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Exhibit 10.4    
    

 
 

STAKEHOLDERS' AGREEMENT    
    

        This STAKEHOLDERS' AGREEMENT (this "Agreement") is dated as of June 2, 2005, and is made by and among  LINN
ENERGY, LLC, a Delaware limited liability company (formerly Linn Energy Holdings, LLC) ("Linn
Energy"), QUANTUM ENERGY PARTNERS II, LP, a Delaware limited partnership ("QEP
II"), CLARK PARTNERS I, L.P., a New York limited partnership ("CEI"),  KINGS HIGHWAY INVESTMENT,
LLC, a Connecticut limited liability company ("KHI"),  WAUWINET ENERGY PARTNERS, LLC, a Delaware limited liability company
("WEP"),  MICHAEL C. LINN, an individual residing in Pittsburgh, Pennsylvania ("Linn"),  ROLAND P. KEDDIE, an individual residing in Pittsburgh, Pennsylvania ("Keddie"), and
GERALD W. MERRIAM, an individual residing in Pittsburgh, Pennsylvania ("Merriam"). QEP II, CEI, KHI,
WEP, Linn, Keddie and Merriam are sometimes referred to herein collectively as the "Existing Members." Terms that are capitalized but not defined shall
have the meanings assigned to such terms in Article 1 hereof. 

 
 

PREAMBLE    
    

        WHEREAS, the Existing Members are all of the holders of membership interests in Linn Energy as of the date hereof;
and 

        WHEREAS, the Existing Members are parties to the Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated
April 6, 2005, as amended through the date hereof (the "Linn Energy LLC Agreement"); and 

        WHEREAS, Linn Energy proposes to file a registration statement on Form S-1 (the
"Registration Statement") with the United States Securities and Exchange Commission (the "SEC") to
effect an initial public offering of units of Linn Energy (the "Offering"); 

        WHEREAS, in connection with the Offering, the parties to this Agreement wish to set forth the following agreements among themselves
relating to: (i) the redemption concurrent with the closing of the Offering (the "Closing") of certain of the membership interests in Linn Energy
held by certain of the Existing Members, (ii) the recapitalization of the remaining membership interests in Linn Energy held by all of the Existing Members for Units, (iii) the corporate
governance of Linn Energy following the Offering, (iv) the acquisition of a directors and officers liability insurance policy and the indemnification of directors, officers and employees
against certain liabilities; and (v) registration rights for the benefit of certain of the Existing Members; and 

        WHEREAS, the exchange of membership interests in Linn Energy for Units pursuant to this Agreement is intended to constitute a
tax-free contribution pursuant to Section 721 of the Internal Revenue Code of 1986, as amended (the "Code") for federal income tax
purposes. 

        NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, the parties agree as follows: 

 
 

ARTICLE 1
  DEFINITIONS    
    

        1.1    Defined Terms.    When used in this Agreement, the following terms shall have the respective meanings set forth
below: 

        "Additional Redemption Amount" means an amount equal to the Over-Allotment Proceeds. 

        "Additional Redemption Payment" is defined in Section 4.1(b)(ii) of this
Agreement. 

        "Additional Redemption Units" is defined in Section 4.1(b)(i) of this
Agreement. 

        "Adjusted Market Value" is equal to (i) the Company Market Value minus (ii) the sum of (A) the Offering Expenses and
(B) the Restricted Units Value. 

 

        "Agreement" is defined in the Preamble of this Agreement. 

        "Board of Directors" means the board of directors of Linn Energy. 

        "Business Day" means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in Wilmington, Delaware. 

        "CEI" is defined in the introductory paragraph of this Agreement. 

        "Class Q Member Percentage" means (i) with respect to QEP, 97.490%, (ii) with respect to CEI, 2.320%,
(iii) with respect to KHI, 0.144% and (iv) with respect to WEP, 0.046%. 

        "Class Q Members" means QEP, CEI, KHI and WEP. 

        "Closing" is defined in the Preamble of this Agreement. 

        "Code" is defined in the Preamble of this Agreement. 

        "Company Market Value" is calculated by multiplying (i) the Total Units Outstanding by (ii) the Market Price. 

        "Current Interests" is defined in Section 3.1 of this Agreement. 

        "Debt Repayment Amount" means the aggregate amount of debt of the Company to be repaid with proceeds from the Offering. 

        "Deemed Distribution Amount" is defined in Section 3.2(b)(i) of this
Agreement. 

        "D&O Policy" is defined in Section 5.6 of this Agreement. 

        "Effectiveness Period" is defined in Section 6.3(a) of this Agreement. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. 

        "Existing Members" is defined in the introductory paragraph. 

        "Included Registrable Securities" is defined in Section 6.4(a) of this Agreement. 

        "Independent Directors" is defined in Section 5.2 of this Agreement. 

        "Initial Redemption Amount" means an amount equal to the IPO Proceeds less the Debt Repayment. 

        "Initial Redemption Payment" is defined in Section 4.1(a)(ii) of this
Agreement. 

        "IPO Proceeds" means the proceeds received by the Company from the sale of the IPO Units less the Offering Expenses (calculated as if the
Over-Allotment Option was not exercised). 

        "IPO Units" means the total number of Units to be sold to the public in connection with the Offering. 

        "IPO Units Value" means the product of (i) the IPO Units multiplied by (ii) the Market Price. 

        "IPO Units Percentage" means the percentage that the IPO Units bear to the total Units outstanding immediately after the IPO, but before
the redemption of any Redemption Units. 

        "KHI" is defined in the introductory paragraph of this Agreement. 

        "Linn" is defined in the introductory paragraph of this Agreement. 

        "Linn Energy" is defined in the introductory paragraph of this Agreement. 

        "Linn Energy LLC Agreement" is defined in the Preamble of this Agreement. 

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        "Linn Redemption Amount" means $3,000,000. 

        "Losses" is defined in Section 6.10(a) of this Agreement. 

        "Managing Underwriter" means, with respect to any Underwritten Offering, the book running lead manager of such Underwritten Offering. 

        "Market Price" means the public offering price per unit of Units sold in the Offering. 

        "Net Market Price" means the public offering price per unit of Units sold in the Offering reduced by the underwriter spread. 

        "Offering" is defined in the Preamble of this Agreement. 

        "Offering Expenses" includes underwriting fees (calculated as if the Over-Allotment Option was exercised), bonuses payable to
executives contingent upon the consummation of the IPO and all other fees and expenses of the Company relating to the IPO. 

        "Over-Allotment Option" means the option granted to the underwriters in connection with the Offering to acquire additional
Units. 

        "Over-Allotment Proceeds" means the proceeds received by the Company from the sale of Units upon the exercise of the
Over-Allotment Option. 

        "Person" means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company,
unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity. 

        "Piggyback Registration" is defined in Section 6.4(a) of this Agreement. 

        "QEP" is defined in the introductory paragraph of this Agreement. 

        "Redeeming Members" is defined in Section 4.1(a)(ii) of this Agreement. 

        "Registrable Security" means the Units until such time as such securities cease to be Registrable Securities pursuant to  Section 6.2 of this Agreement. 

        "Registration Expenses" is defined in Section 6.9 of this Agreement. 

        "Registration Rights Group" is defined in Section 6.1 of this Agreement. 

        "Registration Statement" is defined in the Preamble of this Agreement. 

        "Residual Equity Percentage" is defined in Section 3.2(b)(ii) of this
Agreement. 

        "Residual Equity Value" means the amount determined as provided in Section 3.2(a). 

        "Residual Equity Value Allocations" is defined in Section 3.2(b)(iii) of
this Agreement. 

        "Restricted Units" means the Units to be issued to one or more executives of the Company upon the Closing as described in the Registration
Statement. 

        "Restricted Units Value" is calculated by multiplying the Restricted Units by the Market Price. 

        "Restated LLC Agreement" means the second amended and restated limited liability company agreement of Linn Energy to be adopted by the
Existing Members concurrent with the Closing. 

        "SEC" is defined in the Preamble of this Agreement. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. 

        "Securities Claim" is defined in Section 5.6 of this Agreement. 

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        "Selling Expenses" is defined in Section 6.9 of this Agreement. 

        "Shelf Registration" is defined in Section 6.3(a) of this Agreement. 

        "Shelf Registration Statement" is defined in Section 6.3(a) of this Agreement. 

        "Total Units Outstanding" is calculated by dividing (i) the company's announced first 12 months distributable cash flow by
(ii) the product of (a) the initial quarterly distribution times (b) four. 

        "Transfer" means any sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or
otherwise. 

        "Underwritten Offering" means an offering (including an offering pursuant to a Shelf Registration Statement) in which Units are sold to an
underwriter on a firm commitment basis for reoffering to the public or an offering that is a "bought deal" with one or more investment banks. 

        "Units" means the class of units of ownership interests in Linn Energy that are publicly traded on the Nasdaq National Market. 

        "WEP" is defined in the introductory paragraph of this Agreement. 

 
 

ARTICLE 2
  CONDITIONS TO EFFECTIVENESS    
    

        The effectiveness of the provisions of this Agreement is subject to (i) the consummation by Linn Energy of the Offering with no material changes to those
Offering terms reflected in the prospectus included in the initial Registration Statement filed with the SEC and (ii) the payment of the redemption amounts as provided in  Article 4.

 
 

ARTICLE 3
  OWNERSHIP OF EQUITY IN LINN ENERGY    
    

        3.1    Interests of Existing Members.    The Existing Members currently own all of the outstanding membership
interests in Linn Energy. The class of membership interest and the percentage of such class held by each of the Existing Members prior to consummation of the Offering is referred to herein as the
"Current Interests". 

        3.2    Allocation of Residual Equity Value.    

        (a)   At
the Closing, once the number of IPO Units has been fixed, the Residual Equity Value of the Company will be determined by subtracting from the Company Market Value the
sum of (i) the Debt Repayment Amount, (ii) the Offering Expenses and (iii) the Restricted Units Value. 

        (b)   The
Residual Equity Value as so determined will be apportioned among the holders of the Current Interests by: 

        (i)    first,
treating the Adjusted Market Value as the amount of net cash proceeds that the Company would have received upon a deemed sale of all of its assets and determining
the amount of such proceeds each Existing Member would receive if all of such proceeds were distributed to the Existing Members pursuant to Section 4.2 of the Linn Energy LLC Agreement, the
amount of such deemed distribution referred to herein as the "Deemed Distribution Amount"; and 

        (ii)   then,
determining the percentage that each Existing Member's Deemed Distribution Amount bears to the aggregate Deemed Distribution Amounts of all Existing Members, such
percentage referred to herein as the "Residual Equity Percentage"; and 

        (iii)  then,
each Existing Member's share of the Residual Equity Value will be determined by multiplying the Residual Equity Value by such Existing Member's Residual Equity
Percentage; and 

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	(iv)
	finally,
adjust each Class Q Member's Residual Equity Value by adding an amount equal to the product of the Offering Expenses associated with the
Over-Allotment Option multiplied by such Class Q Member's Class Q Percentage (the amount so calculated for each Existing Member is referred to herein as the
"Residual Equity Value Allocation." 

        3.3    Redemption.    A portion of the Residual Equity Value of certain of the Existing Members will be redeemed for
cash as provided in Article 4. The amount distributed to each Existing Member pursuant to  Article 4 will reduce the Residual Equity Value
Allocation of such Existing Member by such amount. 

        3.4    Determination of Units to be Issued to Existing Members.    Following the redemption of a portion of the
Current Interests, each of the Existing Members shall receive in exchange for all of its remaining Current Interests in Linn Energy, a number of newly-issued Units equal to the Residual Equity Value
Allocation of such Existing Member, adjusted as provided in Section 3.3, divided by the Market Price. 

        3.5    Waiver of Rights of Equity Holders.    Following receipt of the Units as provided in  Section 3.4 and the payment of
the redemption amounts as provided in Article 4,
(i) none of the Existing Members shall be entitled to any further distributions or payments from Linn Energy nor any further exercise of rights as unitholders in Linn Energy with respect to the
Current Interests and (ii) each Existing Member shall forfeit, cancel and relinquish any and all claims and entitlements to its Current Interest. Nothing set forth in this  Section 3.5 shall
preclude the Existing Members from any rights to any distributions declared by the Board of Directors of Linn Energy with
respect to Units or other rights as a holder of Units received as a result of the application of the provisions of this Article 3. 

        3.6    Tax Treatment.    The parties hereto agree to (i) report the exchange of Current Interests for Units
pursuant to this Agreement as a tax-free contribution pursuant to Section 721 of the Code for federal income tax purposes and (ii) take no action to cause such exchange to
fail to so qualify. 

        3.7    Example of Residual Equity Value Allocation and Equity
Exchange.    Annex A is provided solely for purposes of illustrating the method of calculation and
apportionment of the Residual Equity Value and the exchange of the Residual Equity Value for Units described in Section 3.3. To the extent the
ultimate terms of the Offering vary from those assumed in Annex A, the actual number of Units held by the Existing Members following completion
of the Offering will vary accordingly, but shall be calculated in accordance with the terms of this Article 3. 

 
 

ARTICLE 4
  REDEMPTION OF UNITS    
    

        4.1    Redemption of Redemption Units.    

 
 
        (a)    Initial Redemption Amount.
    

        (i)    Upon
Closing, the Initial Redemption Amount will be determined. A portion of the Initial Redemption Amount equal to the Linn Redemption Amount will be apportioned to
Linn, and the balance of the Initial Redemption Amount will be apportioned to the Class Q Members in proportion to their respective Class Q Member Percentages. 

        (ii)   Upon
Closing, each of Linn and the Class Q Members (the "Redeeming Members") shall have a portion of their
Current Interests redeemed for a payment by Linn Energy of an amount equal to the Initial Redemption Amount apportioned to them (the "Initial Redemption
Payment"). 

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           (b)    Additional Redemption Amount.
    

        (i)    Upon
exercise of the Over-Allotment Option, the Additional Redemption Amount will be determined and apportioned to the Class Q Members in proportion
to their respective Class Q Member Percentages. The number of Units to be redeemed from each Class Q Member (the "Additional Redemption
Units") will be equal to the Additional Redemption Amount apportioned to such Class Q Member divided by the Net Market Price, rounded to the nearest whole Unit. 

        (ii)   Upon
exercise of the Over-Allotment Option, all of the Additional Redemption Units held by each Class Q Member shall be redeemed for a payment by
Linn Energy to the Class Q Members of an amount equal to the product of (i) the number of Additional Redemption Units held by such Class Q Member multiplied by (ii) the Net
Market Price of the Units (the "Additional Redemption Payment"). 

        4.2    Waiver of Rights in Redeemed Interests.    Upon payment to an Existing Member of the Initial Redemption Payment
and the Additional Redemption Payment, if any, as provided in Section 4.1, such Existing Member shall forfeit and relinquish any and all claims
or entitlements to the portion of its Current Interest redeemed and Additional Redemption Units held, if any. Each such Existing Members provided in  Section 4.1 agrees that upon receipt of the
Initial Redemption Payment and/or the Additional Redemption Payment, if any, (i) it will not
be entitled to any further payments or distributions relating to the Initial Redemption Units or the Additional Redemption Units, if any, and (ii) such Units will be cancelled and will
thereafter be null and void. 

 
 

ARTICLE 5
  COMPANY GOVERNANCE    
    

        5.1    Amendment of Linn Energy LLC Agreement.    The Existing Members agree to amend and restate the Linn Energy LLC
Agreement simultaneous with the Closing to effect the intent of the provisions set forth in this Article 5 and upon such amendment and
restatement, to take such actions with respect to the designation of members of the Board of Directors as described herein. Upon execution of the Restated LLC Agreement and designation of members of
the Board of Directors as described herein, the provisions of this Article 5 shall no longer have effect except for the provisions of  Section 5.6
hereof with respect to the D&O Policy. 

        5.2    Board of Directors; Independent Directors.    Upon Closing, the Board of Directors of Linn Energy will consist
of five members, three of whom will satisfy the independence requirements of the Nasdaq National Market and applicable securities laws and regulations, including the Securities Act and the Exchange
Act (the "Independent Directors"). Prior to consummation of the Offering, QEP shall have the power to designate one member of the Board of Directors and
Linn shall have the power to designate one member of the Board of Directors. The Independent Directors shall be selected by Linn subject to approval by QEP. 

        5.3    Election of Directors.    At Linn Energy's first annual meeting of unitholders following the Offering, the
members of the Board of Directors will be elected by Linn Energy's unitholders and will be subject to re-election on an annual basis at each annual meeting of Linn Energy's unitholders. 

        5.5    Committees of the Board of Directors.    The Board of Directors will appoint four functioning committees:
(a) an audit committee, (b) a compensation committee, (c) a conflicts committee and (d) a nominating committee, each of which will have such membership and responsibilities
as is necessary to comply with all applicable standards of the Nasdaq National Market as well as of applicable securities laws and regulations, including the Securities Act and the Exchange Act. 

        5.6    Insurance; Indemnification.    Concurrently with or prior to the Closing, Linn Energy shall purchase insurance
on behalf of any person serving as a director or officer of Linn Energy or its 

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subsidiary
entities against any liability asserted against or incurred by such person in that capacity, or arising out of his or its status as such, subject to customary policy exceptions and
regardless of whether or not Linn Energy would have the power or obligation to provide indemnification against such liability under the provisions of the Linn Energy LLC Agreement, as amended or
restated from time to time (the "D&O Policy"). The D&O Policy shall also provide for insurance for any employee of Linn Energy (as the term "employee"
is used in the Registration Statement) or its subsidiary entities against any such liabilities to the extent that such liability arises from a violation or alleged violation of any law, regulation or
rule regulating securities, whether statutory or common law (a "Securities Claim"). Furthermore, the Existing Members shall cause the Restated LLC
Agreement to provide for indemnification of any employee of Linn Energy (as the term "employee" is used in the Registration Statement) or its subsidiary entities against Securities Claims to the same
extent it would indemnify directors and officers for such claims. 

 
 

ARTICLE 6
  REGISTRATION RIGHTS    
    

        6.1    Registration Rights.    Following the Offering and subject to the terms and limitations set forth in this  Article 6,
the Class Q Members, represented solely by QEP, herein referred to as the "Registration Rights
Group" shall be entitled to three demand registration rights; provided, however, that no demand registration request shall be made prior to the expiration of 180 days
following completion of the Offering unless approved by the Managing Underwriter. The Class Q Members, and each permitted transferee of registration rights pursuant to  Section 6.12, shall have
unlimited piggyback registration rights, each as more fully described in this  Article 6. 

        6.2    Registrable Securities.    Any Registrable Security will cease to be a Registrable Security when (a) a
registration statement covering such Registrable Security has been declared effective by the SEC and such Registrable Security has been sold or disposed of pursuant to such effective registration
statement; (b) such Registrable Security has been disposed of pursuant to any section of Rule 144 (or any similar provision then in force under the Securities Act); or (c) such
Registrable Security is held by Linn Energy or one of its subsidiaries. 

        6.3    Shelf Registration.    

 
 
        (a)    Shelf Registration.
    Within 60 days following receipt of a written request for the benefit of all the Registrable Securities held by the Class Q Members, Linn Energy shall prepare and
file a registration statement under the Securities Act to permit the public resale of the Registrable Securities pursuant to such registration statement, including a registration statement
permitting the public resale of the Registrable Securities from time to time pursuant to Rule 415 of the Securities Act (the "Shelf Registration
Statement"). Such written request shall describe the plan of distribution for such Registrable Securities, which plan may include, without limitation, sales through the
facilities of the principal trading market on which securities of the same class as the Registrable Securities are then traded, sales pursuant to an Underwritten Offering, or both. Linn Energy shall
use its commercially reasonable efforts to cause the Shelf Registration Statement to become effective no later than 120 days after the date of filing such Shelf Registration Statement (the
"Shelf Registration"). A Shelf Registration Statement filed pursuant to this Section 6.3(a) shall
be on such appropriate registration form of the SEC as shall be selected by Linn Energy; provided, however, that if a prospectus supplement will be used in connection with the marketing of an
Underwritten Offering from the Shelf Registration Statement and the Managing Underwriter at any time notifies Linn Energy in writing that, in the sole judgment of such Managing Underwriter, inclusion
of detailed information to be used in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, Linn Energy shall use its
commercially reasonable efforts to include such information in the prospectus. Linn Energy will cause the Shelf Registration Statement filed pursuant to this  Section 6.3(a) to be continuously
effective under the Securities Act until all Registrable 

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Securities
covered by the Shelf Registration Statement have been distributed in the manner set forth and as contemplated in the Shelf Registration Statement or there are no longer any Registrable
Securities outstanding (the "Effectiveness Period"). The Shelf Registration Statement when declared effective by the SEC (including the documents
incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 

 
 
        (b)    Delay Rights.
    Notwithstanding anything to the contrary contained herein, Linn Energy: (i) may, upon written notice to any Registration Rights Group whose Registrable Securities are to be
included in a Shelf Registration Statement, delay its obligation to file any Shelf Registration Statement if (A) Linn Energy intends to effect a public offering within 60 days following
the receipt of a written request from any Registration Rights Group, provided, that prior to the receipt of such request, Linn Energy has taken affirmative steps in contemplation of such public
offering, (B) Linn Energy is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and Linn Energy determines in good faith that Linn Energy's ability to
pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Shelf Registration Statement, or (C) Linn Energy has
experienced some other material non-public event the disclosure of which at such time is not required by law or, in the good faith judgment of Linn Energy, would materially adversely
affect Linn Energy, then, in each case, Linn Energy may defer filing the Shelf Registration Statement for up to 60 days; provided, however, that Linn Energy shall not exercise its right to
delay filing the Shelf Registration Statement more than once in any 12 month period (excluding any delays in filing a registration statement or post-effective amendment pursuant to  Section 6.12 hereof); (ii) may, upon written notice to any Registration Rights Group whose Registrable Securities are included in the
Shelf Registration Statement, suspend such Registration Rights Group's use of any prospectus which is a part of the Shelf Registration Statement (in which event the Registration Rights Group shall
discontinue sales of the Registrable Securities pursuant to the Shelf Registration Statement) for up to 60 days if (1) Linn Energy is pursuing an acquisition, merger, reorganization,
disposition or other similar transaction and Linn Energy determines in good faith that Linn Energy's ability to pursue or consummate such a transaction would be materially adversely affected by any
required disclosure of such transaction in the Shelf Registration Statement or (2) Linn Energy has experienced some other material non-public event the disclosure of which at such
time is not required by law or, in the good faith judgment of Linn Energy, would materially adversely affect Linn Energy; provided, however, that Linn Energy shall not exercise its right to suspend
any Registration Rights Group's use of any prospectus more than once in any 12-month period. Upon disclosure of such information or the termination of the condition described in this  Section 6.3(b),
 Linn Energy shall provide prompt notice to the Registration Rights Group whose Registrable Securities are included in the Shelf
Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions to permit registered sales of Registrable Securities as
contemplated in this Agreement. 

        6.4    Piggyback Registration.    

 
 
        (a)    Participation.     If Linn Energy at any time proposes to file a registration statement (including a
Shelf Registration Statement and including any registration statement
intended to satisfy the requirements of Section 6.3(a) of this Agreement) for the sale of Units to the public for its own account or the account
of any Unitholder other than (x) a registration relating solely to employee benefit plans, (y) a registration relating solely to a Rule 145 transaction, or (z) a
registration on any registration form which does not permit secondary sales, then, as soon as practicable following the engagement of counsel to Linn Energy to prepare the registration statement, Linn
Energy shall give notice of such proposed filing for the registration to the Class Q Members and such notice shall offer the Existing Members the opportunity to include in such registration
such number of Registrable Securities as each such Class Q Member may request in writing (a "Piggyback Registration"). Each 

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Class Q
Member shall have 15 days after receipt of such notice to elect to have all (or such portion as the Class Q Member shall specify) of its Registrable Securities included in
such registration. In addition, if Linn Energy at any time proposes to file a prospectus supplement with respect to an Underwritten Offering to a Shelf Registration Statement under which the
Class Q Members have registered the sale of Registrable Securities, then, as soon as practicable following the engagement of counsel to Linn Energy to prepare the documents to be used in
connection with an Underwritten Offering, Linn Energy shall give notice of such proposed Underwritten Offering to each Class Q Member and such notice shall offer each Class Q Member the
opportunity to include in such Underwritten Offering such number of Registrable Securities as each such Class Q Member may request in writing; provided, however, that Linn Energy shall not be
required to offer such opportunity to Class Q Members if Linn Energy has been advised by the Managing Underwriter that the inclusion of Registrable Securities for sale for the benefit of the
Class Q Members will have an adverse effect on the price, timing or distribution of the Units. No Class Q Member may exercise its right to participate in a Piggyback Registration with
respect to sales to be made from an effective shelf registration on which such Class Q Members' Registrable Securities are not registered for resale, except that if Linn Energy's Board of
Directors determines that it is in the best interest of Linn Energy, then Linn Energy may use the net proceeds from any Underwritten Offering to repurchase some or all Registrable Securities from any
of the Class Q Members. Subject to the provisions in this Section 6.4(a) and  Section 6.4(b), Linn Energy shall include in such Underwritten
Offering all such Registrable Securities ("Included
Registrable Securities") with respect to which Linn Energy has received requests within (i) one business day in the event of the filing of a prospectus supplement and
(ii) five business days with respect to the use of a preliminary prospectus supplement after Linn Energy's notice has been delivered in accordance with  Section 6.4. If no request for inclusion
from a Class Q Member is received within the specified time, such Class Q Member shall
have no further right to participate in such Piggyback Registration. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such
Underwritten Offering, Linn Energy shall determine for any reason not to undertake or to delay such Underwritten Offering, Linn Energy may, at its election, give written notice of such determination
to the selling Class Q Members and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable
Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any
Included Registrable Securities for the same period as the delay in the Underwritten Offering. 

 
 
        (b)    Priority of Piggyback Registration.     If the Managing Underwriter or Underwriters of any proposed
Underwritten Offering of Units included in a Piggyback Registration advises Linn Energy that the total
amount of Units which the selling Class Q Members and any other Persons intend to include in such Underwritten Offering exceeds the number which can be sold in such offering without being
likely to have an adverse effect on the price, timing or distribution of the Units offered or the market for the Units, then the Units to be included in such Underwritten Offering shall include all of
the Units that Linn Energy intends to include in such Underwritten Offering, plus the number of Registrable Securities that such Managing Underwriter or Underwriters advises Linn Energy can be sold
without having such adverse effect, with such number to be allocated pro rata among the selling Class Q Members who have requested participation in the Piggyback Registration (based, for each
such selling Class Q Member, on the percentage derived by dividing (i) the number of Registrable Securities proposed to be sold by such selling Class Q Member in such offering; by
(ii) the aggregate number of Units proposed to be sold by the selling Class Q Members and any other Persons participating in the Piggyback Registration to be included in such offering).
Notwithstanding the foregoing, if the registration statement was filed to meet the requirements of Section 6.3(a), then the Registration Rights
Group that requested such registration shall have priority over Linn Energy and any other selling Class Q Members in determining the number of Units that may be included in such Underwritten
Offering. 

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        6.5    Underwritten Offerings.    

 
 
        (a)    Shelf Registration.     If a Class Q Member elects to dispose of Registrable Securities in an
Underwritten Offering, Linn Energy shall enter into an underwriting agreement in
customary form with the Managing Underwriter or Underwriters, which shall include, among other provisions, indemnities to the effect and to the extent provided in  Section 6.10, and shall take all
such other reasonable actions as are requested by the Managing Underwriter in order to expedite or facilitate
the registration and disposition of the Registered Securities. 

 
 
        (b)    General Procedures.     In connection with any Underwritten Offering pursuant to a Shelf Registration
Statement filed at the request of a Registration Rights Group pursuant to  Section 6.3 hereof, such Registration Rights Group, with the consent of Linn Energy, shall be entitled to select the
Managing Underwriter or
Underwriters. The consent of Linn Energy to the selection of the Managing Underwriter or Underwriters shall not be unreasonably withheld. In all other cases, Linn Energy shall select the Managing
Underwriter or Underwriters. In connection with an Underwritten Offering pursuant to Section 6.3 or  Section 6.4 hereof, each participating
Class Q Member and Linn Energy shall be obligated to enter into an underwriting agreement which
contains such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of securities. No Class Q Member
may participate in such Underwritten Offering unless such Class Q Member agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and
executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. Each Class Q Member may, at its option,
require that any or all of the representations and warranties by, and the other agreements on the part of, Linn Energy to and for the benefit of such underwriters also be made to and for such
Class Q Member's benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to its
obligations. If any Class Q Member disapproves of the terms of an underwriting, such Class Q Member may elect to withdraw therefrom by notice to Linn Energy and the Managing Underwriter;
provided, however, that such withdrawal must be made on or before the pricing of any such Underwritten Offering. No such withdrawal or abandonment shall affect Linn Energy's obligation to pay
Registration Expenses. 

        6.4    Registration Procedures.    In connection with its obligations contained in  Section 6.3 or Section 6.4 hereof, Linn Energy will, as expeditiously as possible: 

        (a)   prepare
and file with the SEC such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to
keep the Shelf Registration Statement effective and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Shelf
Registration Statement; 

        (b)   furnish
to each Class Q Member (i) as far in advance as reasonably practicable before filing the Shelf Registration Statement or any other registration
statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and
each document incorporated by reference therein to the extent then required by the rules and regulations of the SEC), and provide each such Class Q Member the opportunity to object to any
information pertaining to such Class Q Member and its plan of distribution that is contained therein and make the corrections reasonably requested by such Class Q Member with respect to
such information prior to filing the Shelf Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of the Shelf
Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or other registration statement; 

10

 

        (c)   if
applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Shelf Registration Statement or any other
registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Class Q Members or, in the case of an Underwritten Offering, the
Managing Underwriter, shall reasonably request, provided that Linn Energy will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify
or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; 

        (d)   promptly
notify each Class Q Member and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of
(i) the filing of the Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection
therewith, or any amendment or supplement thereto, and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, when
the same has become effective; and (ii) any written comments from the SEC with respect to any filing referred to in clause (i) and any written request by the SEC for amendments or
supplements to the Shelf Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto; 

        (e)   immediately
notify each Class Q Member and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act,
of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Shelf Registration Statement or any other registration statement contemplated by
this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; (ii) the issuance or threat of issuance by the SEC of any stop order suspending the effectiveness of the Shelf Registration Statement
or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (iii) the receipt by Linn Energy of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, Linn Energy
agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an
untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then
existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto; 

        (f)    furnish
to each Class Q Member copies of any and all transmittal letters or other correspondence with the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Securities; 

        (g)   in
the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel for Linn Energy, dated the effective date of the applicable registration
statement or the date of any amendment or supplement thereto, and a letter of like kind dated the date of the closing under the underwriting agreement, and (ii) a "cold comfort" letter, dated
the effective date of the applicable registration statement or the date of any amendment or supplement thereto and a letter of like kind dated the date of the closing under the underwriting agreement,
in each case, signed by the independent public accountants who have certified Linn Energy's financial statements included or incorporated by reference into the applicable registration statement, and
each of the opinion and the "cold comfort" letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus and any
prospectus supplement included therein) as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered 

11

 

to
the underwriters in Underwritten Offerings of securities, and such other matters as such underwriters may reasonably request; 

        (h)   otherwise
use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to the Class Q Members, as
soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; 

        (i)    make
available to the appropriate representatives of the Managing Underwriter and Class Q Members access to such information and Linn Energy personnel as is
reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided that Linn Energy need not disclose any information to any such representative
unless and until such representative has entered into a confidentiality agreement with Linn Energy; 

        (j)    cause
all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which
similar securities issued by Linn Energy are then listed; 

        (k)   use
its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of Linn Energy to enable the Class Q Members to consummate the disposition of such Registrable Securities; 

        (l)    provide
a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration
statement; and 

        (m)  enter
into customary agreements and take such other actions as are reasonably requested by the Class Q Members or the underwriters, if any, in order to expedite
or facilitate the disposition of such Registrable Securities. 

Each
Class Q Member, upon receipt of notice from Linn Energy of the happening of any event of the kind described in subsection (e) of this  Section 6.6, shall forthwith discontinue disposition
of the Registrable Securities until such Class Q Member's receipt of the copies of
the supplemented or amended prospectus contemplated by subsection (e) of this Section 6.6 or until it is advised in writing by Linn Energy
that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by Linn Energy, such
Class Q Member will, or will request the Managing Underwriter or Underwriters, if any, to deliver to Linn Energy (at Linn Energy's expense) all copies in their possession or control, other than
permanent file copies then in such Class Q Member's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 

        6.7    Cooperation by Class Q Members.    Linn Energy shall have no obligation to include in the Shelf
Registration Statement or in a Piggyback Registration units of a Class Q Member who has failed to timely furnish such information which, in the opinion of counsel to Linn Energy, is reasonably
required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act. 

        6.8    Restrictions on Public Sale by Class Q Members of Registrable Securities.    Each Class Q Member
that is a holder of Registrable Securities that are included in a registration statement agrees not to effect any public sale or distribution of the Registrable Securities, other than in an
Underwritten Offering, during the 90 calendar day period beginning on the date of a prospectus supplement filed with the SEC with respect to the pricing of such Underwritten Offering, provided that
the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally 

12

 

imposed
by the underwriters on the officers or directors or any other unitholder of Linn Energy on whom a restriction is imposed. 

        6.9    Expenses.    Linn Energy will pay all Registration Expenses in connection with the Shelf Registration Statement
filed pursuant to Section 6.3(a) of this Agreement, and Linn Energy will pay all Registration Expenses in connection with a Piggyback
Registration, whether or not the Shelf Registration Statement becomes effective or any sale is made pursuant to the Shelf Registration Statement or Piggyback Registration. Each Class Q Member
shall pay all Selling Expenses in connection with any sale of its Registrable Securities hereunder. "Registration Expenses" means all expenses incident to Linn Energy's performance under or compliance
with this Agreement to effect the registration of Registrable Securities in a Shelf Registration or a Piggyback Registration, and the disposition of such securities, including, without limitation, all
registration, filing, securities exchange listing and Nasdaq National Market fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes and fees of transfer agents and registrars, all word processing, duplicating and printing expenses, and the fees and
disbursements of counsel and independent public accountants for Linn Energy, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and
compliance. Except as otherwise provided in Section 6.10 hereof, Linn Energy shall not be responsible for legal fees incurred by Class Q
Members in connection with the exercise of such Class Q Members' rights hereunder. Linn Energy shall not be responsible for any "Selling
Expenses," which means all underwriting fees, discounts and selling commissions allocable to the sale of the Registrable Securities. 

        6.10    Indemnification.    

 
 
        (a)    By Linn Energy.     In the event of a registration of any Registrable Securities under the Securities Act
pursuant to this Agreement, Linn Energy will indemnify and hold harmless
each Class Q Member thereunder, its directors and officers, and each underwriter, pursuant to the applicable underwriting agreement with such underwriter, of Registrable Securities thereunder
and each Person, if any, who controls such Class Q Member or underwriter within the meaning of the Securities Act and the Exchange Act, against any losses, claims, damages, expenses or
liabilities (including reasonable attorneys' fees and expenses) (collectively, "Losses"), joint or several, to which such Class Q Member or
underwriter or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Shelf Registration Statement or any other registration statement
contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were
made) not misleading, and will reimburse each such Class Q Member, its directors and officers, each such underwriter and each such controlling Person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however, that Linn Energy will not be liable in any such case if and to the extent
that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such
Class Q Member, such underwriter or such controlling Person in writing specifically for use in the Shelf Registration Statement or such other registration statement, or prospectus supplement,
as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Class Q Member or any such director, officer or controlling
Person, and shall survive the transfer of such securities by such Class Q Member. 

 
 
        (b)    By Each Class Q Member.     Each Class Q Member agrees severally and not jointly to indemnify and
hold harmless Linn Energy, its directors and officers, each Person, if any, who
controls 

13

 

Linn
Energy within the meaning of the Securities Act or of the Exchange Act, and each other Class Q Member, its directors, officers, and controlling Persons within the meaning of the Securities
Act or of the Exchange Act, to the same extent as the foregoing indemnity from Linn Energy to the selling Class Q Members, but only with respect to information regarding such Class Q
Member furnished in writing by or on behalf of such Class Q Member expressly for inclusion in the Shelf Registration Statement or prospectus supplement relating to the Registrable Securities,
or any amendment or supplement thereto; provided, however, that the liability of each Class Q Member shall not be greater in amount than the dollar amount of the proceeds (net of any Selling
Expenses) received by such Class Q Member from the sale of the Registrable Securities giving rise to such indemnification. 

 
 
        (c)    Notice.     Promptly after receipt by an indemnified party hereunder of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party other than under this Section 6.10. In any action brought against any indemnified party, it shall
notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under this Section 6.10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying
party has failed to assume the defense and employ counsel or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the
indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or
if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses
related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnified party shall settle any action brought
against it with respect to which it is entitled to indemnification hereunder without the consent of the indemnifying party, unless the settlement thereof imposes no liability or obligation on, and
includes a complete and unconditional release from all liability of, the indemnifying party. 

 
 
        (d)    Contribution.     If the indemnification provided for in this Section 6.10 is held by a court or government agency of
competent jurisdiction to be unavailable to Linn Energy or any Class Q Member or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses as between Linn Energy on the one hand and such Class Q
Member on the other, in such proportion as is appropriate to reflect the relative fault of Linn Energy on the one hand and of such Class Q Member on the other in connection with the statements
or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Class Q Member be required to contribute an
aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Class Q Member from the sale of Registrable Securities giving rise to such
indemnification. The relative fault of Linn Energy on the one hand and each Class Q Member on the other shall be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this
paragraph were to be determined by pro rata 

14

 

allocation
or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an indemnified party
as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation. 

 
 
        (e)    Other Indemnification.     The provisions of this Section 6.10 shall be in addition to any other rights to indemnification or
contribution which an indemnified party may have pursuant to law, equity, contract or otherwise. 

        6.11    Rule 144 Reporting.    With a view to making available the benefits of certain rules and regulations of
the SEC that may permit the sale of the Registrable Securities to the public without registration, Linn Energy agrees to use its commercially reasonable efforts to: 

        (a)   Make
and keep public information regarding Linn Energy available, as those terms are understood and defined in Rule 144 of the Securities Act, at all times from
and after the date hereof; 

        (b)   File
with the SEC in a timely manner all reports and other documents required of Linn Energy under the Securities Act and the Exchange Act at all times from and after
the date hereof; and 

        (c)   So
long as a Class Q Member owns any Registrable Securities, furnish to such Class Q Member forthwith upon request a copy of the most recent annual or
quarterly report of Linn Energy, and such other reports and documents so filed as such Class Q Member may reasonably request in availing itself of any rule or regulation of the SEC allowing
such Class Q Member to sell any such securities without registration. 

        6.12    Transfer or Assignment of Registration Rights.    The rights to cause Linn Energy to register Registrable
Securities granted to QEP by Linn Energy pursuant to Section 6.3 may be transferred or assigned by QEP to one or more transferee(s) or
assignee(s) of such Registrable Securities, provided that (i) each such transferee or assignee holds Registrable Securities representing at least 30% (after giving effect to such transfer) of
the Registrable Securities held by the QEP at the Closing (after giving effect to the redemption of QEP's Units, (ii) Linn Energy is given written notice prior to any said transfer or
assignment, stating the name and address of each such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned, and (iii) each
such transferee assumes in writing responsibility for its portion of the obligations of the Class Q Members under this Agreement. The rights granted to the Class Q Members by Linn Energy
pursuant to Section 6.4 with respect to Registrable Securities may be transferred or assigned by the Class Q Members to one or more
transferee(s) or assignee(s) of such Registrable Securities, provided that (a) Linn Energy is given written notice prior to any said transfer or assignment, stating the name and address of each
such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned, and (b) each such transferee assumes in writing responsibility
for its portion of the obligations of the Class Q Members under this Agreement. In no event shall Linn Energy be required to file a post-effective amendment to a Shelf
Registration Statement or a new Shelf Registration Statement for the benefit of such transferee(s) or assignee(s) unless such transferring Class Q Member notifies Linn Energy in writing that it
will pay all of the additional Registration Expenses incurred by Linn Energy in connection with filing a post-effective amendment to a Shelf Registration Statement or a new Shelf
Registration Statement for the benefit of such transferee(s) or assignee(s); provided, however, that Linn Energy shall be entitled to delay any such filing as provided in  Section 6.3(b) hereof.

15

 

 
 

ARTICLE 7
  MISCELLANEOUS    
    

        7.1    Communications.    All notices and other communications provided for or permitted hereunder shall be made in
writing by facsimile, courier service or personal delivery: 

	(a)
	if
to Linn Energy:

 Southmark
Executive Suites

Suite 100

1700 North Highland Road

Pittsburg, PA 15241

Attention: Micael C. Linn 

	(b)
	if
to QEP II:

 777
Walker, Suite 2530

Houston, TX 77002

Attention: S. Wil VanLoh, Jr. 

	

	With
a copy to:

 2106
Vicksburg Avenue

Lubbock, Texas 79407

Attention: Toby R. Neugebauer 

	(c)
	if
to CEI:

 c/o
Ninth Floor Corporation

1 Rockefeller Plaza, 31st Floor

New York, NY 10020

Attention: Kevin Moore 

	(d)
	if
to KHI:

 c/o
Terry Crikelair

820 North Street

Greenwich, CT 06831 

	(e)
	if
to WEP: 

 c/o
Daniel McCarthy

1238 Commonwealth Avenue

Newton, MA 02465 

16

 

	(f)
	If
to Linn, Keddie or Merriam:

 Southmark
Executive Suites

Suite 100

1700 North Highland Road

Pittsburg, PA 15241

Attention: Michael C. Linn 

        (g)   if
to a transferee of any Existing Member, to such transferee at the address provided pursuant to Section 6.12
above. 

        All
such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent
via Internet electronic mail; and when actually received, if sent by any other means. 

        7.2    Successors and Assigns.    This Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including subsequent transferees of Registrable Securities to the extent permitted by Section 6.12 hereof. 

        7.3    Limitation of Rights.    This Agreement shall not be construed to vest any rights under this Agreement to any
individual or entity other than the Existing Members and the Existing Members do not intend for any portion of this Agreement to confer rights upon any Person other than the Existing Members. 

        7.4    Assignment of Rights.    Except as provided in  Section 6.12 of this Agreement, none of the rights and obligations of
the Existing Members under this Agreement may be transferred or assigned by
any Existing Member. 

        7.5    Recapitalization, Exchanges, etc. Affecting the Units.    The provisions of this Agreement shall apply to the
full extent set forth herein with respect to any and all units of Linn Energy or any successor or assign of Linn Energy (whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date
of this Agreement. 

        7.6    Specific Performance.    Damages in the event of breach of this Agreement by a party hereto may be difficult,
if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or
other
equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all
defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such
Person from pursuing any other rights and remedies at law or in equity which such Person may have. 

        7.7    Counterparts.    This Agreement may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the
same Agreement. 

        7.8    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. 

        7.9    Governing Law.    The laws of the State of Delaware shall govern this Agreement without regard to principles of
conflict of laws. 

17

 

        7.10    Severability of Provisions.    Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the
validity or enforceability of such provision in any other jurisdiction. 

        7.11    Entire Agreement.    This Agreement is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 

        7.12    Amendment.    This Agreement may be amended only by means of a written amendment signed by all parties to this
Agreement. 

        7.13    No Presumption.    In the event any claim is made by a party relating to any conflict, omission, or ambiguity
in this Agreement, no presumption or burden of proof or persuasion shall be implied by
virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel. 

        7.14    Payment of Expenses.    Linn Energy shall pay or reimburse the Existing Members, to the extent such costs have
been incurred, for all reasonable third-party out-of-pocket costs and expenses (including the reasonable fees and expenses of legal counsel) incurred by them in connection with
(i) negotiations leading to the execution of this Agreement, (ii) the review of the Registration Statement and all amendments thereto and (iii) the amendment and restatement of
the Linn Energy LLC Agreement simultaneous with the Closing. Nothing set forth herein shall obligate Linn Energy to reimburse any Existing Member with respect to any other costs or expenses incurred
with respect to its investment in Linn Energy or the Offering. 

        [Signature page follows]

18

 

        IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above set forth. 

	 	 	QUANTUM ENERGY PARTNERS II, LP
	

 	
 	
By:	

Quantum Energy Management II, LP,

its general partner
	

 	
 	

By:	

Quantum Energy Management II, LLC,

its general partner
	

 	
 	

By:	

/s/  TOBY R. NEUGEBAUER      
 Toby R. Neugebauer

Vice-President

	

 	
 	
CLARK PARTNERS I, L.P.
	

 	
 	
By:	

Ninth Floor Corporation, its general partner
	

 	
 	

By:	

/s/  KEVIN MOORE      
 Kevin Moore

President

	

 	
 	
KINGS HIGHWAY INVESTMENT, LLC
	

 	
 	
By:	

/s/  TERRY M. CRIKELAIR      
 Terry M. Crikelair

Co-Managing Member

	

 	
 	
WAUWINET ENERGY PARTNERS, LLC
	

 	
 	
By:	

/s/  DANIEL M. MCCARTHY      
 Daniel M. McCarthy

Manager
	

 	
 	

/s/  MICHAEL C. LINN      
Michael C. Linn
	

 	
 	
/s/  ROLAND P. KEDDIE      
Roland P. Keddie
	

 	
 	
/s/  GERALD W. MERRIAM      
Gerald W. Merriam

19

 
 
 

ANNEX A    
    

	 
	 	 
	 	 
	 	S-1 (PRE SHOE FIGURES)
	 	Additional Redemption
	 	POST SHOE
	 
	 
	 	Residual

Equity Value
	 	Initial

Redemption

Amount
	 
	 
	 	Mkt. Value
	 	Units
	 	%
	 	Amount
	 	Units
	 	Value
	 	Units
	 	%
	 
	Gross Proceeds	 	 	 	 	$	110,200,000	 	 	 	 	 	 	 	 	$	16,530,000	 	 	 	 	 	 	 	 	 	 
	Underwriter Spread	 	 	 	 	$	(7,714,000	)	 	 	 	 	 	 	 	$	(1,157,100	)	 	 	 	 	 	 	 	 	 
	Debt	 	 	 	 	$	(35,000,000	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expenses	 	 	 	 	$	(2,000,000	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	IPO Bonuses	 	 	 	 	$	(900,000	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Initial Redemption Amount	 	 	 	 	$	64,586,000	 	 	 	 	 	 	 	 	$	15,372,900	 	 	 	 	 	 	 	 	 	 
	Linn Redemption Amount	 	 	 	 	$	(3,000,000	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net Initial Redemption Amount	 	 	 	 	$	61,586,000	 	 	 	 	 	 	 	 	$	15,372,900	 	 	 	 	 	 	 	 	 	 
	

Public	
 	
 	

 	
 	
$	

110,200,000	
 	
$	

110,200,000	
 	

5,510,000	
 	

34.3	
%	
$	

16,530,000	
 	

826,500	
 	
$	

126,730,000	
 	

6,336,500	
 	

39.5	
%
	QEP II, LP	 	$	205,960,753	 	$	(60,039,997	)	$	145,920,760	 	7,296,038	 	45.4	%	$	(16,115,040	)	(805,752	)	$	129,805,720	 	6,490,286	 	40.4	%
	CP	 	$	4,901,470	 	$	(1,428,836	)	$	3,472,640	 	173,632	 	1.1	%	$	(383,500	)	(19,175	)	$	3,089,140	 	154,457	 	1.0	%
	KHI	 	$	303,888	 	$	(88,587	)	$	215,300	 	10,765	 	0.1	%	$	(23,780	)	(1,189	)	$	191,520	 	9,576	 	0.1	%
	WEP	 	$	98,037	 	$	(28,579	)	$	69,440	 	3,472	 	0.0	%	$	(7,680	)	(384	)	$	61,760	 	3,088	 	0.0	%
	Mike Linn	 	$	48,266,552	 	$	(3,000,000	)	$	45,266,560	 	2,263,328	 	14.1	%	 	 	 	 	 	$	45,266,560	 	2,263,328	 	14.1	%
	Chip Keddie	 	$	6,033,319	 	$	0	 	$	6,033,320	 	301,666	 	1.9	%	 	 	 	 	 	$	6,033,320	 	301,666	 	1.9	%
	Gerry Merriam	 	$	6,033,319	 	$	0	 	$	6,033,320	 	301,666	 	1.9	%	 	 	 	 	 	$	6,033,320	 	301,666	 	1.9	%
	Sub-Total	 	$	271,597,338	 	$	45,614,000	 	$	317,211,340	 	15,860,567	 	98.8	%	 	 	 	 	 	$	317,211,340	 	15,860,567	 	98.8	%
	Restricted Units	 	$	0	 	$	3,965,142	 	$	3,965,140	 	198,257	 	1.2	%	 	 	 	 	 	$	3,965,140	 	198,257	 	1.2	%
	TOTAL	 	$	271,597,338	 	$	49,579,142	 	$	321,176,480	 	16,058,824	 	100.0	%	 	 	 	 	 	$	321,176,480	 	16,058,824	 	100.0	%

20

QuickLinks

Exhibit 10.4

STAKEHOLDERS' AGREEMENT

PREAMBLE

ARTICLE 1 DEFINITIONS

ARTICLE 2 CONDITIONS TO EFFECTIVENESS

ARTICLE 3 OWNERSHIP OF EQUITY IN LINN ENERGY

ARTICLE 4 REDEMPTION OF UNITS

(a)  Initial Redemption Amount .

(b)  Additional Redemption Amount .

ARTICLE 5 COMPANY GOVERNANCE

ARTICLE 6 REGISTRATION RIGHTS

(a)  Shelf Registration .

(b)  Delay Rights .

(a)  Participation.

(b)  Priority of Piggyback Registration.

(a)  Shelf Registration.

(b)  General Procedures.

(a)  By Linn Energy.

(b)  By Each Class Q Member.

(c)  Notice.

(d)  Contribution.

(e)  Other Indemnification.

ARTICLE 7 MISCELLANEOUS

ANNEX A<Page>

                                                                    Exhibit 10.3

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this "Agreement") made effective as of the 11th
day of April 2005(the "Effective Date"), by and between Advanced Life Sciences,
Inc., an Illinois corporation (the "Company"), and John L. Flavin (the
"Executive").

     WHEREAS, the Company and the Executive previously entered into an
employment contract (the "Existing Employment Contract"); and

     WHEREAS, the Company and the Executive desire to enter into this Agreement,
effective as of the Effective Date, to replace the Existing Employment Contract;
and

     WHEREAS, the Company desires to employ the Executive in accordance with the
terms and conditions hereinafter set forth and the Executive desires to be so
employed; and

     WHEREAS, the Company has agreed with the Executive that this Agreement
shall set forth the terms and conditions of the Executive's employment with the
Company;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and the Executive agree as follows:

     1.   TERM. The employment of the Executive by the Company pursuant to this
Agreement shall begin as of the Effective Date and shall expire on the third
anniversary of the Effective Date (the "Term"), unless extended, as set forth
below, or otherwise terminated pursuant to the provisions of this Agreement;
PROVIDED, HOWEVER, that commencing on the third anniversary of the Effective
Date and on each anniversary thereafter, the Term of this Agreement shall
automatically be extended for one additional year unless, not later than 90 days
prior to such anniversary, the Executive or the Company shall have given notice
in writing that he or it does not wish to extend this Agreement.

     2.   POSITION AND DUTIES. The Executive shall serve as the President of the
Company, and shall have such responsibilities, duties and authority as are
assigned by the Chief Executive Officer of the Company and are customarily
associated with such position, including but not limited to, those he may have
as of the Effective Date. The Executive shall devote such time to the
performance of his duties as is necessary to satisfactorily perform his
responsibilities and duties.

     3.   PLACE OF PERFORMANCE. In connection with the Executive's employment by
the Company, the Executive shall be based at the principal executive offices of
the Company currently in Woodridge, Illinois, except for required travel on the
Company's business.

     4.   COMPENSATION AND RELATED MATTERS. During the Term of the Executive's
employment, as compensation and consideration for the performance by the
Executive of the Executive's duties, responsibilities and covenants pursuant to
this Agreement, the Company shall pay the Executive and the Executive agrees to
accept in full payment for such performance the amounts and benefits set forth
below.

<Page>

          (a)  SALARY. The Company shall pay to the Executive an annual base
     salary of $157,500 ("Base Salary"), payable in substantially equal
     installments no less frequently than monthly in accordance with the
     Company's applicable payroll practices. The amount of Base Salary shall be
     reviewed annually by the Chief Executive Officer (with the first review to
     occur prior to the first anniversary of the Effective Date) to determine
     whether to increase the Base Salary on a prospective basis. The Executive's
     Base Salary shall not be reduced after any increase, without the
     Executive's consent.

          (b)  BONUS. The Executive shall be eligible to participate throughout
     the Term in the Company's annual bonus plan or any similar or successor
     bonus plan ("BONUS PLAN") in accordance with the Company's compensation
     practices and the terms and provisions of the Bonus Plan. During the 2005
     fiscal year of the Company, the maximum bonus that the Executive may
     receive under the Bonus Plan is $350,000.

          (c)  STOCK INCENTIVE PLAN. As of the Effective Date, the Executive
     shall be shall be eligible to receive additional awards of the Company's
     common stock under the Stock Incentive Plan or under any other equity plan
     of the Company as determined by the Board of Directors of the Company (the
     "Board") in its discretion.

          (d)  OTHER BENEFITS AND PERQUISITES. During the Term of the
     Executive's employment hereunder:

               (i)    BENEFIT PLANS. The Executive shall be entitled to
          participate in or receive benefits under any employee pension or
          welfare benefit plan or arrangement made available by the Company at
          any time during his employment hereunder to its employees
          (collectively the "Benefit Plans"), including without limitation each
          qualified retirement plan, life insurance and accident plan, medical,
          dental insurance plans, and disability plan, subject to and on a basis
          consistent with the terms, conditions and overall administration of
          such plans and arrangements, as they may be amended from time to time.

               (ii)   VACATION. The Executive shall be entitled to not less than
          20 days of paid vacation in each calendar year, in accordance with the
          Company's vacation policy.

               (iii)  EXPENSE REIMBURSEMENT. The Executive shall be entitled to
          receive reimbursement for all reasonable business, travel or other
          out-of-pocket expenses incurred by the Executive in fulfilling the
          Executive's duties and responsibilities hereunder, provided that such
          expenses are incurred and accounted for in accordance with the
          policies and procedures established by the Company.

     5.   TERMINATION.

          (a)  The Executive's employment hereunder may be terminated under the
     following circumstances:

               (i)    The death of the Executive;

<Page>

               (ii)   By the Company for "Cause", which shall mean any of the
          following:, as determined by the Board in its discretion: (A)
          conviction of or plea of guilty or NOLO CONTENDERE to any criminal
          violation involving dishonesty or fraud; (B) engagement in conduct
          that is injurious to the Company; (C) engagement in any act of
          dishonesty or misconduct that results in damage to the Company or its
          business or reputation or that the Board determines to adversely
          affect the value, reliability or performance of the Executive to the
          Company; (D) refusal or failure to substantially comply with the
          Company's human resources rules, policies, directions and/or
          restrictions relating to harassment and/or discrimination, or with
          compliance or risk management rules, policies, directions and/or
          restrictions; (E) unauthorized use or disclosure of Confidential
          Information (as defined below) or other trade secrets of the Company;
          (F) loss of any license or registration that is necessary for the
          Executive to perform his duties to the Company, or commission of any
          act that could result in the legal disqualification of the Executive
          from being employed by the Company or any of its affiliates; (G)
          failure to cooperate with the Company or any of its affiliates in any
          internal investigation or administrative, regulatory or judicial
          proceeding; or (H) continuous failure by the Executive to perform his
          duties to the Company (which may include any sustained and unexcused
          absence of the Executive from the performance of such duties, which
          absence has not been certified in writing as due to physical or mental
          illness or disability), after a written demand for performance has
          been delivered to the Executive identifying the manner in which the
          Executive has failed to substantially perform such duties. The
          application of any part of the definition of Cause set forth in
          clauses (A) through (H) above to the Executive shall not preclude or
          prevent the reliance by the Company or the Board on any other part of
          the definition that also may be applicable. In addition, the
          Executive's employment shall be deemed to have terminated for Cause
          if, after the Executive's employment has terminated, facts and
          circumstances are discovered that would have justified a termination
          for Cause.

               (iii)  By mutual agreement between the Company and the Executive;
          or

               (iv)   By the Executive or the Company for any reason other than
          as stated in Sections 5(a)(i) through 5(a)(iii) above, upon providing
          a Notice of Termination (as defined in Section 5(b)).

          (b)  NOTICE OF TERMINATION. Any termination of the Executive's
     employment by the Company or by the Executive (other than a termination
     pursuant to Section 5(a)(i) above) shall be communicated by written Notice
     of Termination to the other party hereto in accordance with Section 10. For
     purposes of this Agreement, a "Notice of Termination" shall mean a notice
     that shall indicate the specific termination provision in this Agreement
     relied upon and shall set forth in reasonable detail the facts and
     circumstances claimed to provide a basis for termination of the Executive's
     employment under the provision so indicated.

          (c)  "Date of Termination" shall mean (i) if the Executive's
     employment is terminated pursuant to Section 5(a)(i) above, the date of his
     death; (ii) if the Executive's employment is terminated pursuant to Section
     5(a)(ii) or 5(a)(iv) above, the date such

<Page>

     Notice of Termination is given (or such later date as provided therein);
     (iii) if the Executive's employment is terminated pursuant to Section
     5(a)(iii) above, the date mutually agreed to by the parties; (iv) the date
     the Term of this Agreement expires, if either the Company or the Executive
     provides notice in accordance with Section 1; or (v) if the Executive
     terminates his employment and fails to provide written notice to the
     Company of such termination, the date of such termination.

     6.   COMPENSATION UPON TERMINATION.

          (a)  The following payments shall be made upon the Executive's
     termination of employment for any reason: (i) earned but unpaid Base Salary
     through the Executive's Date of Termination; (ii) any accrued but unpaid
     vacation; (iii) unreimbursed business expenses owed pursuant to Section
     4(d)(iii); and (iv) any amounts payable under any of the Company's Benefit
     Plans in accordance with the terms of those plans. All amounts under
     clauses (i) through (iii) shall be paid in a lump sum on the Executive's
     Date of Termination or as soon as administratively practicable thereafter.

          (b)  In the event the Executive's employment is terminated pursuant to
     Sections 5(a)(i) or 5(a)(ii), or by the Executive for any reason pursuant
     to Section 5(a)(iv), above, the Company shall have no further obligation to
     the Executive under this Agreement, other than the payments in Section
     6(a).

          (c)  If the Executive's employment is terminated by the parties
     pursuant to Section 5(a)(iii) above, the Executive shall be entitled to
     receive the compensation the parties specify in any written agreement that
     the Company and the Executive execute regarding the Executive's
     termination.

          (d)  In addition to the payments made under Section 6(a), if the
     Executive's employment is terminated by the Company without Cause pursuant
     to Section 5(a)(iv) above, the Company shall, for a period of nine (9)
     months following the Date of Termination, (i) provide to Executive salary
     continuation, at Executive's Base Salary rate then in effect, and (ii)
     continue the Executive's coverage under the Benefit Plans in which the
     Executive participated immediately prior to the Date of Termination,
     provided, however, that if the Company cannot continue such coverage, the
     Company shall provide or arrange to provide, at its expense, similar
     coverage to the Executive. Notwithstanding the forgoing, vacation days
     shall not accrue during the nine (9) month period of severance.

          (e)  The Executive shall not be required to mitigate the amount of any
     payment provided for in this Section 6 by seeking other employment or
     otherwise, nor shall the amount of any payment or benefit provided for in
     this Section 6 be reduced by any compensation earned by the Executive as
     the result of employment by another employer, by retirement benefits, by
     offset against any amount claimed to be owed by the Executive to the
     Company, or otherwise.

          (f)  The obligations of the Company to make payments and provide
     benefits under this Section 6 shall survive the termination of this
     Agreement.

<Page>

     7.   Change in Control.

          (a)  Payments and Benefits Upon Employment Termination Upon a Change
     in Control. If the Executive's employment is terminated other than for
     Cause within 24 months after a Change in Control (as defined below), the
     Company shall provide the following payments and benefits to the Executive,
     in lieu of those payments and benefits provided under Sections 6(d), but in
     addition to the amounts payable under Section 6(a):

               (i)    The Company shall pay the Executive a lump sum cash amount
          equal to two (2) times the sum of (A) the Executive's Base Salary as
          in effect on the date of the Executive's termination of employment and
          (B) the Executive's target bonus amount for the fiscal year in which
          the Executive's employment is terminated OR an amount equal to the
          annual bonus paid to the Executive during the fiscal year immediately
          preceding the Executive's termination of employment.

               (ii)   The Company shall continue the Executive's coverage under
          the Benefit Plans in which the Executive participated immediately
          prior to the Executive's termination of employment for a period of 24
          months, provided, however, that if the Company cannot continue such
          coverage, the Company shall provide or arrange to provide, at its
          expense, similar coverage to the Executive.

          (b)  Timing of Payment. All payments under Section 7(a) shall be made
     in a lump sum cash payment as soon as practicable, but in no event more
     than 10 days after the Executive's termination of employment.

          (c)  Definitions. For purposes of this Agreement, the following terms
     shall have the following definitions:

               (i)    "Change in Control" means the occurrence of any one or
          more of the following:

                      (A)  Any "person" (as such term is defined in Section
               3(a)(9) of the Securities Exchange Act of 1934, as amended (the
               "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of
               the Exchange Act), including a "group" (as defined in Section
               13(d)(3) of the Exchange Act), other than (I) the Company, (II)
               any wholly-owned subsidiary of the Company, (III) any employee
               benefit plan (or related trust) sponsored or maintained by the
               Company or any of its affiliates, or (IV) a "Permitted Holder"
               (as defined below), becomes a "beneficial owner" (as defined in
               Rule 13d-3 under the Exchange Act), directly or indirectly, of
               securities of the Company having fifty percent (50%) or more of
               the combined voting power of the then-outstanding securities of
               the Company that may be cast for the election of directors of the
               Company (other than as a result of an issuance of securities
               initiated by the Company in the ordinary course of business) (the
               "Company Voting Securities"); provided, however, that the event
               described in this Section 7(c)(i) shall not be deemed to be a
               Change in Control by virtue of any underwriter temporarily
               holding securities pursuant to an offering of such securities;

<Page>

                      (B)  During any period of two consecutive years,
               individuals who at the beginning of any such period constitute
               the Board (the "Incumbent Directors") cease for any reason to
               constitute at least a majority of the Board, unless the election,
               or the nomination for election by the stockholders of the
               Company, of each new director of the Company during such period
               was approved by a vote of at least two-thirds of the Incumbent
               Directors then still in office;

                      (C)  As the result of, or in connection with, any cash
               tender or exchange offer, merger or other business combination,
               sale of all or substantially all of the Company's assets or
               contested election, or any combination of the foregoing
               transactions, less than a majority of the combined voting power
               of the then-outstanding securities of the Company or any
               successor corporation or entity entitled to vote generally in the
               election of the directors of the Company or such other
               corporation or entity after such transaction is held in the
               aggregate by the holders of the securities of the Company
               entitled to vote generally in the election of directors of the
               Company immediately prior to such transaction; or

                      (D)  The stockholders of the Company approve a plan of
               complete liquidation or dissolution of the Company.

                      Notwithstanding the foregoing, a Change in Control shall
               not be deemed to occur solely because any person acquires
               beneficial ownership of more than fifty percent (50%) of the
               Company Voting Securities as a result of the acquisition of
               Company Voting Securities by the Company which reduces the number
               of Company Voting Securities outstanding; provided, however, that
               if after such acquisition by the Company such person becomes the
               beneficial owner of additional Company Voting Securities that
               increases the percentage of outstanding Company Voting Securities
               beneficially owned by such person, a Change in Control
               transaction shall then occur.

                      Further notwithstanding the foregoing, unless a majority
               of the Incumbent Directors determines otherwise, no Change in
               Control shall be deemed to have occurred with respect to the
               Executive if the Change in Control results from actions or events
               in which the Executive is a participant in a capacity other than
               solely as an officer, employee or director of the Company or any
               of its affiliates.

               (ii)   "Permitted Holders" means (A) Michael T. Flavin (the
          "Principal"), (B) the spouse or any immediate family member of the
          Principal and any child or spouse of any spouse or immediate family
          member of the Principal, (C) a trust, corporation, partnership or
          other entity, the beneficiaries, stockholders, partners, owners or
          persons beneficially holding, directly or indirectly, a controlling
          interest of which consists of the Principal and/or such other persons
          referred to in the immediately preceding clause (B), or (D) the
          trustees of any trust referred to in clause (D).

<Page>

          (d)  Treatment of Parachute Payments.

               (i)    Notwithstanding any other provisions of this Agreement,
          and except as set forth below, in the event that any payment or
          benefit received or to be received by the Executive in connection with
          a Change in Control or the termination of the Executive's employment
          (whether pursuant to the terms of this Agreement or any other plan,
          arrangement or agreement with the Company, any person whose actions
          result in a Change in Control or any person affiliated with the
          Company or such person) (all such payments and benefits, including
          payments under Section 7(a) above, being hereinafter called "Total
          Payments") is determined to be an "excess parachute payment" pursuant
          to Section 280G of the Internal Revenue Code of 1986, as amended (the
          "Code"), or any successor or substitute provision of the Code, with
          the effect that the Executive is liable for the payment of the excise
          tax described in Code Section 4999 or any successor or substitute
          provision of the Code (the "Excise Tax"), then, after taking into
          account any reduction in the Total Payments provided by reason of Code
          Section 280G in such other plan, arrangement or agreement, the cash
          payments provided in Section 7(a)(i) of this Agreement shall first be
          reduced, and the noncash payments and benefits shall thereafter be
          reduced, to the extent necessary so that no portion of the Total
          Payments is subject to the Excise Tax; provided, however, that the
          Executive may elect (at any time prior to the payment of any Total
          Payment under this Agreement) to have the noncash payments and
          benefits reduced (or eliminated) prior to any reduction of the cash
          payments under this Agreement.

               (b)    All determinations required to be made under this Section
          7(d), and the assumptions to be utilized in arriving at such
          determination, shall be made by the certified public accounting firm
          used for auditing purposes by the Company immediately prior to the
          date of the Executive's termination of employment or, if the parties
          determine that such certified public accounting firm cannot make such
          determination because of legal restrictions, the parties shall agree
          on a different certified public accounting firm (such certified public
          accounting firm is hereinafter referred to as the "Accounting Firm"),
          which shall provide detailed supporting calculations both to the
          Company and the Executive not later than 5 days prior to the date of
          the Executive's termination of employment. The Company shall pay all
          fees and expenses of the Accounting Firm. Any determination by the
          Accounting Firm shall be binding upon the Company and the Executive,
          except as provided in paragraph (c) below.

               (c)    As a result of the uncertainty in the application of Code
          Sections 280G and 4999 at the time of the initial determination by the
          Accounting Firm hereunder, it is possible that the Internal Revenue
          Service (the "IRS") or other agency will claim that an Excise Tax, or
          a greater Excise Tax, is due. If the Executive is required to make a
          payment of any such Excise Tax, the Company will promptly pay the
          Executive an additional amount equal to the amount, or greater amount,
          of Excise Tax the Executive is required to pay (plus a gross up
          payment for any income taxes, interest, penalties or additional Excise
          Tax payable by Executive with respect to such Excise Tax or additional
          payment), as

<Page>

          determined by the Accounting Firm. The Executive will notify the
          Company in writing of any claim by the IRS or other agency that, if
          successful, would require payment by the Company of the additional
          payments under this paragraph. The Executive and the Company shall
          each reasonably cooperate with the other in connection with any
          administrative or judicial proceedings concerning the existence or
          amount of liability for Excise Tax with respect to the Total Payments.
          The Company shall pay all fees and expenses of the Executive relating
          to a claim by the IRS or other agency.

     8.   Restrictive Covenants.

          (a)  Trade Secrets. The Executive acknowledges that he has had and
     shall have access to confidential information of the Company, whether or
     not reduced to writing and whether in paper, electronic, digital, analog or
     other format (including, but not limited to, trade secrets, know-how,
     Inventions (as defined below), new product and product development
     information, research results, marketing and sales programs, customer and
     supplier information, financial data, employee records, cost information,
     pricing information, sales and marketing strategies, the identity of
     customers, information received by the Company under an obligation of
     confidentiality to customers, and all information generated by the Company
     for customers) relating to the past, present or planned business,
     customers, clients, contacts, prospects and assets of the Company that is
     unique, valuable and has not purposefully been made generally known to the
     public by the Company ("Confidential Information"). Confidential
     Information shall not include any information that: (i) is now, or
     hereafter becomes, through no act or failure to act on the part of the
     Executive that constitutes a breach of this Section 8, generally known or
     available to the public; (ii) is hereafter furnished without restriction on
     disclosure to the Executive by a third party, other than an employee or
     agent of the Company, who is not under any obligation of confidentiality to
     the Company; (iii) is disclosed with the written approval of the Company;
     or (iv) is required to be disclosed or provided by law, court order, or
     similar compulsion, including pursuant to or in connection with any legal
     proceeding involving the parties hereto; provided, however, that such
     disclosure shall be limited to the extent so required or compelled; and
     provided further, however, that if the Executive is required to disclose
     such Confidential Information, the Executive shall give the Company notice
     of such disclosure and cooperate in seeking suitable protections. The
     Executive acknowledges that all Confidential Information, and all
     documents, files, reports, drawings, designs, specifications, formulae,
     samples, data, writings, tools, equipment, memory devices or any other
     tangible objects that incorporate, contain, refer to or embody any
     Confidential Information ("Items"), acquired by the Executive in connection
     with the Executive's employment with the Company are the property of the
     Company. Other than in the course of performing services for the Company or
     otherwise authorized in writing by the Company, the Executive shall not, at
     any time, directly or indirectly use, divulge, furnish or make accessible
     to any person any Confidential Information, but instead shall keep all
     Confidential Information strictly and absolutely confidential. The
     Executive shall deliver promptly to the Company, at the termination of his
     employment or at any other time at the request of the Company, without
     retaining any copies, all Items and any other documents or materials in the
     Executive's possession relating, directly or indirectly, to any
     Confidential Information.

<Page>

          (b)  Non-competition. Beginning on the Effective Date and for a period
     of twelve (12) months following Executive's Date of Termination (the
     "Restricted Period"), Executive shall not directly or indirectly, alone or
     in conjunction with any other party, own any interest in, operate, control,
     engage in or participate as a partner, director, principal, officer,
     employee, independent contractor or agent of, act as a consultant to,
     perform any services for, or assist in any way any company, person, or
     entity in the United States that is engaged in "Competing Services" (as
     defined herein). Competing Services shall mean chemistry and biology
     research and development relating to, arising from, connected with, or
     competitive with or intended to be competitive with, any product or
     research project as to which the Executive performed services for the
     Company, or about which the Executive received access to Confidential
     Information while employed by the Company. If the Executive obtains other
     employment during the twelve-month period after the Executive's Date of
     Termination, the Executive agrees to notify the Company in writing of the
     name and address of such employer. The Executive understands, and the
     Company agrees, that the Company shall pay to the Executive a monthly
     amount equal to one month of the Executive's final Base Salary if the
     Executive is unable to secure other employment as a direct result of this
     Section 8(b). The Executive agrees and acknowledges that (i) the Company
     shall be obligated to make such payment only upon a written request by the
     Executive containing sufficient information for the Company to make a
     determination that this Section 8(b) caused the Executive's inability to
     secure other employment, and (ii) the Company shall be released from the
     obligation to make such payment if the Company provides the Executive a
     written release from this Section 8(b). The Company's obligation to make
     payments under this Section 8(b) shall be made only for the period
     beginning with the Executive's inability to secure other employment as a
     result of this Section 8(b) and ending no later than the expiration of the
     twelve-month period following the Executive's Date of Termination.

          (c)  Non-Solicitation of Employees. During the Restricted Period, the
     Executive shall not, directly or indirectly solicit or induce, or attempt
     to solicit or induce, any current employee of the Company, or any
     individual who becomes an employee during the Restricted Period, to leave
     his or her employment with the Company or join or become affiliated with
     any other business or entity, hire any employee of the Company or in any
     way interfere with the relationship between any employee and the Company.

          (d)  Non-Solicitation of Customers. During the Restricted Period, the
     Executive shall not, directly or indirectly, solicit or induce, or attempt
     to solicit or induce, any customer, supplier, licensee, licensor or other
     business relation of the Company to terminate its relationship or contract
     with the Company, to cease doing business with the Company, or in any way
     interfere with the relationship between any such customer, supplier,
     licensee or business relation and the Company (including making any
     negative statements or communications concerning the Company or their
     employees).

          (e)  Inventions. The Executive acknowledges all inventions of the
     Company (including, but not limited to, procedures, systems, machines,
     methods, processes, uses, apparatuses, compositions of matter, designs, or
     configurations of any kind, discovered, conceived, reduced to practice,
     developed, made or produced) ("Inventions") that (i) relate to the present
     or planned business of the Company or the work performed by the

<Page>

     Company for its customers, and (ii) are conceived or reduced to practice by
     the Executive, either alone or with others, during the Executive's
     employment with the Company or during a period of 120 days after the
     Executive's Date of Termination, whether or not done during the Executive's
     regular working hours, are the sole property of the Company, including,
     without limitation, all domestic and foreign patent rights, rights of
     registration or other protection under the copyright laws, or other rights
     pertaining to the Inventions. For purposes of this Agreement, Inventions
     shall include any improvements to an Invention and shall not be limited to
     the definition of a patentable invention or copyrightable work of
     authorship as contained in the United States patent or copyright laws. The
     Executive shall disclose promptly and fully in writing to the Company each
     Invention, whether or not reduced to practice, that the Executive conceives
     or learns (either alone or jointly with others) during the Term of
     Employment. The Executive hereby assigns to the Company, or its nominee,
     all of the Executive's right, title and interest, including international
     priority rights, in and to all Inventions (other than any Invention that
     was developed entirely on the Executive's own time and for which no
     equipment, supplies, facilities or trade secret information of the Company
     was used, unless such Invention relates directly to the Company's business
     or to the Company's actual or demonstrably anticipated research or
     development), and in and to all United States or foreign patents,
     copyrights and other proprietary rights granted thereon or resulting
     therefrom, and in and to all applications for United States or foreign
     copyrights, patents and other proprietary rights. The Executive shall
     execute all papers, perform all lawful acts or assist the Company in any
     way the Company deems necessary or advisable (at the Company's expense) for
     the preparation, filing, prosecution, issuance, procurement, maintenance or
     enforcement of patents applications and patents of the United States and
     foreign countries, and for obtaining and enforcing copyright protection and
     registration, of any Invention. To that end, the Executive shall at the
     Company's request and without limitation, testify in any suit or other
     proceeding involving any of the Inventions, execute all documents that the
     Company reasonably determines to be necessary or convenient for use in
     applying for and obtaining patent or copyright protection and registration
     on any of the Inventions and enforcement of that protection and
     registration, and execute all necessary documents and papers required to
     vest title in and assign to the Company (or its nominee) patent or
     copyright protection and registration. The Executive's obligation to assist
     the Company in obtaining and enforcing patent or copyright protection and
     registration for the Inventions shall continue following termination of
     this Agreement, but Company shall compensate the Executive following the
     expiration or termination of this Agreement at a rate of $10 for the
     execution of each document and $150 per day for each day or portion thereof
     spent at the Company's request in rendering assistance, plus reimbursement
     for the reasonable out-of-pocket expenses incurred by the Executive for
     such assistance. The Executive hereby irrevocably appoints the Company and
     its duly authorized officers and agents as his agent and attorney-in-fact
     to act for and on behalf of the Executive in filing all patent
     applications, applications for copyright protection and registration
     amendments, renewals and all other appropriate documents in any way related
     to the Inventions.

          (f)  Survival. The provisions set forth in this Section 8 shall
     survive termination of this Agreement.

<Page>

          (g)  Scope Limitations. If the scope, period of time or area of
     restriction specified in this Section 8 are or would be judged to be
     unreasonable in any court proceeding, then the period of time, scope or
     area of restriction shall be reduced or limited in the manner and to the
     extent necessary to make the restriction reasonable, so that the
     restriction may be enforced in those areas, during the period of time and
     in the scope that are or would be judged to be reasonable.

     9.   Binding Agreement; Successors. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate. This Agreement shall be binding upon, and inure to the benefit of, any
successors or assigns of the Company. This Agreement is not intended to confer
upon any person other than the parties hereto (and the Executives' Spouse and
dependents) any rights or remedies, except as specifically provided in this
Section 9.

     10.  NOTICE. Notices, demands and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered, if delivered personally, or (unless otherwise specified) when
received, if mailed by United States certified or registered mail, return
receipt requested, postage prepaid, by Federal Express or other reputable
overnight courier service or by facsimile, addressed as follows:

          If to the Executive:

                  John L. Flavin
                  4820 Bryan Place
                  Downers Grove, IL 60515

          If to the Company:

                  Advanced Life Sciences, Inc.
                  1440 Davey Road
                  Woodridge, Illinois 60517
                  Attn: Chief Executive Officer

or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

     11.  GENERAL PROVISIONS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Company's Board. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or

<Page>

implied, with respect to the subject matter hereof have been made by either
party that are not set forth expressly in this Agreement.

     12.  VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement is found to be invalid or
unenforceable, in whole or in part, then it shall be deemed to be modified or
restricted to the extent and in the manner necessary to render it valid and
enforceable, or shall be deemed excised from this Agreement, as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if the provision had been originally incorporated
herein as so modified or restricted, or as if it had not originally been
incorporated herein, as the case may be.

     13.  COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

     14.  ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled. For the avoidance of doubt, the Company and the
Executive hereby agree that this Agreement shall replace and supercede the
Existing Employment Contract and govern the relationship of the parties.

     15.  IRREPARABLE HARM. The Executive acknowledges that: (i) the Executive's
compliance with this Agreement is necessary to preserve and protect the
proprietary rights, Confidential Information and the goodwill of the Company and
its subsidiaries as going concerns; (ii) any failure by the Executive to comply
with the provisions of this Agreement shall result in irreparable and continuing
injury for which there will be no adequate remedy at law; and (iii) in the event
that the Executive should fail to comply with the terms and conditions of this
Agreement, the Company shall be entitled, in addition to such other relief as
may be proper, to all types of equitable relief (including, but not limited to,
the issuance of an injunction and/or temporary restraining order) as may be
necessary to cause the Executive to comply with this Agreement, to restore to
the Company its property, and to make the Company whole.

     16.  CONSENT TO JURISDICTION AND FORUM; LEGAL FEES AND COSTS. The Company
and the Executive hereby expressly and irrevocably agree that any action,
whether at law or in equity, arising out of or based upon this Agreement or the
Executive's employment by the Company shall only be brought in a federal or
state court located in Cook County, Illinois. The Executive hereby irrevocably
consents to personal jurisdiction in such court and to accept service of process
in accordance with the provisions of such court. In connection with any dispute
arising out of or based upon this Agreement or the Executive's employment by the
Company, each party shall be responsible for its or his own legal fees and
expenses and all court costs shall be shared equally by the Company and the
Executive unless the court apportions such legal fees or court costs in a
different manner.

<Page>

     17.  WITHHOLDING. All payments made to the Executive pursuant to this
Agreement shall be subject to applicable withholding taxes, if any, and any
amount so withheld shall be deemed to have been paid to the Executive for
purposes of amounts due to the Executive under this Agreement.

     18.  GOVERNING LAW. This Agreement is governed by and is to be construed
and enforced in accordance with the laws of the State of Illinois, without
regard to its conflict of law provisions.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.

EXECUTIVE                              ADVANCED LIFE SCIENCES, INC.

By: /s/ John L. Flavin                 By:  /s/ Michael T. Flavin
   -------------------------------        -------------------------------
Name: John L. Flavin                   Name:  Michael T. Flavin
                                       Title: Chief Executive Officer

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