, offering for sale and importation of Licensed Products in the Gilead Territory; (ii) using, selling, offering for sale and
importing Licensed Products in the Gilead Territory; and (iii) developing (by conducting preclinical and clinical studies) Licensed Products on a worldwide basis for the use, sale, offering for
sale and importation of Licensed Products in the Gilead Territory. Gilead may grant sublicenses under the foregoing license under Cubist Know-How for the purpose of making and having made
(solely as provided in Article 7 and the Supply Agreement) Licensed Products on a worldwide basis for the use, sale, offering for sale and importation of Licensed Products in the Gilead
Territory and for such other purposes as Cubist may agree pursuant to Section 6.11. All such sublicenses are subject to the terms and conditions of this Agreement. Cubist shall retain any and
all rights in and to the Cubist Know-How that are not expressly granted to Gilead pursuant to this Section 6.3. 

    6.4 Nonexclusive Know-How License to Cubist. Subject to the terms and conditions of this Agreement, Gilead
grants Cubist a royalty-free, non-exclusive, worldwide license, to use Gilead Know-How solely for purposes of (i) making and having made Licensed Products on
a worldwide basis for the use, sale, offering for sale and importation of Licensed Products outside of the Gilead Territory and, solely pursuant to this Agreement, including without limitation the
Supply Agreement, in the Gilead Territory; (ii) using, selling, offering for sale and importing Licensed Products outside the Gilead Territory and, solely pursuant to this Agreement, including
without limitation the Supply Agreement, in the Gilead Territory; and (iii) developing Licensed Products on a worldwide basis for the use, sale, offering for sale and importation of Licensed
Products outside of the Gilead Territory and, solely pursuant to this Agreement, including without limitation the Supply Agreement, within the Gilead Territory. Cubist may grant sublicenses under the
foregoing license under Gilead Project Know-How. All such licenses are subject to the terms and conditions of this Agreement. Gilead shall retain any and all rights in and to the Gilead
Project Know-How that are not expressly granted to Cubist pursuant to this Section 6.4. 

    6.5 Rights of First Refusal and Negotiation.

    (a) ROFR for Licensed Product in the ROFR Territory. Gilead desires to have a right of first refusal to develop and
Commercialize Licensed Products in the countries included in the ROFR Territory, which are countries of [*]. Accordingly, Cubist hereby grants Gilead a right of first refusal
for [*] Licensed Products in the ROFR Territory as follows: if Cubist intends to [*] to [*] in any country
[*], Cubist shall so [*] prior to entering into an agreement with such Third Party with respect to [*] and shall first
[*] with respect to such [*] upon the same [*] with respect to such [*], on the other terms and
conditions set forth in this Agreement, prior to entering into such [*]. If, within [*] after Cubist shall have made such offer to Gilead, Gilead shall
not have agreed in writing to [*] with respect to such Licensed Product upon such [*], then Cubist shall be free to enter into such agreement with such
Third Party on such [*] and shall have no further obligation under this Section 6.5(a) to offer or grant such terms to Gilead in each case for a period of
[*] after the earlier of [*]. Without limiting the generality of the foregoing, this Section 6.5(a) shall apply if [*]
with a Third Party for the [*] in any country within the ROFR Territory during the Term. If Gilead accepts [*] pursuant to this Section 6.5(a),
then such country shall be included in 

23

 

the Gilead Territory and excluded from the ROFR Territory for the remainder of the Term. For purposes of this Section 6.5(a), [*]. 

    (b) ROFN for [*]. Cubist hereby grants Gilead a right of first negotiation for
[*] in the Gilead Territory and ROFR Territory on the following terms: If Cubist wishes to contract with a Third Party [*], Cubist shall so notify
Gilead, such notice to reference the relevant [*]. If Gilead requests within [*] after its receipt of such notice to discuss with Cubist the terms upon
which Cubist would grant Gilead the right to include such [*] within the definition of Licensed Product (and therefore the licenses of Sections 6.1 and 6.3 pursuant to this
Agreement) and Commercialize, or to otherwise grant Gilead the right to Commercialize, such  [*], then the Parties shall negotiate in good faith for a period
of [*] such terms. If the Parties are unable to agree upon such terms within such [*] period, Cubist shall be free for a period of
[*] after the end of the Parties' good faith negotiation period to contract with a Third Party [*]; provided,
however, that in no event shall Cubist enter into an agreement with a Third Party relating to such [*] (i) prior to the expiration of such
[*] period if Gilead has not notified Cubist of its interest prior to such date, or (ii) prior to expiration of such [*] period, if the Parties
do not reach written agreement prior to such date. If the Parties reach agreement as to such terms pursuant to this Section 6.5(b), then the Parties may either agree in writing to include such
[*] within the definition of Licensed Product hereunder or enter into a separate agreement pursuant to which Cubist would grant Gilead the right to Commercialize such
[*] in the Gilead Territory. Without limiting the generality of the foregoing, this Section 6.5(b) shall apply if [*] with a Third Party for the
[*] in any country within the Gilead Territory or ROFR Territory. 

    6.6 Exclusivity.

    (a) Gilead. In each country of the Gilead Territory, Gilead shall not market, sell or otherwise distribute any Directly
Competitive Product prior to the [*] anniversary of the Commercial Launch of the Licensed Product with which such Directly Competitive Product is competitive in such country.
Gilead shall not develop, promote, sell or offer for sale Licensed Products (except in connection with clinical trials of Licensed Product) outside of the Gilead Territory. Gilead shall require
[*] to make a covenant similar that provided in this Section 6.6(a) with respect to Licensed Products. Gilead shall be free to manufacture Licensed Products outside the
Gilead Territory solely to the extent permitted in Article 7 and the Supply Agreement. 

    (b) Cubist. Cubist shall not promote, sell, or offer for sale Licensed Products for use (except in connection with
clinical trials of Licensed Product) within the Gilead Territory. Cubist shall be free to manufacture Licensed Products in the Gilead Territory in a manner consistent with the licenses granted to it
in Article 6. Cubist shall require [*] to make a covenant similar to that provided in this Section 6.6(b) with respect to Licensed Products. 

    6.7 Trademark License. Cubist hereby grants Gilead an exclusive, royalty-free license under its entire
right, title and interest in and to the Cubist Marks to use and display the Cubist Marks in connection with the Commercialization of Licensed Products within the Gilead Territory. Gilead hereby grants
Cubist an exclusive, royalty-free license under its entire right, title and interest in and to the Gilead
Marks to use and display the Gilead Marks in connection with the Commercialization of Licensed Products outside of the Gilead Territory. Each Party shall provide the other Party with copies of any
materials containing such other Party's trademarks prior to using or disseminating such materials, and shall reasonably consider all comments made by such other Party regarding the use of its
trademarks. Neither Party shall use the other Party's trade names and/or marks in a way which would be confusing or otherwise adversely affect their value. [*]. 

24

 

    6.8 Third Party Technology.

    (a) Required. [*] under all intellectual property rights (including without limitation rights in
Patents and trade secrets) that are [*] that may be brought by a Third Party in connection with the manufacture of Licensed Product by or for supply to
[*], or [*] by [*] in the [*], except that [*] shall have no obligation under
this Section 6.8(a) to the extent that such claims arise or would arise solely out of the practice of [*], and shall [*], including without
limitation [*] due pursuant to such licenses. [*], its Affiliates, Permitted Sublicensees and distributors as described in more detail in
Section 9.6(d) against any losses arising from [*] to obtain or maintain any such license. 

    (b) Desirable. For each intellectual property right that is [*], either Party may propose that
the Steering Committee consider (i) whether the Parties should seek a license thereunder to allow either or both Parties to practice such right in connection with the development, manufacture,
use sale, offer for sale or import of Licensed Products, (ii) how to allocate the costs of obtaining and maintaining such license between the Parties (taking into account the Parties' relative
interests therein inside and outside of the Gilead Territory) and (iii) how the Parties should proceed to seek such license. If the Steering Committee is unable to reach consensus with respect
to the seeking of such license, either Party shall be free to itself seek a license under such right at its sole cost and expense, with no obligation to make such license or right available to the
other Party. 

    6.9 Sublicensed Technology.

    (a) Generally. The licenses granted under this Article 6, to the extent they include sublicenses of Third-Party
technology, shall be subject to the terms and conditions of the license agreement pursuant to which the sublicense is granted; provided, however, that
if either Party enters into any Third Party license relevant to the development or commercialization of Licensed Products during the Term for technology that is desirable for the development and
commercialization of Licensed Products, such Party shall faithfully and timely perform and discharge its obligations under such Third Party license and shall not permit any action to be taken or event
to occur, in each case, within such Party's reasonable control, which would give such Third Party the right to terminate such Third Party license. [*]. If the Party that enters
into any such Third Party license [*] or otherwise [*], it shall promptly notify the other Party. The Parties shall promptly confer regarding an
[*] within [*] by [*]. If the Party that entered
into any such Third Party license [*] within [*], then the [*] may [*] for [*]
for [*] and  [*] shall be [*]. If a good faith dispute between a Third Party and the Party that entered into a
license with such Third Party about the interpretation of any provision of the agreement governing such Third Party license, the other Party shall use its Commercially Reasonable Efforts to ensure
that its actions, if any, under this Section 6.9 do not detrimentally affect the ability of the breaching Party to contest the interpretation advanced by such Third Party. 

    (b) Lilly License.  

     (i)  Cubist shall, for the benefit of Gilead, faithfully and timely perform and discharge its obligations under the Lilly License and shall not
permit any action to be taken or event to occur, in each case, within Cubist's reasonable control, which would give Lilly the right to terminate the Lilly License. Notwithstanding the provisions of
the foregoing sentence, [*]. If Cubist is notified or otherwise becomes aware of its material breach of the Lilly License, it shall promptly notify Gilead.
[*]. If Cubist does not perform the agreed upon remedy of such breach within the designated time, [*]. 

    (ii) It is agreed and acknowledged that in the event of termination of the Lilly License, [*]. 

    (c) Grants Back by Other Licensees. Cubist shall attempt to obtain the agreement of each of the Other Licensees to grant
to Cubist the ability to grant Gilead a license under such Other 

25

 

Licensee's Patents and Know-How [*] for Gilead's activities under this Agreement. Gilead shall attempt to obtain the agreement of its Permitted Licensees to grant
to Gilead the ability to grant Cubist a license under such sublicensee's Patents and Know-How [*] to make, have made, use, sell, offer for sale, import or export
Licensed Products outside of the Gilead Territory. If either Party[*], as the case may be, [*] agreement with the Other Licensee or Permitted
Sublicensee, as the case may be; provided, however, that neither Party shall be [*] in connection with such efforts. 

    6.10 Related Gilead Technology.

    (a) Gilead shall inform Cubist of any Related Gilead Know-How (i) that Gilead is aware is being used
by [*] to [*] in or for use in [*], or (ii) that Gilead wishes for Cubist and its Affiliates and Third Party
manufacturers [*], in the case of clause (ii), as the Parties intend to further provide for in the Supply Agreement. 

    (b) Gilead shall inform Cubist in writing of any [*] (i) that Gilead is aware covers the
[*] in or for use in [*], or (ii) that covers an invention that Gilead wishes for Cubist and its Affiliates and Third Party manufacturers
[*], in the case of clause (ii), as the Parties intend to further provide for in the Supply Agreement. 

    (c) If Cubist desires to include within the definition of [ *] thereunder pursuant to
[*], as applicable, any particular [*] of which [*], then Cubist shall so [*] pursuant to
[*] and the Parties shall, to the extent that [*] for a period of [*] upon which [*]. If the Parties
[*] for any particular [*] then such [*] shall be included in the definitions of [*], as applicable,
subject to such agreed [*]. If the Parties [*], then [* ]. 

    6.11 Sublicensing. In addition to Gilead's rights to sublicense certain of its rights included in its licenses under the
Cubist Patents and the Cubist Know-How pursuant to Sections 6.1 and 6.3 as provided for in such sections, [*] pursuant to this Section 6.11 shall be referred
to herein as a "Permitted Sublicensee". 

    6.12 Use of Patents and Know-How. Each Party covenants to the other that it will not practice the Patents or
Know-How of the other Party except as expressly permitted in the licenses granted to it in this Article 6. 

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

ARTICLE 7

MANUFACTURE AND SUPPLY  

    7.1 Supply by Cubist. As of the Effective Date, Cubist has established manufacturing arrangements for bulk Daptomycin
and finished IV Products through Third Party suppliers (such Third Parties and any other Third Party supplier of Licensed Products to Cubist shall be referred to collectively as the "Cubist
Suppliers"). Cubist shall supply to Gilead, and Gilead shall purchase from Cubist, (i) [*] in the Gilead Territory during the first five (5) years of the Term,
and (ii) [*] of [*] in the Gilead Territory after the first [*] of the Term, in both cases on the terms and conditions to
be set forth in a Supply Agreement to be added to this Agreement by addendum, which the Parties shall use their reasonable efforts in good faith to negotiate, execute and deliver within
[*] days after the Effective Date (the "Supply Agreement"). Attached hereto as Exhibit G is a term sheet that sets forth certain of the terms that the Parties have
agreed to incorporate into the Supply Agreement. Upon execution and delivery by the Parties of the Supply Agreement, the Supply Agreement shall supersede all of the terms and provisions of such term
sheet. 

26

 

    7.2 Transfer Price.

    (a) Gilead shall pay to Cubist a transfer price for (i) clinical supply of Licensed Product to Gilead by Cubist
equal to the Clinical Transfer Price, and (ii) commercial supply of Licensed Product by Cubist to Gilead equal to the Transfer Price, in each case as determined in accordance with this
Section 7.2. 

    (b) [*] 2001, a "Clinical Transfer Price" for units of Licensed Product for clinical supply
delivered by Cubist to Gilead and a "Transfer Price" for units of Licensed Product for commercial supply delivered by Cubist to Gilead, in each case to apply for the following
[*], shall be determined as provided in Sections 7.2(c) and (e) based upon Cubist's [*], for Licensed Product in the [*]
period preceding the time the Transfer Price and Clinical Transfer Price are determined. The "Clinical Manufacturing Cost" shall be equal to [*], calculated in accordance with
reasonable cost accounting methods that comply with generally accepted accounting principles. The "Manufacturing Cost" shall be equal to [*], calculated in accordance with
reasonable cost accounting methods that comply with generally accepted accounting principles. For quantities of Licensed Product Cubist acquires from a Third Party, Cubist's
[*] the calculations of the Clinical Manufacturing Cost and Manufacturing Cost. The Transfer Price and Clinical Transfer Price shall [*]. 

    (c) No later than [*] and no later than [*] thereafter, Cubist shall
notify Gilead in writing of the dollar figures that Cubist proposes to be the Clinical Transfer Price and Transfer Price, respectively, for units of Licensed Product delivered in the
[*] following the date of such notice. Cubist's notice as to the Clinical Transfer Price and Transfer Price it proposes shall include [*] upon which
[*], and shall include a [*]. Within [*] of receiving such notice from Cubist, Gilead shall respond in writing as to whether it
(i) [*] manufactured by Cubist and/or its Affiliates to be [*], or (ii) [*]. Additionally within such time frame,
[*]. 

    (d) If Gilead does not dispute the Clinical Transfer Price or the Transfer Price proposed by Cubist, then the amounts
proposed by Cubist shall be the Clinical Transfer Price and Transfer Price, respectively, for all units of Licensed Product manufactured by or for Cubist and/or its Affiliates and delivered to Gilead
in the [*] following the date of the Parties' notices pursuant to Section 7.2(c). 

    (e) Within [*] after the end of each [*] in which Cubist has delivered
Licensed Product to Gilead, Cubist shall notify Gilead in writing of Cubist's actual Clinical Manufacturing Cost for quantities of Licensed Product delivered to Gilead as clinical supply in such
[*]. If Gilead does not dispute the Clinical Manufacturing Cost as calculated by Cubist, then [*] any difference between the Clinical Transfer Price and
the Clinical Manufacturing Cost shall, within [*] after the end of such [*], pay [*] by wire transfer of immediately available
funds to an account designated by such other Party. If Gilead disputes the Clinical Manufacturing Cost as calculated by Cubist, then such values shall be determined pursuant to Section 7.2(f)
and [ *] any such discrepancy shall, within [*] after the Independent Accounting Firm as
defined in Section 7.2(f) makes its calculation of such value known to the Parties, pay  [*] by wire transfer of immediately available funds to an
account designated by such other Party. 

    (f)  If Gilead disputes an amount proposed by Cubist to be the Clinical Transfer Price, Transfer Price, Clinical
Manufacturing Price or Manufacturing Price, then the Steering Committee shall discuss the issues for a period of [*]. If, after such discussions by the Steering Committee, the
Parties continue to disagree on such issue, then the Parties shall submit the issue to Cubist's independent auditor (currently, Pricewaterhouse Coopers) (the "Independent Accounting Firm"). The
Independent Accounting Firm, using personnel other than those who perform regular accounting services for Cubist, shall calculate the disputed value in accordance with the basis specified in
Section 7.2(b) based on [*]. The Parties shall use their commercially reasonable efforts 

27

 

to cause the Independent Accounting Firm to render its calculation of the disputed value to the Parties within [*] of the date the Parties submit such calculation to the
Independent Accounting Firm. Neither Party shall [*] the Independent Accounting Firm. The Parties shall [*] the Independent Accounting Firm for the
purposes described in this Section 7.2(f). The Independent Accounting Firm's calculation of the disputed value [*]. 

    (g) If Cubist is to supply Gilead with multiple Licensed Products in a given [*], then Clinical
Transfer Prices, Transfer Prices, Clinical Manufacturing Costs and Manufacturing Costs shall be determined separately for each Licensed Product in accordance with this Section 7.2. 

    (h) The Supply Agreement shall [*]. 

ARTICLE 8

COMPENSATION  

    8.1 License Fee.

    (a) Within [*] after the Effective Date, Gilead shall pay a license fee for the IV Product of
[*] to Cubist by wire transfer of immediately available funds into an account designated by Cubist. This license fee shall be nonrefundable and noncreditable. 

    (b) Within [*] after the Effective Date, Gilead shall pay a license fee for the Oral Product of
[*] to Cubist by wire transfer of immediately available funds into an account designated by Cubist (the "Oral Product Fee"). The Oral Product Fee shall be subject to
[*] in accordance with the provisions of Section 8.1(c). 

    (c) If (I) this Agreement is [*] by Gilead with respect to the Oral Product pursuant to
the provisions of Section 14.2 at any time prior to the [*] anniversary of the Effective Date, (II) Cubist shall have [*] its
[*] with respect to the Oral Product for a period exceeding [*] (other than on account of a Force Majeure) at any time prior to the
[*], or (III) Cubist has been determined pursuant to Section 3.5 to have [*] with respect to the Oral Product at any time
[*] in accordance with the following schedule: 

    (i)  If a [*] occurs prior to the [*] anniversary of the Effective Date,
[*]. 

    (ii) If a [*] occurs on or after the [*] anniversary of the Effective
Date but prior to the [*] anniversary of the Effective Date, [*] between [*], prorated based upon the number of months after the
[*] anniversary of the Effective Date such event occurs (as examples, if such event occurs [*] after the Effective Date, [*]; if
such event occurs [*] after the Effective Date, [*]). 

    Additionally,
Gilead shall not [*] with respect to the development of an Oral Product [*], subject to Section 8.1(d). 

    (d) If the [*] leading to a [*] pursuant to Section 8.1(c) was
the [*] referred to in clause (I) of such Section, then Gilead shall have [*] to the Oral Product. If the [*] leading to
a [*] pursuant to Section 8.1(c) was the [*] referred to in clause (II) or clause (III) of such Section, then Cubist shall
[*] with respect to Oral Products, but Gilead shall [*] pursuant to this Agreement. If at any time after a [*  ] referred to in the foregoing sentence Cubist wishes to resume development of an Oral
Product, Cubist shall so notify Gilead in writing
[*] development of an Oral Product. In such event, Gilead shall be [*] with respect to an Oral Product
[*] after the Resumption Date, but shall have [*]. 

    8.2 Milestone Payments. Subject to Section 14.2, in consideration for the licenses and exclusive rights of this
Agreement, Gilead shall make milestone payments to Cubist based on achievement of IV Product development milestones as set forth in Section 8.2(a), and based on the achievement of Oral 

28

 

Product development milestones as set forth in Section 8.2(b). Gilead shall pay the amounts set forth below within [* ]
after Gilead's receipt of notice from Cubist of the first achievement of the relevant milestone for an IV Product or an Oral Product, as documented by appropriate written and/or other
materials. Each milestone payment by Gilead to Cubist hereunder shall be paid only once, and shall be noncreditable and nonrefundable. 

    (a) IV Product Development Milestone Payments.

	Milestone Event
	 	Payment Amount
 (in millions)

	1.	 	[*] in the following clinical trials included in Exhibit A (defined as [*] for cSST; and either of the [*] for CAP.	 	[*]
	2.	 	[*], Protocol Number [*].	 	[*]
	3.	 	[*], Protocol Number [*]	 	[*]
	4.	 	[*], Protocol Number [*].	 	[*]
	5.	 	[*], Protocol Number [*].	 	[*]
	6.	 	[*] for Endocarditis	 	[*]
	7.	 	[*] for Endocarditis.	 	[*]
	8.	 	Completion of the [*] of the following trials:	 	[*]
	 	 	• [*] for UTI	 	 
	 	 	• [*] for Bacteremia	 	 
	 	 	• [*] for Enterococcal Infection	 	 
	9.	 	[*] for the IV Product.	 	[*]
	10.	 	[*]	 	[*]
	11.	 	Patent issuing from [*] in a country within the Gilead Territory.	 	[*]
	

	Total Potential IV Product Development Milestone Payments	 	[*]

    The
Parties recognize that the clinical trials, protocol numbers and Primary Endpoints listed in the milestone events above may change as otherwise permitted pursuant to this
Agreement. The milestone events as defined above shall be interpreted to apply to the modified clinical trial, protocol number and/or Primary Endpoint replacing that set forth above. 

    (b) Oral Product Development Milestone Payments.

	Milestone Event
	 	Payment Amount
 (in millions)

	1.	 	[*] for an Oral Product.	 	[*]
	2.	 	[*] of an Oral Product.	 	[*]
	3.	 	[*] of an Oral Product.	 	[*]
	4.	 	[*] of an Oral Product.	 	[*]
	5.	 	[*]	 	[*]
	

	Total Potential Oral Product Development Milestone Payments	 	[*]

    8.3 Royalties.

    (a) Royalty. Subject to the other terms and conditions of this Agreement, Gilead shall pay Cubist a royalty equal to
[*] (the "Royalty Rate") of Net Sales of each Licensed Product sold during each calendar quarter by Gilead, its Affiliates, or Permitted Sublicensees, less the
[*] paid by Gilead for supply of units of such Licensed Product that are (i) [*] or (ii) [*], but in the case of
clause (ii), [*] Licensed Products, and in each case by Gilead, its Affiliates or Permitted Sublicensees in such calendar quarter, subject to adjustment pursuant to this
Section 8.3. 

29

 

    (b) Royalty Where There Is No Exclusivity. The Royalty Rate shall be reduced by [*] with respect
to Net Sales in any country in the Gilead Territory in which (i) there is [*] of Licensed Products, or [*] covering [*];
and (ii) there is [*] in such country. 

    (c) Compulsory License. If Gilead learns that a Third Party is seeking a Compulsory License in any country in the Gilead
Territory, Gilead shall use commercially reasonable efforts to oppose the granting of such Compulsory License. If either Party learns that a Third Party has obtained a Compulsory License in any
country in the Gilead Territory, such Party shall promptly notify the other Party of such occurrence. If the [*] by the grantee of the Compulsory License is
[*] than the [*] applicable in such country [*], then the applicable [*] applicable in such country
pursuant to such Compulsory License for so long as such Compulsory License remains in effect. 

    8.4 Term of Royalties. Cubist's right to receive royalties under Section 8.3 shall expire on a
country-by-country and product-by-product basis upon the later of (i) [*] from the Commercial Launch of such Licensed
Product in such country; or (ii) expiration of the last to expire issued Cubist Patent containing a Valid Claim which would be infringed by the manufacture, use or sale in the Gilead Territory
by Gilead of Licensed Product absent the license granted hereunder. 

    8.5 Third Party Royalties and Other Payments. The royalties payable by Gilead to Cubist under Section 8.3 shall
be [*] arising from license or other agreements entered into by Cubist prior to the Effective Date relating the manufacture, use, sale, offer for sale or importation of the
Licensed Products, including without limitation [*]; provided, however, that nothing in this Section 8.5 shall limit the
obligation of Gilead to [*] as contemplated by the Supply Agreement. 

    8.6 Royalty Payments and Reports. All amounts payable to Cubist under this Agreement shall be paid in Dollars within
[*] of the end of each calendar quarter except as otherwise specifically provided herein. Each payment of royalties owing to Cubist shall be accompanied by a statement,
[*] of Licensed Product, [*] showing deductions provided for in Section 1.65 during such quarter, the [*] of Licensed
Product and Net Sales during such quarter and on a [*] and the amount of royalty due on such sales. If any royalty reductions are claimed by Gilead under this Agreement from
the full royalty rates set forth in Section 8.3, then the report shall set forth in detail the claimed reduction and the related facts. 

    8.7 Taxes. Subject to the provisions of Section 8.7(b), Cubist shall be responsible for any and all taxes levied
on account of amounts it receives under this Agreement. 

    (a) Payment Procedure. If Gilead is required by law, rule or regulation to withhold taxes from such types of payments
due Cubist hereunder, Gilead will (i) deduct those taxes from the remittable amount,
(ii) pay the taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of payment to Cubist within [*] following that
payment. 

    (b) Gross-Up for Taxes Resulting from Assignment. If as a result of any assignment of this Agreement from
Gilead to an Affiliate of Gilead, or from an Affiliate of Gilead to another Affiliate of Gilead, including, without limitation, assignments pursuant to Section 16.6 (collectively, "Gilead
Affiliate Assignment"), the [*] under this Agreement [*]. 

    8.8 Blocked Currency. In any country where conversion of the local currency is blocked and such currency cannot be
removed from the country, Gilead shall pay Cubist in local currency by deposit in a local bank designated by Cubist. 

    8.9 Foreign Exchange. For the purpose of computing the Net Sales for Licensed Products sold in a currency other than
Dollars, such currency shall be converted into Dollars as computed in the central Gilead currency conversion system using the average monthly rate of exchange at the time for such currencies as
retrieved from the on-line edition of the Wall Street Journal (at http://www.interactive.wsj.com). The currency conversion system used by Gilead shall be subject to audit by Cubist as
described in Section 12.1, and, if not determined to be a system reflecting a reasonable 

30

 

average exchange rate of the currencies in question, shall be modified as necessary to effect currency conversion at a reasonable average exchange rate. 

    8.10 Payments to or Reports by Affiliates. Any payment required under any provision of this Agreement to be made to
either Party or any report required to be made by any Party shall be made to or by an Affiliate of that Party if designated in writing by that Party as the appropriate recipient or reporting entity. 

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

ARTICLE 9

INTELLECTUAL PROPERTY  

    9.1 Ownership of Inventions. Each Party shall own any inventions made solely by its employees or agents in their
activities hereunder. Inventions hereunder made jointly by employees or agents of each Party shall be owned jointly by the parties ("Joint Inventions"). Inventorship shall be determined in accordance
with U.S. patent laws. 

    9.2 Prosecution of Patents.

    (a) Cubist Patents. Cubist shall be responsible for the prosecution and maintenance of the Cubist Patents at
[*]. Gilead shall have the right to review and comment upon such prosecution by Cubist of the Cubist Patents in the jurisdictions of the Gilead Territory. To that end, Cubist
shall furnish Gilead with copies of each draft submission regarding a Cubist Patent to a patent authority of any jurisdiction of the Gilead Territory no later than [ *] prior
to the date such submission is proposed to be made, in the state that such submission is reasonably in at such time (which may, for example, be in the form of descriptions of experiments and
experimental data that may be used to demonstrate an actual reduction to practice of the relevant invention, which experiment may be ongoing) and will [*  ] thereon. If Gilead does not provide Cubist
with reasonably timely comments, Cubist shall be free to proceed with its submission or other
contemplated action. Cubist will make reasonable efforts to provide Gilead an update to such draft prior to filing to enable Gilead to monitor progress and further comment on the draft and shall
provide Gilead with a copy of each submission to a patent authority of a jurisdiction within the Gilead Territory regarding a Cubist Patent [*] after making such filing. If
Cubist determines in its sole discretion to abandon or not maintain any claim or patent application within the Cubist Patents anywhere in the Gilead Territory, then Cubist shall provide Gilead with
[* ] prior written notice of such determination and shall provide Gilead with the opportunity to prosecute and maintain such
claim or patent application in the Gilead Territory on behalf of Cubist [*]. Cubist shall inform Gilead of any patents, information or proceeding of which Cubist becomes aware
that relate to Cubist Patents that may adversely impact the validity, title or enforceability of Cubist Patents in the Gilead Territory. 

    (b) Gilead Project Patents. Gilead shall be responsible for the prosecution and maintenance of the Gilead Project
Patents [*]. Cubist shall have the right to review and comment upon Gilead's prosecution of the Gilead Project Patents in the jurisdictions outside the Gilead Territory. To
that end, Gilead shall furnish Cubist with copies of each draft submission regarding a Gilead Project Patent to the patent authority of any jurisdiction outside the Gilead Territory no later than
[*] prior to the date such submission is proposed to be made, in the state that such draft submission is reasonably in at such time (which may, for example, be in the form of
descriptions of experiments 

31

 

and experimental data that may be used to demonstrate an actual reduction to practice of the relevant invention, which experiment may be ongoing) and will [*] thereon. If
Cubist does not provide Gilead with reasonably timely comments, Gilead shall be free to proceed with its submission or other contemplated action. Gilead will make reasonable efforts to provide Cubist
an update to such draft prior to filing to enable Cubist to monitor progress and further comment on the draft and shall provide Cubist with a copy of each submission made to a patent authority outside
the Gilead Territory regarding a Gilead Project Patent reasonably promptly after making such filing. If Gilead determines in its sole discretion to abandon or not maintain any claim or patent
application within the Gilead Project Patents anywhere outside the Gilead Territory, then Gilead shall provide Cubist with [*] prior written notice of such determination and
shall provide Cubist with the opportunity to prosecute and maintain such claim or patent application outside the Gilead Territory on behalf of Gilead at [*]. Gilead shall
inform Cubist of any patents, information or proceeding of which Gilead becomes aware that relate to Gilead Project Patents that may adversely impact the validity, title or enforceability of Gilead
Project Patents outside the Gilead Territory. 

    (c) Joint Patents. With respect to Joint Inventions, the Parties shall [*] covering such Joint
Invention (any such patent application and any patents issuing therefrom a "Joint Patent"). If either Party prosecutes a patent application covering a Joint Invention, such Party shall
[*], except as provided in the final sentence of this paragraph. Except to the extent either Party is restricted by the licenses granted to the other Party, and covenants
contained, herein, and to the extent permitted by law, each Party shall be entitled to [*]. Either Party may disclaim its interest in any particular Patent or patent
application covering a Joint Invention, in which case (i) the disclaiming Party shall assign its ownership interest in such Patent or patent application to the other Party for no additional
consideration, (ii) the Party which is then the sole owner shall be solely responsible for all future costs of such patent or patent application, and (iii) the disclaiming Party shall
hold no further rights thereunder. 

    9.3 Patent Term Extensions. Cubist will, [*], after discussing its strategy with Gilead and
[*], in each country in the Gilead Territory, determine for which, if any, of the Patents within the Cubist Patents, Gilead Project Patents and Joint Patents, the Parties will
apply to extend the patent term with respect to Licensed Products, as provided for in patent term extension laws or regulations in the Gilead Territory similar to the Patent Term Restoration Act or
other similar laws and regulations affording an extension or restoration of patent terms in the United States, which similar laws and regulations shall include without limitation any Supplementary
Protection Certificates. Cubist shall act with reasonable promptness in light of the development stage of Licensed Products to apply for any such extension. Gilead shall not make any submissions,
filings or other communications with any governmental agency with respect to patent term restoration (or other similar grant of a monopoly right with respect to any Licensed Product) for any Patents
within the Cubist Patents, Gilead Project Patents or Joint Patents in the Gilead Territory without Cubist's express consent. Gilead will cooperate fully with Cubist in making such filings
[*] which may include without limitation, making available regulatory data and information. 

    9.4 Non-Patent Regulatory Exclusivity. Gilead shall have the right to apply for regulatory exclusivity for
the Licensed Products as provided in Section 4.7. 

    9.5 Infringement of Patents by Third Parties.  

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

    (b) Infringement of Cubist Patents in the Gilead Territory [*]. If the Infringement of Cubist
Patents involves or would involve a [*] in the Gilead Territory only and not Licensed Products outside of the Gilead Territory, Gilead shall have the right, but not the
obligation, to bring, [ *], an 

32

 

appropriate action against the person or entity engaged in such Infringement directly or contributorily. If Gilead does not bring such action within [*] of notification thereof
to or by Cubist pursuant to Section 9.5(a) or within [ *] of the date upon which notification thereof to Cubist should have been given by Gilead pursuant to
Section 9.5(a) hereof, Cubist shall have the right, but not the obligation, to bring [* ], such appropriate action. The
Party not bringing an action under this paragraph (b) shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall
cooperate fully with the party bringing such action. 

    (c) Other Infringement of Cubist Patents. For all Infringement of Cubist Patents that involves or would involve a
product that is [*] other than Infringement described in Section 9.5(b), Cubist shall have the [*  ] right, but not the obligation, to bring, [* ], an
appropriate
action against any person or entity engaged in such Infringement directly or contributorily. If Cubist does not bring such action within [*] of notification thereof to or by
Gilead pursuant to Section 9.5(a) or within [*] of the date upon which notification thereof to Gilead should have been given by Cubist pursuant to Section 9.5(a)
hereof, Gilead shall have the right, but not the obligation, to bring [* ], such appropriate action;  provided, however, that such appropriate action is
brought [*] and is limited only to [*] and not
to[*] or otherwise to [* ]. The Party not bringing an action under this paragraph (c) shall be
entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall cooperate fully with the Party bringing such action. 

    (d) Joint Patents. With respect to Third Party Infringement of Joint Patents other than that Infringement described in
Sections 9.5(b) and 9.5(c), the Parties shall confer and take such action, and allocate expenses and recoveries, in such manner as they shall agree. 

    (e) Infringement of Gilead Project Patents Outside the Territory by [*] Infringement. In the
event the Infringement of a Gilead Project Patent involves or would involve a [*] outside of the Gilead Territory, Cubist shall have the right, but not the obligation, to
bring, [*], an appropriate action against the person or entity Infringing a Gilead Project Patent (including any Joint Patent) directly or contributorily. If Gilead does not
bring such action within [*] in the case of an action brought under the Hatch-Waxman Act) of notification thereof to or by Gilead, Cubist shall have the right, but not the
obligation, to bring [*], such appropriate action. The Party not bringing an action under this Section 9.5(e) shall be entitled to
separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall cooperate fully with the party bringing such action. 

    (f)  Other Infringement of Gilead Project Patents. For all Infringement other than that described in
Section 9.5(e) that involves a Gilead Project Patent that is not a Joint Patent, Gilead shall have the exclusive right, but not the obligation, to bring, [*  ], an appropriate action against any
person or entity Infringing a Gilead Project Patent directly or contributorily. 

    (g) Settlement; Allocation of Proceeds. Cubist shall not settle a claim brought under this Section 9.5 involving
Gilead Project Patents or Joint Patents, or a claim brought under this Section 9.5 involving Cubist Patents that would [*], in either case without the prior written
consent of Gilead (which consent shall not be unreasonably withheld or delayed). Gilead shall not settle a claim brought under this Section 9.5 involving Cubist Patents or Joint Patents, or a
claim brought under this Section 9.5 involving Gilead Project Patents that would [*], in either case without the prior written consent of Cubist (which consent shall not
be unreasonably withheld or delayed). In the event of any recovery of monetary damages from the Third Party in an action brought under this Section 9.5, [*], such
recovery shall be allocated  [*], and any remaining amounts shall be split as follows: (i) the portion of any such remaining amounts that represents
recovery for Infringement that involves or would involve a product that [*] to Gilead and [*] to Cubist unless 

33

 

such remaining amounts are recovered in an action brought by Cubist pursuant to Section 9.5(b) hereof in which case the portion of any such remaining amounts that represents recovery for
Infringement that involves or would involve a product that [*], (ii) the portion of any such remaining amounts that represents recovery for Infringement that involves or
would involve a product that [*] for Cubist and (iii) the portion of any such remaining amounts that represents recovery for Infringement in an action brought pursuant
to Section 9.5(d) shall be split [*] to Gilead and [*] to Cubist unless Gilead and Cubist shall have agreed to a different allocation. 

    9.6 Infringement of Third Party Rights.  

    (a) Notice. If any Licensed Product manufactured, used or sold by either Party, its Affiliates, licensees or sublicensees under this Agreement
becomes the subject of a Third Party claim, or there is the potential for a claim, of patent infringement relating to the manufacture, use, sale, offer for sale or importation of Licensed Product, the
Party first having notice of the claim shall promptly notify the other Party, and the Parties shall promptly meet to consider the claim and the appropriate course of action. 

    (b) Defense. Except as provided herein, the Party against which such Third Party infringement claim is brought shall
defend against such claim at its sole expense and the other Party shall have the right, but
not the obligation, to participate in any such suit, at its sole option and at its own expense. Such other Party shall reasonably cooperate with the Party conducting the defense of the claim,
including if required to conduct such defense, furnishing a power of attorney. Notwithstanding the foregoing provisions of this Section 9.6(b), [*]. 

    (c) Settlement. Neither Party shall enter into any settlement that affects the other Party's rights or interests without
such other Party's written consent, which consent shall not be unreasonably withheld or delayed. 

    (d) Indemnification.

    (i)  Subject to the provisions of this Section 9.6(d), Cubist shall Indemnify (as defined in Section 11.1)
Gilead and the Gilead Indemnitees (as defined in Section 11.1) from and against any and all Losses arising from the [*] of any Third Party intellectual property right
(all such Losses, "Section 9.6(d) Losses") by the manufacture, use, sale, offer for sale or importation of Licensed Products by Gilead and its Affiliates, Permitted Sublicensees and
distributors; provided that Cubist shall not be obligated to Indemnify Gilead or the Gilead Indemnitees pursuant to this
Section 9.6(d)(i) to the extent that (i) the alleged infringement arises out of Gilead's breach or non-compliance with any of the provisions of this Agreement
(including without limitation the Supply Agreement), or (ii) such Section 9.6(d) Losses are Gilead Indemnifiable Technology Losses. If Cubist is unable to procure any license from a
Third Party owning or controlling rights that would be infringed or misappropriated by the development, manufacture, use or sale of Licensed Products in the Gilead Territory on commercially reasonable
terms, Cubist shall so notify Gilead and Gilead shall discontinue manufacturing, using and selling such Licensed Product; provided that prior to being
required to cease such activities, (i) the Parties shall first confer in good faith as promptly as practicable as to whether to alter their approach to the infringing activities with respect to
the Licensed Product that would avoid such infringement without adversely affecting their rights under this Agreement or return from the Commercialization of Licensed Product in the Gilead Territory,
(ii) the Third Party owning such technology shall have refused to grant a license to Cubist on commercially reasonable terms, and (iii) Cubist shall have afforded Gilead an opportunity
to seek such Third Party license and, within sixty (60) days of being given such opportunity, such Third Party [*]. Notwithstanding the foregoing, Cubist shall not be
required to obtain any such license and Cubist shall not be obligated to [*] that would cause [*]. Gilead may in its sole discretion agree to
[*] in order to allow Cubist to achieve [*]. 

34

 

    (ii) If Cubist desires to incorporate or utilize any Gilead Project Know-How or invention claimed by any
Gilead Project Patent in or in connection with the [*]. If Gilead agrees in writing, after such discussions by the Development Subcommittee, that any such Gilead Project
Technology shall be so incorporated or utilized and shall be deemed "Gilead Indemnifiable Technology" hereunder, then Gilead shall indemnify Cubist pursuant to the last sentence of this
Section 9.6(d)(ii). If Gilead does not so agree in writing, Cubist shall be entitled to make such incorporation or utilization in connection with the practice of the licenses set forth in
Sections 6.2 and 6.4, but such Gilead Project Technology shall not
be Gilead Indemnifiable Technology and Gilead shall not be obliged to indemnify Cubist as provided in such sentence. Gilead Indemnifiable Technology shall also include any technology owned or
Controlled by Gilead (other than Cubist Technology or Joint Patents) that Gilead uses (but that is not being used by Cubist, its Affiliates or sublicensees in connection with Licensed Products outside
the Gilead Territory) in the development, manufacture, use, sale offer for sale or import of Licensed Products in the Gilead Territory. Subject to the last sentence of this Section 9.6(d),
Gilead shall Indemnify Cubist and the Cubist Indemnitees (as defined in Section 11.1) from and against any and all Losses to the extent arising from the infringement or misappropriation of any
Third Party intellectual property right (all such Losses, "Gilead Indemnifiable Technology Losses") by the practice of Gilead Indemnifiable Technology in the manufacture, use, sale, offer for sale or
importation of Licensed Products by or for Gilead and its Affiliates, Permitted Sublicensees and distributors as otherwise permitted hereunder; provided
that Gilead shall not be obligated to Indemnify Cubist pursuant to this Section 9.6(d)(ii) to the extent that (i) the alleged infringement or misappropriation arises out of
Cubist's breach or non-compliance with any of the provisions of this Agreement, including without limitation the Supply Agreement, or (ii) such Losses arise from the infringement or
misappropriation of Third Party intellectual property by the practice of Cubist Technology. 

    (iii) If Gilead is obligated to indemnify Cubist pursuant to Section 9.6(d)(ii) with respect to the
practice of Gilead Indemnifiable Technology outside of the Gilead Territory, and in connection with such obligation is unable to procure any license from a Third Party owning or Controlling rights
that would be infringed or misappropriated by the development, manufacture, use or sale of Licensed Products outside of the Gilead Territory with respect to the Gilead Indemnifiable Technology on
commercially reasonable terms, Gilead shall so notify Cubist and [*], (i) the Parties shall [*], (ii) the Third Party owning such
technology shall have [*], and (iii) Gilead shall have afforded Cubist an [*]. The provisions of this Section 9.6(d) and Sections 9.7 and
11.6 state [*] in respect of liability for infringement or misappropriation of any Third Party's intellectual property right by the manufacture, use, sale, offer for sale or
importation of any Licensed Product. 

    9.7 Royalty Reduction. If Gilead is required (either by final judgment from a court of competent jurisdiction or
pursuant to the terms of any settlement that complies with the provisions of Section 9.6(c) above) to pay a Third Party a royalty or make any payment of any kind for the right to practice the
Cubist Technology in a particular country in the Gilead Territory and Cubist is required, [*], an amount [*] in respect of the
[*]; provided, however, that nothing in this Section 9.7 shall relieve Cubist or Gilead from its obligations under
Section 9.6 hereof. 

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

    9.9 Selection and Registration of Product Trademarks. Gilead may select and own its own trademarks for use in connection
with the sale of Licensed Products within the Gilead Territory, in addition to the Cubist-owned trademarks to which Gilead has a license pursuant to Section 6.7. Each Party shall be responsible
for registering and maintaining its own trademarks, at its own expense. 

35

 

    9.10 Infringement of Trademarks by Third Parties. With respect to Licensed Products within the Gilead Territory, each
Party shall notify the Steering Committee promptly upon learning of any actual, alleged or threatened infringement of any trademark or of any unfair trade practices, trade dress imitation, passing off
of counterfeit goods, or like offenses, or any such claims brought by a Third Party against a Licensed Product (hereinafter "TM Infringement"). Upon learning of such TM Infringement, the Steering
Committee [*]. In the absence of other agreement [*], to bring an action to address such TM Infringement, in which case such Party
[*]. 

    9.11 Patent Oppositions.  

    (a) Third Party Patent Rights. If either Party desires to bring an opposition, action for declaratory judgment, nullity action, interference,
reexamination or other attack upon the validity, title or enforceability of a Patent owned or Controlled by a Third Party that covers the manufacture, use or sale of any Licensed Product, such Party
shall so notify the other Party and the Parties shall promptly confer to determine whether to bring such action or the manner in which to settle such action. Cubist shall have the first right, but not
the obligation, to bring at its own expense and in its sole control such action outside the Gilead Territory. Gilead shall have the first right, but not the obligation, to bring at its own expense and
in its sole control such action in the Gilead Territory. If Gilead does not bring such action within [*] of notification thereof pursuant to this Section 9.11(a) (or
earlier, if required by the nature of the proceeding), Cubist shall have the right, but not the obligation, to bring at Cubist's expense and in its sole control, such action. The Party not bringing an
action under this Section 9.11(a) shall be entitled to separate representation in such proceeding by counsel of its own choice and at its own expense, and shall cooperate fully with the Party
bringing such action. Any awards or amounts received in bringing any such action shall be first allocated to [*]. 

    (b) Parties' Patent Rights. If a Cubist Patent or a Gilead Project Patent becomes the subject of any proceeding
commenced by a Third Party in connection with an opposition, reexamination request, action for declaratory judgment, nullity action, interference or other attack upon the validity, title or
enforceability thereof, then the Party owning or Controlling such Patent shall control such defense at its sole cost; provided that if such action
relates to a Joint Patent, the Parties shall confer and determine which Party shall control such action. The controlling Party will permit the non-controlling Party to participate in the
proceeding to the extent permissible under law, and to be represented by its own counsel in such proceeding, at the non-controlling Party's expense. If either Party decides that it does
not wish to defend against such action, then the other Party shall have a backup right to assume defense of such Third Party action at its own expense. Any awards or amounts received in defending any
such Third Party action shall be allocated [*]. 

    (c) Noncontravention. Nothing in this Section 9.11 shall be deemed to relieve either Party of its obligations
under Section 9.6(d) or Article 11. 

    9.12 Lilly License. Notwithstanding the foregoing, the Parties' rights and obligations under this Article 9 shall
be subject to limitations imposed by the Lilly License, provided that the Parties shall work to address such limitations in a manner that permits Gilead
to exercise its rights under this Agreement to the fullest extent reasonably possible. 

ARTICLE 10

REPRESENTATIONS AND WARRANTIES  

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

    (a) Corporate Existence and Power. It is a corporation duly organized, validly existing and in good standing under the
laws of the state in which it is incorporated, and has full corporate power 

36

 

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

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

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

    (d) Regulatory Data. The regulatory data it provides to the other Party shall be complete and accurate in all material
respects. 

    (e) No Misappropriation. It has not and shall not misappropriate the trade secret of another in its activities to
develop or commercialize Licensed Products. 

    (f)  No Debarment. Each Party represents and warrants that in the course of the development of Licensed Products, such
Party shall not have used, during the term of this Agreement, any employee or consultant that has been debarred by the FDA or Regulatory Authorities, or, to the best of such Party's knowledge, is the
subject of debarment proceedings by the FDA or Regulatory Authorities. 

    10.2 Cubist. Cubist represents and warrants to Gilead as follows: 

    (a) Non-Infringement of Cubist Technology by Third Parties. As of the Effective Date, Cubist is unaware of
any activities by Third Parties which would constitute infringement or misappropriation of the Cubist Technology. 

    (b) Lilly License. Cubist is in full compliance with the Lilly License as of the Effective Date, and has received no
notices of default under the Lilly License. 

    (c) Regulatory Data. Cubist is not aware of any data or information given to Gilead relating to Licensed Products that
is untrue or inaccurate in any material respect or of any other data or information that is necessary to make the data and information provided to Gilead complete and not misleading in all material
respects. 

    (d) Oral Product Rights. Cubist owes no obligation [*] which would conflict with the rights
granted Gilead herein, including without limitation the exclusive license with respect to all Licensed Products (including without limitation Oral Products) that Gilead continues pursuant to this
agreement to enjoy even after a [*] described by clause (II) or (III) of Section 8.1(c). 

    (e) Rights in Technology. As of the Effective Date, Cubist has sufficient right in and to the Cubist Technology, free
and clear of any liens or encumbrances, to grant the rights set forth in this Agreement. 

    (f)  Non-infringement of Third Party Rights. As of the Effective Date, Cubist is unaware of any Patents or
trade secret rights owned or controlled by a Third Party, which would be infringed 

37

 

or misappropriated by the manufacture, use, sale, offer for sale or importation of Daptomycin Products, and has received no, and has reason to believe that it would receive any, written claims
relating to any claims of such infringement or misappropriation. 

    10.3 Disclaimer. Gilead understands that Licensed Products are the subjects of ongoing clinical research and development
and that Cubist cannot assure the safety or usefulness of Licensed Products. Cubist makes no warranty except as set forth in this Article 10 concerning its Patents or Know-How. 

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

ARTICLE 11

INDEMNIFICATION  

    11.1 Indemnification by Cubist. Cubist hereby agrees to defend, hold harmless and indemnify (collectively "Indemnify")
Gilead and its Affiliates, agents, directors, officers and employees (the "Gilead Indemnitees") from and against any and all suits, claims, actions, demands, liabilities, expenses and/or losses,
including without limitation reasonable legal expenses and attorneys' fees (collectively "Losses") resulting directly or indirectly from (i) a breach of any of Cubist's representations and
warranties pursuant to Article 10; (ii) any claims resulting directly or indirectly from the secondment of a Cubist MSL in the Gilead Territory other than to the extent arising directly
from an action taken by a Cubist MSL in accordance with Gilead's specific instructions; or (iii) the development, use, sale, offer for sale or importation of Licensed Products by Cubist or its
Affiliates, licensees or sublicensees; provided, however, that Cubist shall not be required pursuant to this Section 11.1 to indemnify the Gilead
Indemnitees for any Section 9.6(d) Losses. Cubist's obligation to Indemnify the Gilead Indemnitees pursuant to this Section 11.1 shall not apply to the extent of any Losses
(i) that arise from the negligence or intentional misconduct of any Gilead Indemnitee; (ii) from Gilead's breach of this Agreement, including without limitation the Supply Agreement; or
(iii) for which Gilead is obligated to Indemnify the Cubist Indemnitees pursuant to Section 11.2 or the Supply Agreement. Cubist's obligations to indemnify Gilead with respect to the
manufacture and supply of Licensed Product are set forth in the Supply Agreement. 

    11.2 Indemnification by Gilead. Gilead hereby agrees to Indemnify Cubist and its Affiliates, agents, directors, officers
and employees (the "Cubist Indemnitees") from and against any and all Losses resulting directly or indirectly from (i) a breach of any of Gilead's representations and warranties pursuant to
Article 10; or (ii) the development, use, sale, offer for sale or importation of Licensed Products by Gilead or its Affiliates or sublicensees. Gilead's obligation to Indemnify the
Cubist Indemnitees pursuant to the foregoing sentence shall not apply to the extent of any Losses (i) that arise from the negligence or intentional misconduct of any Cubist Indemnitee,
(ii) for which Cubist is obligated to Indemnify the Gilead Indemnitees pursuant to Section 11.1, or (iii) from any breach by Cubist of this Agreement, including without limitation
the Supply Agreement. Gilead's obligations to indemnify Cubist with respect to the manufacture and supply of Licensed Products are set forth in the Supply Agreement. 

    11.3 Procedure. If either Party is seeking indemnification under Section 11.1 or 11.2 in connection with a Third
Party claim, it shall inform the indemnifying Party of such Third Party claim giving rise to the obligation to indemnify pursuant to such section as soon as reasonably practicable after receiving
notice of the claim. The indemnifying Party shall have the right to assume the defense of any such Third Party claim for which it is obligated to indemnify the indemnified Party under
Section 11.1 or 

38

 

11.2. The indemnified Party shall cooperate with the indemnifying Party (and its insurer) as the indemnifying Party may reasonably request, and at the indemnifying Party's sole cost and expense. The
indemnified Party shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party. Neither
Party shall have any obligation to indemnify the other Party in connection with any settlement made without the indemnifying Party's written consent,  provided that the indemnifying Party does not
unreasonably withhold or delay any such written consent. If the Parties cannot agree as to the application
of Sections 11.1 or 11.2 to any Third Party claim, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other in accordance
with Section 11.1 or 11.2 upon resolution of the underlying claim. 

    11.4 Insurance. Each Party shall procure and maintain insurance or self-insurance, including product
liability insurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent companies similarly situated at all times during which any Licensed
Product is being clinically tested with human subjects or commercially distributed or sold by Gilead. It is understood that such insurance shall not be construed to create a limit of either Party's
liability with respect to its indemnification obligations under this Article 11. Each Party shall provide the other with written evidence of such insurance (or financial information that
describes the amounts available under any self-insurance facility) upon request. Each Party shall provide the other with written notice at least [*] prior to the
cancellation, non-renewal or material change in such insurance or self-insurance which materially adversely affects the rights of the other Party hereunder. 

    11.5 No Application to Third Party Infringement Claims. Except for the provisions of Section 11.4 above and
Section 11.6 below, the provisions of this Article 11 shall not apply to any claims by a Third Party
for infringement of such Third Party's patents or other intellectual property or to any Losses suffered or incurred by either Party arising from, or related to, any such claims by a Third Party. The
indemnification rights and obligations of both Parties with respect to any such claims by a Third Party are provided for in Section 9.6(d) hereof. 

    11.6 Limitation of Liability. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING WITHOUT LIMITATION IN THIS
ARTICLE 11, AND EXCEPT FOR INFRINGEMENT BY EITHER PARTY OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS OR BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 13, NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR LOST PROFITS OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY (COLLECTIVELY, "OTHER DAMAGES"). IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR OTHER
DAMAGES IN EXCESS OF [*] (THE "SECTION 11.6 CAP"). IT IS EXPRESSLY UNDERSTOOD THAT THE OBLIGATION OF EITHER PARTY UNDER ARTICLE
11 TO INDEMNIFY FOR AMOUNTS THAT THE OTHER PARTY ACTUALLY PAYS TO A THIRD PARTY SHALL NOT BE LIMITED BY THE SECTION 11.6 CAP. 

ARTICLE 12

RECORDS; PUBLICATIONS  

    12.1 Records. Each Party shall keep or cause to be kept such records as are required to determine, in a manner
consistent with generally accepted accounting principles in the United States, the sums or credits due under this Agreement, including, but not limited to Incremental Product Development Expenses,
Transfer Prices and Net Sales. At the request (and expense) of either Party, the other Party and its Affiliates and licensees and sublicensees shall permit an independent certified public accountant
appointed by such Party and reasonably acceptable to the other Party, accompanied by representatives of the financial department of the audited Party at reasonable times, upon reasonable notice and no 

39

 

more frequently than once per calendar year, to examine only those records as may be necessary to determine, with respect to any calendar year ending not more than [*] prior to
such Party's request, the correctness or completeness of any report or payment made under this Agreement. Results of any such examination shall be (i) limited to information relating to the
Licensed Products, (ii) made available to both Parties, and (iii) subject to Article 13. The Party requesting the audit shall bear the full cost of the performance of any such
audit, unless such audit discloses a variance of more than [*] from the amount of the original report, royalty or payment calculation. In such case, the Party being audited
shall bear the full cost of the performance of such audit. 

    12.2 Publications. Neither Party shall publish or present the results of studies carried out under this Agreement
without the opportunity for prior review by the other Party. Subject to Section 13.2, each Party agrees to provide the other Party the opportunity to review any proposed abstracts, manuscripts
or presentations (including verbal presentations) which relate to any Licensed Product at least [*] prior to their intended submission for publication and agrees, upon request,
not to submit any such abstract or manuscript for publication, or to make such presentation, until the other Party is given a reasonable period of time to secure patent protection for any material in
such publication or presentation which it believes to be patentable. Both Parties understand that a reasonable commercial strategy may require delay of publication or presentation of information or
filing of patent applications. The Parties agree to review and consider delay of publication or presentation and filing of patent applications under certain circumstances. The Steering Committee will
review such requests and recommend subsequent action. Neither Party shall have the right to publish or present Confidential Information of the other Party, and each Party shall remove the Confidential
Information of the other Party from any proposed publication or presentation upon request by such other Party. Nothing contained in this Section 12.2 shall prohibit the inclusion of information
necessary to file a patent application with a government authority, except for Confidential Information of the non-filing Party, provided the non-filing Party is given a
reasonable opportunity to review the information to be included prior to submission of such patent application. Notwithstanding the foregoing, the Parties recognize that independent investigators have
been engaged, and will be engaged in the future, to conduct clinical trials of Licensed Products. Independent investigators that have been engaged by a Party or both Parties prior to or on the
Effective Date may release information regarding such studies in a manner consistent with academic standards within the scope of such investigator's agreement with the relevant Party. Independent
investigators that are engaged by a Party or both Parties after the Effective Date are understood to operate in an academic environment and shall be allowed to release information regarding such
studies in a manner consistent with academic standards; provided, however, that the Party in privity with such investigators shall discourage such
disclosures if detrimental to the collaboration. 

ARTICLE 13

CONFIDENTIALITY  

    13.1 Treatment of Confidential Information. The Parties agree that during the Term, and for a period of [*  ] after this Agreement expires or terminates, a Party
receiving Confidential Information of the other Party shall (i) maintain in
confidence such Confidential Information to the same extent such Party maintains its own proprietary industrial information of similar kind and value (but at a minimum each Party shall use
commercially reasonable efforts to maintain Confidential Information in confidence); (ii) not disclose such Confidential Information to any Third Party without prior written consent of the
disclosing Party, except for disclosures made in confidence to any Third Party pursuant to a plan approved by the Steering Committee or to its licensees or sublicensees who agree to be bound by
obligations of non-disclosure and non-use at least as stringent as those contained in this Article 13; and (iii) not use such Confidential Information for any
purpose except those purposes permitted by this Agreement. 

40

 

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

    (a) to the extent and to the persons and entities required by an applicable governmental law, rule or regulation or
court order; provided, however, that the Party required to disclose Confidential Information shall first have given prompt notice to the other Party
hereto to enable it to seek any available exemptions from or limitations on such disclosure requirement and shall reasonably cooperate in such efforts by the other Party; 

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

    (c) as necessary to file or prosecute patent applications, prosecute or defend litigation or otherwise establish rights
or enforce obligations under this Agreement, but only to the extent that any such disclosure is necessary. In particular, the Parties acknowledge that Cubist and/or Gilead may be obligated to
file a copy of this Agreement with the U.S. Securities and Exchange Commission with its next quarterly report on Form 10-Q, annual report on Form 10-K or
current report on Form 8-K or with any registration statement filed with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended.
In the event of any such filing, the Parties agree to cooperate and work together to request confidential treatment pursuant to, and in accordance with, the rules and regulations of the SEC; or 

    (d) as required by the Lilly License. 

    13.3 Publicity. The Parties agree that the joint public announcement of the execution of this Agreement shall be
substantially in the form of the press release attached as Exhibit H. Any other publication, news release or other public announcement relating to this Agreement or to the performance
hereunder, shall first be reviewed and approved by both Parties, which approval shall not be unreasonably withheld. 

ARTICLE 14

TERM AND TERMINATION  

    14.1 Term. This Agreement shall become effective on the Effective Date and shall remain in effect, unless earlier
terminated pursuant to this Article 14 with respect to each Licensed Product until the expiration of the last royalty obligation relating to sales of such Licensed Product as provided in
Article 8. 

    14.2 Termination by Gilead. Gilead shall have, [*], the right to terminate this Agreement
[*] upon [*] written notice to Cubist. If Gilead terminates this Agreement [*] Licensed Product pursuant to this
Section 14.2, (i) Gilead shall provide Cubist with all reasonable assistance during the [*] notice period to effect the transfer of all regulatory activities,
regulatory filings and Regulatory Approvals in the Gilead Territory for Licensed Product(s) as to which such termination is effective to Cubist, (ii) Cubist shall promptly wind down its efforts
under any Proposed Modification to a protocol for a clinical trial being conducted by Cubist for such Licensed Product(s) pursuant to Section 3.4 that the Steering Committee approves, to the
extent reasonably practicable without adversely affecting the value of the data to be obtained from such clinical trial to Cubist or compromising patient safety, and (iii) Gilead shall wind
down its efforts to develop and commercialize such Licensed Product(s) in the Gilead Territory. Gilead shall continue to [*] pursuant to its [*] as to
which this Agreement is terminated that is ongoing as of the date upon which Gilead provides a termination notice for such Licensed Product(s) pursuant to this Section 14.2, but Gilead shall
not be responsible for [*] with respect to the Licensed Product(s) that are the subject of such trial. The Steering Committee shall oversee any such wind down efforts.
Additionally, after termination of this Agreement pursuant to this Section 14.2, [*] with respect to which this Agreement is terminated prior to the effective date of
such termination, but not for [*]. 

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    14.3 Termination for Breach.

    (a) Notice. If either Party believes that the other is in material breach of this Agreement with respect to one or more
Licensed Products, then the Party holding such belief (the "Non-breaching Party") may deliver notice of such breach to the other Party (the "Notified Party"). Other than as explicitly
provided for in Sections 3.5 or 5.6, a breach by either Party of its Diligence Obligation shall not be deemed to be a material breach of this Agreement. The Notified Party shall have
[*] to either cure such breach or, if cure cannot be reasonably effected within such [*] period, to deliver to the Non-breaching Party a
plan to cure such breach within a timeframe that is reasonably prompt in light of the circumstances then prevailing. Following delivery of such plan, the notified Party shall use Commercially
Reasonable Efforts to carry out the plan and cure the breach. 

    (b) Failure to Cure. If the Notified Party fails to cure such breach as provided for in Section 14.3(a), the
Non-breaching Party may terminate this Agreement either in its entirety or with respect to one or more Licensed Products upon written notice to the Notified Party;  provided, however, that alleged
breaches by either Party of its Diligence Obligations pursuant to Section 3.1 or 5.5 shall be handled initially
as provided in Section 3.5 or 5.6. 

    (c) Disputes. If a Party gives notice of termination under this Section 14.3 and the other Party disputes whether
such termination is proper under this Section 14.3, then the issue of whether this Agreement may properly be terminated upon expiration of the notice period (unless such breach is cured as
provided in Section 14.3(a)) shall be resolved in accordance with Article 15. If as a result of such dispute resolution process it is determined that the notice of termination was
proper, then such termination shall be deemed to have been effective [* ] following the date of the notice of termination. If as
a result of such dispute resolution process it is determined that the notice of termination was improper, then no termination shall have occurred and this Agreement shall remain in effect. 

    (d) Termination as to Certain Licensed Products. Notwithstanding the foregoing provisions of this Section 14.3,
either Party may exercise its right to terminate the Agreement pursuant to this Section 14.3 with respect to one or more particular Licensed Products as to which the other Party has breached
its obligations under this Agreement, rather than with respect to the entire Agreement, in which case the notice provided by such Party pursuant to Section 14.3(a) shall specify that the
Agreement is being terminated pursuant to this Section 14.3 only with respect to certain Licensed Products listed in such notice. If either Party makes such an election under this
Section 14.3(d), then subsections (a) through (c) shall be deemed to refer to termination of the Agreement only with respect to those Licensed Products set forth in the notice
provided pursuant to Section 14.3(a). 

    14.4 Cubist Rights upon Certain Terminations of the Agreement or as to Certain Licensed Products. If Cubist terminates
this Agreement in its entirety or with respect to one or more Licensed Product(s) pursuant to Section 14.3, or Gilead terminates this Agreement in its entirety or with respect to any Licensed
Products pursuant to Section 14.2 (such Licensed Products as to which Gilead or Cubist has terminated Gilead's rights, or all Licensed Products if the Agreement is terminated in its entirety,
"Reverted Products"), then: 

    (a) Gilead hereby grants to Cubist a nonexclusive, royalty-free license, with the right to grant
sublicenses, to use the Gilead Marks in connection with the commercialization of Reverted Products (collectively "Permitted Uses"). Promptly after any such termination of this Agreement in its
entirety or Gilead's rights with respect to certain Licensed Products, Gilead shall execute any documents required in the reasonable opinion of Cubist for Cubist to be entered as a "registered user"
or recorded licensee of the Gilead Marks for Permitted Uses, or for Gilead to be removed as registered user or licensee thereof. 

42

 

    (b) Gilead shall transfer to Cubist all Drug Approval Applications and Regulatory Approvals for Reverted Products that
Gilead holds as of the time of such termination. In such event, Gilead shall take all actions reasonably necessary to effect such transfer of such Drug Approval Applications and Regulatory Approvals
for Reverted Products to Cubist. 

    (c) The licenses granted by Cubist and by Gilead under Article 6 shall terminate with respect to Reverted
Products. Gilead shall grant to Cubist a nonexclusive, worldwide, royalty-free, license, with the right to grant sublicenses, under the Gilead Project Technology to develop, make, use,
sell, offer for sale and import Reverted Products. 

    (d) Upon termination of this Agreement for any reason with respect to any or all Licensed Products and, if applicable,
after the sell-out period set forth in Section 14.5 hereof has expired, Gilead shall discontinue making any representation regarding its status as a licensee of or distributor for
Cubist in the Gilead Territory for all Reverted Products, and shall cease conducting any activities with respect to the marketing, promotion, sale or distribution of the Reverted Product in the Gilead
Territory. 

    14.5 Gilead Rights upon Certain Terminations. If Gilead terminates this Agreement pursuant to Section 14.3 in its
entirety or with respect to one or more Licensed Product(s), then [*] with respect to [*] for which [* ], shall
[*] for so long as [*], except that [*] shall [*], without [*], and Gilead shall
have no further obligations under this Agreement with respect to any such Licensed Product(s) other than [*], which shall last [*] as required by
[*], and any other [*] that [*]. In addition, each Party's [*] with respect to
[*] shall [*]. Gilead shall [*]. 

    14.6 Survival. The following provisions shall survive any expiration or termination of this Agreement for the period of
time specified: Articles 11 (other than Section 11.4, and, subject to Section 14.5, only with respect to actions arising with respect to periods prior to termination), 12, 14, 15 and 16,
and Sections 4.3 (but solely as necessary to effect the exchange of adverse events information in conjunction with Section 4.5), 4.5, 6.7 (but solely as to marks used in connection with
Licensed Products during the Term), 7.2(e) (but only for [* ] beyond the end of the Term), 8.6 (but only for
[*] and in relation to Net Sales made during the Term), 9.6(d) (subject to Section 14.5, with respect to actions arising with respect to periods prior to termination),
13.1 and 13.2, and in the case of any of the foregoing and other Section that by their terms explicitly survive beyond the Term, each such Section shall survive beyond the Term only for the length of
time specified in such Section. The foregoing provisions that survive in the event of any expiration or termination of this Agreement shall survive in addition to those that survive any termination
under Section 14.4 or 14.5, as specifically provided in such sections. Termination of this Agreement shall not relieve the Parties of any liability which accrued hereunder prior to the
effective date of such termination nor preclude either Party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement nor
prejudice either Party's right to obtain performance of any obligation. The remedies provided in this Article 14 are not exclusive of any other remedies a Party may have in law or equity. 

    14.7 Clarification with respect to Supply Agreement. Upon The Parties' execution of the Supply Agreement, references to
the Agreement in Sections 14.2, 14.3, 14.4, 14.5 and 14.6 shall be interpreted to apply to this Agreement and to the Supply Agreement as if they were one agreement. 

    14.8 Repurchase of Inventory. Upon any termination of this Agreement by Gilead, Cubist shall have the obligation, upon
request of Gilead, to repurchase all of the inventory of the Licensed Product held by Gilead or its sublicensees in the Gilead Territory, provided such
inventory is in resalable condition. The price for such inventory shall be [*]. Gilead shall notify Cubist within [*] days after termination if Gilead
wishes to have Cubist repurchase inventory and Cubist shall issue a return authorization to Gilead and Gilead shall ship the Licensed Product to Cubist [*]. If Gilead does not 

43

 

exercise its right to have Cubist repurchase inventory pursuant to this Section 14.8, Gilead shall have the right to sell out its inventory for a period of [*] from the
date of termination. 

ARTICLE 15

DISPUTE RESOLUTION  

    15.1 Disputes. The Parties recognize that disputes as to certain matters may from time to time arise during the term of
this Agreement which relate to either Party's rights and/or obligations hereunder. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under
this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this
Section 15.1 if and when a dispute arises under this Agreement. All disputes arising under this Agreement shall be discussed first by the Steering Committee. If the Steering Committee is unable
to resolve any dispute within [* ] after such dispute is submitted to it, either Party may, by written notice to the other
Party, have such dispute referred to their respective executive officers designated below or their successors for attempted resolution by good faith negotiations within [*]
after such notice is received. Such designated officers are as follows: 

    For Gilead:    Chief Executive Officer 

    For Cubist:    Chief Executive Officer 

    If
the designated officers are not able to resolve such dispute within such [*] period, either Party may at any time thereafter pursue any legal or equitable
remedy available to it. 

    15.2 Governing Law; Judicial Resolution. Resolution of all disputes arising out of or related to this Agreement or the
performance, enforcement, breach or termination of this Agreement and any remedies relating thereto, shall be governed by and construed under the substantive laws of the State of New York, as applied
to Agreements executed and performed entirely in the State of New York by residents of the State of New York, without regard to conflicts of law rules. Any dispute arising under
this Agreement shall be submitted to a state or federal court of competent jurisdiction, except as otherwise expressly provided in this Agreement. 

    15.3 Patent and Trademark Dispute Resolution. Any dispute, controversy or claim relating to the scope, validity,
enforceability or infringement of any patent rights covering the manufacture, use or sale of any Licensed Product or of any trademark rights relating to any Licensed Product shall be submitted to a
court of competent jurisdiction in the territory in which such patent or trademark rights were granted or arose. 

    15.4 [*] Resolution of Certain Disputes. Issues relating to whether either Party is meeting its
Diligence Obligations designated for resolution by a [*] pursuant to Section 3.5 or 5.6, modification of Section 1.29 with respect to Directly Competitive Product
of an Oral Product, and whether Gilead has properly determined the amount of Promotional Resources under Section 5.7, shall be finally determined as set forth in this Section 15.4.
Within [ *] after a Party proposes to submit an issue for resolution by a [*], each Party shall [*]. Neither of such
[*] may be [*], and neither of such [*]. Within [*] days after expiration of such
[*] period, the [*] shall [*] the issue(s) presented by the Parties. [*]. Each Party shall submit
written materials to the other Party and to [*] relating to the matters in issue within [*] after [*]. Each Party shall then
have [*] to submit a written rebuttal to the other Party's materials to the other Party [*]. The [*] shall decide the issue
presented to them pursuant to Section 5.6, within [*] after they receive all such written materials from each Party. The [*] shall have the
discretion to [*]. Each Party shall cooperate with [*]. The [*] determination shall be dispositive of all issues presented to it
and such determination shall be given retroactive effect. Until such determination is delivered to the Parties, the Parties shall continue to perform their obligations under 

44

 

this Agreement in good faith and make any applicable payments accordingly. The Parties shall bear all expenses incurred pursuant to this Section 15.4 equally. 

ARTICLE 16

MISCELLANEOUS  

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

    16.2 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the
extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the
condition constituting force majeure continues and the nonperforming Party uses reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall include conditions
beyond the control of the Parties, including without limitation, an act of God, voluntary or involuntary compliance with any regulation, law or order of any government, war, civil commotion, labor
strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe;  provided, however, the payment of invoices due and owing hereunder shall not be delayed by the payor because of a force majeure affecting the payor. 

    16.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically
refer to this Agreement and shall be deemed to have been sufficiently given for all purposes if mailed by first class certified or registered mail, postage prepaid, express delivery 

45

 

service or personally delivered, or if sent by facsimile, electronic transmission confirmed. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as described below. 

	For Gilead:	 	Gilead Sciences, Inc.

333 Lakeside Drive,

Foster City, CA 94404

Attn: Vice-President of Corporate Development

Fax: (650) 522-5488

cc: General Counsel

Fax: (650) 522-5537
	

With a Copy to:	
 	

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

Fax: (650) 849-7400

Attention: Robert L. Jones, Esq.
	

For Cubist:	
 	

Cubist Pharmaceuticals, Inc.

24 Emily Street

Cambridge, Massachusetts 02139

Attention: Head of Corporate Development and Licensing

Fax: (617) 234-5592
	

With a Copy to:	
 	

Bingham Dana LLP

150 Federal Street

Boston, Massachusetts 02492

Attention: Julio E. Vega, Esq.

Fax: (617) 951-8736

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

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

    16.6 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the
prior written consent of the other, except that a Party may make such an assignment without the other Party's consent to Affiliates or to a successor to substantially all of the business of such
Party, whether in a merger, sale of stock, sale of assets or other transaction, and except to the extent provided in Section 10.06 of the Lilly License. Any permitted successor or assignee of
rights and/or obligations hereunder shall, in a writing to the other Party, expressly assume performance of such rights and/or obligations. The Cubist Technology and the Gilead Project Technology
shall exclude any intellectual property held or developed by a permitted successor of the relevant Party not in connection with Daptomycin Products. Any permitted assignment shall be binding
on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 16.6 shall be null and void and of no legal effect. 

    16.7 Performance by Affiliates. Each of Cubist and Gilead acknowledge that obligations under this Agreement may be
performed by Affiliates of Cubist and Gilead. Each of Cubist and Gilead guarantee performance of this Agreement by its Affiliates. Wherever in this Agreement the Parties delegate responsibility to
Affiliates or local operating entities, the Parties agree that such entities may not make 

46

 

decisions inconsistent with this Agreement, amend the terms of this Agreement or act contrary to its terms in any way. 

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

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

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

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

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

47

 

    IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate originals by their proper officers as of the Effective Date. 

	CUBIST PHARMACEUTICALS, INC.	 	GILEAD SCIENCES, INC.
	

By:	
 	

/s/ S. M. Rocklage	
 	

By:	
 	

/s/ John C. Martin
	 	 	
	 	 	 	

	Title:	 	President & CEO	 	Title:	 	President & CEO
	 	 	
	 	 	 	

	Date:	 	January 6, 2001	 	Date:	 	January 6, 2001
	 	 	
	 	 	 	

48

  

 
 

EXHIBIT A

 
 

CUBIST CLINICAL TRIALS

	Core Trials
 
	 	Protocol Number

and Trial Phase
	 	Country(ies) in which conducted
	 	Primary Endpoint

	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	Other Trials	 	 	 	 	 	 
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]

A–1

  

 
 

EXHIBIT B

 
 

CUBIST MARKS

	Mark
 
	 	Country
	 	Filing Date
	 	Application

Number

	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]
	[*]	 	[*]	 	[*]	 	[*]

B–1

  

 
 

EXHIBIT C

 
 

PRIMARY DAPTOMYCIN MOLECULE

[*]  

C–1

  

 
 

EXHIBIT D

 
 

GILEAD MARKS

[*]  

D–1

  

 
 

EXHIBIT E

 
 

COUNTRIES OF THE GILEAD TERRITORY

[*]  

E–1

  

 
 

EXHIBIT F

 
 

COUNTRIES OF THE ROFR TERRITORY

[*]  

F–1

  

 
 

EXHIBIT G    
  

 
 

SUPPLY AGREEMENT
  SUMMARY OF TERMS

[*]  

    (4 pages of continuous text omitted here) 

G–1

  

 
 

EXHIBIT H

 
 

JOINT PRESS RELEASE

	[CUBIST PHARMACEUTICALS LOGO]	 	

 
	Contacts:	 	 
	

Cubist Pharmaceuticals, Inc.	
 	

Gilead Sciences, Inc.
	

Jennifer LaVin	
 	

Susan Hubbard, Investors
	

Senior Director, Corporate Communications

(617) 576-4258	
 	

(650) 522-5715
	

jlavin@cubist.com	
 	

Amy Flood, Media

(650) 522-5643
	

Noonan/Russo Communications	
 	

 
	

Renee Connolly, Media	
 	

 
	

(212) 696-4455 ext. 227	
 	

 
	

renee@noonanrusso.com	
 	

 

 
 

CUBIST PHARMACEUTICALS AND GILEAD SCIENCES ANNOUNCE
  EUROPEAN COMMERCIALIZATION AGREEMENT FOR
  INVESTIGATIONAL ANTIBACTERIAL AGENT CIDECINTM    
  

    Cambridge, MA and Foster City, CA, January 7, 2001—Cubist Pharmaceuticals, Inc.
(Nasdaq: CBST) and Gilead Sciences, Inc. (Nasdaq: GILD) today jointly announced the signing of a licensing agreement for the exclusive rights to commercialize Cubist's investigational
antibacterial drug CidecinTM (daptomycin for injection) and an oral formulation of daptomycin in 16 European countries following regulatory approval. 

    Gilead
has agreed to pay Cubist an up-front licensing fee of $13 million, and Cubist is entitled to receive additional cash payments of up to $31 million
upon achievement of certain clinical and regulatory milestones. Gilead will also pay Cubist a fixed royalty on net sales. Cubist will continue to be responsible for worldwide clinical development of
Cidecin, while Gilead will be responsible for any regulatory filings in the covered territories. Gilead's sales force will market the products in Europe. Cubist will provide European Medical Science
Liaisons (MSLs) who will support the product by providing medical education services to infectious disease specialists and other international opinion leaders. 

    "We
believe Gilead to be the ideal European marketing partner for Cubist," said Scott M. Rocklage, Ph.D., Chairman, President and CEO of Cubist. "With its international sales force,
Gilead is already calling on the identical target market for Cidecin. We believe this will be a synergistic relationship given that Gilead's product AmBisome and Cidecin are complementary in
therapeutic focus, allowing for targeted marketing efforts to the same physician audiences. In addition, Gilead's 

H–1

 

proven track record of sales performance and experience with European regulatory authorities provides us with confidence in the company's ability to successfully market Cidecin to the European
hospital community." 

    Daptomycin
is the first in a new class of investigational drugs called lipopeptides. Cubist is currently developing IV and oral formulations of daptomycin to treat serious bacterial
infections. In vitro data show daptomycin has the ability to rapidly kill virtually all Gram-positive bacteria, including those resistant to
current therapies. Cubist has multiple ongoing Phase III clinical trials of Cidecin, the IV formulation, to evaluate the efficacy and safety in the treatment of complicated skin and soft tissue
infection (cSST), community-acquired pneumonia (CAP) and complicated urinary tract infection (cUTI). Phase II trial are also ongoing to investigate the treatment of bacteremia (BAC) and resistant
infections (RRC). Cubist recently announced that it had completed enrollment in its international Phase III cSST trial and expects to announce clinical results during the second quarter of 2001. An
oral version of daptomycin is currently in pre-clinical development. 

    "Cidecin
is an important addition to our portfolio of products for unmet medical needs," said John C. Martin, Ph.D., President and Chief Executive Officer of Gilead. "We believe
Cidecin possesses a strong worldwide market potential and are pleased that Cubist has chosen Gilead as its European commercialization partner." 

    Gilead
markets AmBisome® (liposomal amphotericin B) for injection in 42 countries worldwide for the treatment of life-threatening systemic fungal
infections. Since the product's European introduction in 1990, Gilead has successfully grown the market for Ambisome throughout the world. With total 1999 sales of $173 million, AmBisome is the
second largest-selling injectable antifungal product worldwide. Much of the product's growth can be attributed to Gilead's efforts to increase the number of territories in which AmBisome is marketed,
expand the product label through additional regulatory filings and inclusion of head-to-head competitive data, and maintain its well established marketing relationships. 

    Cubist
Pharmaceuticals is focused on becoming a global leader in the research, development and commercialization of novel antimicrobial drugs to combat serious and
life-threatening bacterial and fungal infections. Cubist is evaluating the safety and efficacy of CidecinTM (daptomycin for injection) in the EDGETM (Evaluation of
Daptomycin against Gram-positive Entities) clinical trial program and is engaged in multiple, strategic partnerships, including Novartis Pharma AG, Merck & Co and Schering-Plough
for the discovery and development of novel antiinfectives. Cubist recently completed the acquisition of TerraGen Discovery Inc., a private, natural products discovery company with operations in
Vancouver, BC, Canada and Slough, UK. 

    Gilead
Sciences, headquartered in Foster City, CA, is an independent biopharmaceutical company that seeks to provide accelerated solutions for patients and the people who care for
them. The Company discovers, develops, manufactures and commercializes proprietary therapeutics for challenging infectious diseases (viral, fungal and bacterial infections) and cancer. Gilead
maintains research, development or manufacturing facilities in Foster City, CA, Boulder, CO, San Dimas, CA, and Cambridge, UK, and sales and marketing organizations in the United States, Europe and
Australia. 

    Statements
contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, that are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ
materially from those projected or suggested in any forward-looking statements made by Cubist or Gilead. These factors include, but are not limited to: (i) the ability of Cubist to successfully
complete product research and development, including pre-clinical and clinical studies and commercialization; (ii) the ability of Cubist and Gilead to obtain required governmental
approvals; (iii) the ability of Cubist to attract and/or maintain manufacturing, sales, distribution and marketing partners; (iv) the ability of Cubist to develop and commercialize its 

H–2

 

products before its competitors; and (v) the ability of Gilead to grow or maintain the market for AmBisome particularly in light of the anticipated introduction of competitive products.
Additional factors that would cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in each company's filings with the Securities
and Exchange Commission, including those factors discussed under the caption "Risk Factors" for Cubist on Annual Report on Form 10-K/A (file No. 000-21379) filed
on April 3, 2000 and for Gilead on Form 10-K for the year ended December 31, 1999. 

### 

 
 

For additional information, visit either of the companies' web sites at
  www.cubist.com or www.gilead.com.    

H–3

QuickLinks

ARTICLE 1 DEFINITIONS

ARTICLE 2 MANAGEMENT

ARTICLE 4 REGULATORY

EXHIBIT A

CUBIST CLINICAL TRIALS

EXHIBIT B

CUBIST MARKS

EXHIBIT C

PRIMARY DAPTOMYCIN MOLECULE

EXHIBIT D

GILEAD MARKS

EXHIBIT E

COUNTRIES OF THE GILEAD TERRITORY

EXHIBIT F

COUNTRIES OF THE ROFR TERRITORY

EXHIBIT G

SUPPLY AGREEMENT SUMMARY OF TERMS

EXHIBIT H

JOINT PRESS RELEASE

CUBIST PHARMACEUTICALS AND GILEAD SCIENCES ANNOUNCE EUROPEAN COMMERCIALIZATION AGREEMENT FOR INVESTIGATIONAL ANTIBACTERIAL AGENT CIDECINTM

For additional information, visit either of the companies' web sites at www.cubist.com or www.gilead.com .

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