Document:

Form of Stock Issuance Agreement

  Exhibit 10.01
 Explanatory Note
                The following agreement has been entered into by certain of our employees in connection with the Company’s Stock Issuance Program
under its 2000 Stock Incentive Plan.
                The Stock Issuance Program is a component of the Company’s cost
management efforts.  Effective July 1, 2002, 24% of the Company’s employees (after a headcount reduction in June 2002) realized a 10% annual reduction in future cash compensation.  Three executive officers had previously reduced their
annual cash compensation between 8%-10% effective December 1, 2001. These officers now realize reductions of approximately 17-20% of their annual cash compensation.  The reductions in cash compensation for all employees will be replaced in
equal amounts by compensation in the form of the Company’s common stock under the terms of the Stock Issuance Program.  
                Participants in this program include the following executive officers: Robert L. Erwin; John D. Fowler, Jr.; David R. McGee; Ronald J.
Artale; John S. Rakitan; Laurence K. Grill; R. Barry Holtz; Robert J. Walden; and Michael D. Centron.

  LARGE SCALE BIOLOGY CORPORATION
 STOCK ISSUANCE AGREEMENT
             THIS AGREEMENT is made as of this 30th day of September 2002, by and between Large Scale Biology Corporation
(“Corporation”), and _________________ (“Participant”).
              Except to the extent the context clearly
indicates otherwise, each capitalized term used in this Agreement shall have the meaning assigned to such term in Article XI hereof. 

	  
 	 I.  AWARD OF SHARES
 
	  
 	  
 
	  
 	           1.1     Award.  In consideration of Participant’s past and continued
Service with the Corporation, the Corporation hereby agrees to issue to Participant shares of common stock (the “Shares”) pursuant to the provisions of the Plan and this Agreement.  Commencing on September 30, 2002 and on the last day
of each of the next three successive calendar quarters thereafter, the Corporation shall award to Participant, provided Participant remains in Service on such dates, a quantity of Shares (to the nearest whole share) having an aggregate value of
$___________ based on the per share Issuance Price.
 
	  
 	  
 
	  
 	           1.2     Participant’s Acceptance.  Participant hereby agrees to
accept the award of the Shares under the terms and conditions of this Agreement and the Plan.
 
	  
 	  
 
	  
 	           1.3     Issuance Price.  The per share Issuance Price of the Shares is
the respective per share closing price of the Corporation’s common stock on NASDAQ on the last day of the calendar quarter or the last trading day on NASDAQ for the calendar quarter if the common stock is not traded on the last day of the
calendar quarter.
 
	  
 	  
 
	  
 	           1.4     Delivery of Certificates.  The certificates representing the
Shares hereunder shall be held in escrow by the Treasurer of the Corporation as provided in Article VII hereof.
 
	  
 	  
 
	  
 	           1.4     Shareholder Rights.  Until such time as the Corporation actually
exercises its Purchase Right under Article V of this Agreement, Participant (or any successor in interest) shall have all the rights of a shareholder (including voting and dividend rights) with respect to the Shares, including the Shares held in
escrow under Article VII, subject, however, to the transfer restrictions of Article IV.
 
	  
 	  
 
	  
 	 II.  DISPOSITION OF UNVESTED SHARES
 
	  
 	  
 
	  
 	           2.1     Disposition of Shares.  Participant hereby agrees that
Participant shall make no disposition of the Unvested Shares other than a permitted transfer under paragraph 4.1 and no such disposition shall be effective unless and until:
 
	  
 	  
 
	  
 	  
 	           (i)          Participant shall have notified the Corporation of the
proposed disposition and provided a written summary of the terms and conditions of the proposed disposition;
 

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 	           (ii)         Participant shall have complied with all requirements of this
Agreement applicable to the disposition of the Unvested Shares;
 
	  
 	  
 	  
 
	  
 	  
 	           (iii)       Participant shall have provided the Corporation with written assurances, in
form and substance satisfactory to the Corporation, that (a) the proposed disposition does not require registration of the Shares under the 1933 Act or (b) all appropriate action necessary for compliance with the registration requirements of the
1933 Act or of any exemption from registration available under the 1933 Act (including Rule 144) has been taken; and
 
	  
 	  
 	  
 
	  
 	  
 	  
 
	           The Corporation shall not be required (i) to transfer on its books any Shares which have been
transferred in violation of the provisions of Articles II or IV nor (ii) to treat as the Owner of the Shares, or otherwise to accord voting or dividend rights to, any transferee to whom the Shares have been transferred in contravention of this
Agreement.
 
	  
 	  
 	  
 
	  
 	           2.2     Restrictive Legend.  In order to reflect the restrictions on
disposition of the Shares, the stock certificates for the Shares will be endorsed with restrictive legends, including the following legend:
 
	  
 	  
 
	  
 	  
 	 “This certificate and the shares represented hereby may not be sold, assigned, transferred, encumbered, or in any manner disposed of except in conformity with the terms of a
written agreement effective September 30, 2002, between the Corporation and the registered holder of the shares (or the predecessor in interest to the shares). Such agreement grants certain purchase rights to the Corporation (or its assignees). The
Corporation will upon written request furnish a copy of such agreement to the holder hereof without charge.”
 
	  
 	  
 	  
 
	  
 	 III.  SPECIAL TAX PROVISIONS
 
	  
 	  
 	  
 
	  
 	           3.1     Section 83(b) Election. The Participant understands that under Section
83 of the Code, the fair market value of the Shares on the date the Purchase Right applicable to such Shares lapses will be reportable as ordinary income at that time.  In the event the Corporation exercises its Purchase Right, the Participant
will realize ordinary income on the effective date of such exercise equal to the total purchase amount (the quantity of Shares purchased multiplied by the Issuance Price).  For this purpose, the Purchase Right includes the right of the
Corporation to purchase the Shares pursuant to Article V of this Agreement. Participant understands that he/she may elect under Section 83(b) of the Code to be taxed at the time the Shares are awarded hereunder, rather than when and as such Shares
are purchased by the Corporation or cease to be subject to the Purchase Right. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of each award of Shares.  The form for making this election is
attached as Exhibit A hereto. Participant understands that failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income by the Participant when the Shares are purchased by the Corporation or cease
to be subject to the Purchase Right.  Participant also understands that an election to be taxed under Section 83(b) involves an assumed risk by the Participant that they will not be able to subsequently qualify for a tax deduction equal to the
value of any forfeited Shares.  PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS 

				

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 	 REPRESENTATIVES TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered or certified mail, return receipt requested, and Participant must retain
two (2) copies of the completed form for filing with his/her state and Federal tax returns for the current tax year, a copy to the Corporation’s Treasurer, and an additional copy for his/her personal records.
 
	  
 	  
 	  
 
	  
 	           The Corporation recommends that Participant obtain competent independent tax advice from a licensed tax
professional as to whether or not Participant should make an election under Section 83(b) with regard to any Shares awarded to Participant under this Agreement.
 
	  
 	  
 	  
 
	  
 	           3.2     Surrender of Shares to Pay Income and Employment Taxes.  If
Participant will be taxed on the Shares at the time of the lapse of the Purchase Right as provided in paragraph 5.4 rather than at the time of award of the Shares to the Participant due to Participant’s Section 83(b) election, Participant may
elect to transfer to the Corporation vested Shares or other common stock of the Corporation owned free and clear by Participant with a fair market value equal to the lesser of the applicable withholding taxes calculated at the supplemental Federal,
state and local rates or the Participant’s actual withholding taxes to which the Participant may become subject in connection with any Shares becoming substantially vested under Section 83 of the Code at that time provided that Participant is
in Service at such time and the Shares are traded on NASDAQ.  However, no Shares or common stock will actually be accepted in satisfaction of such withholding and employment tax liability except to the extent any such Shares or common stock is
valued at fair market value determined by the NASDAQ closing selling price of common stock on the date the Shares are deemed substantially vested under Section 83 of the Code, or if there is no closing selling price for common stock on the date in
question, then the fair market value shall be the closing selling price on the last preceding date for which such quotation exists.
 
	  
 	  
 	  
 
	  
 	           3.3     Tax Advice.  The Corporation makes no warranties or
representations to Participant with respect to the income tax consequences of the transactions contemplated by this Agreement regarding the Shares, and Participant is in no manner relying on the Corporation or the Corporation’s representatives
for an assessment of such tax consequences.
 
	  
 	  
 	  
 
	  
 	           3.4     Amendment by Corporation.  The Corporation in its sole and
absolute discretion may make changes and modifications to this Agreement to provide for forfeiture restrictions and other conditions applicable to the Shares reasonably necessary so that the Shares will not be deemed to be substantially vested as
provided under Section 83 of the Code until lapse of the Purchase Right as provided in paragraph 5.4.
 
	  
 	  
 	  
 
	  
 	 IV.  TRANSFER RESTRICTIONS
 
	  
 	  
 	  
 
	  
 	           4.1     Restriction on Transfer.  Participant shall not transfer, sell,
assign, encumber or otherwise dispose of any of the Unvested Shares which are subject to the service requirement under paragraph 5.1 and/or the Corporation’s Purchase Right under paragraph 5.2 until the Shares are not subject to both the
service requirement and the Purchase Right.  Such restrictions on transfer, however, shall not be applicable to (i) a gratuitous transfer of the Shares made to the Participant’s spouse or issue, including adopted children; a trust for the
exclusive benefit of the Participant or the Participant’s 
 

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 	 spouse or issue; or a former spouse, provided and only if the Participant obtains the Corporation’s prior written consent to such transfer, or (ii) a transfer
of title to the Shares is effected pursuant to the Participant’s will or the laws of intestate succession or pursuant to a valid domestic relations court order.
 
	  
 	  
 	  
 
	  
 	           4.2     Transferee Obligations.  Each person other than the Corporation
(or the legal representative of such persons such as the guardian of the estate of a minor child or the trustee(s) of a trust) to whom the Unvested Shares are transferred by means of one of the permitted transfers specified in paragraph 4.1 must, as
a condition precedent to the validity of such transfer, acknowledge and agree in writing to the Corporation that such person is bound by the provisions of this Agreement and that the transferred Shares are subject to the service requirement under
paragraph 5.1 and the Corporation’s Purchase Right under paragraph 5.2 hereunder to the same extent such Shares would be so subject if retained by the Participant.
 
	  
 	  
 	  
 
	          V.  PARTICIPANT SERVICE, PURCHASE RIGHT, AND LAPSE OF PURCHASE RIGHT
 
	  
 	  
 	  
 
	  
 	           5.1     Participant Service.  If a Participant ceases to remain in
Service through June 30, 2003, then the Shares shall be forfeited and immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those Shares.
 
	  
 	  
 	  
 
	  
 	           5.2     Purchase Right.  The Corporation (or its assignees) is hereby
granted the right, in accordance with the provisions of paragraph 5.3, to purchase at the Issuance Price all or (at the discretion of the Corporation) any portion of the Unvested Shares that have not been forfeited pursuant to paragraph 5.1
hereof.
 
	  
 	  
 	  
 
	  
 	  
 	  
 
	  
 	           5.3     Exercise of the Purchase Right.  The Corporation intends to, but
is not obligated to, exercise the Purchase Right if and only if the Corporation does not realize Positive Operating Cash Flows for the six month period ending June 30, 2005.  The Corporation has a history of negative operating cash flows and
management considers the realization of Positive Operating Cash Flows by the six month period ending June 30, 2005 to be a reasonable performance goal that is related to the purpose of this Agreement.  Exercise of the Purchase Right shall be
communicated by written notice delivered in accordance with paragraph 9.3 to the Owner of the Unvested Shares at any time prior to July 31, 2005. The notice shall indicate the number of Unvested Shares to be purchased and the date on which the
purchase is to be effected, such date to be not more than thirty (30) days after the date of notice.
 
	  
 	  
 	  
 
	  
 	           5.4     Lapse of the Purchase Right.  The Purchase Right shall lapse, and
cease to be exercisable, with respect to any and all Shares if; 1) the Corporation realizes Positive Operating Cash Flows for the six month period ending June 30, 2005, or 2) the Corporation does not exercise its Purchase Right in accordance with
paragraph 5.3.
 
	  
 	  
 	  
 
	  
 	           5.5     Fractional Shares.  No fractional shares shall be purchased by
the Corporation. Accordingly, should the Purchase Right extend to a fractional share (in accordance with the provisions of paragraphs 5.2 and 5.6), then such fractional share shall be added to any fractional share in which the Participant is at such
time vested in order to make one whole vested share no longer subject to the Purchase Right.
 

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 	           5.6     Additional Shares or Substituted Securities.  In the event of any
stock dividend, stock split, recapitalization or other change affecting the Corporation’s outstanding common stock as a class effected without receipt of consideration, then any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which is by reason of any such transaction distributed with respect to the Shares shall be immediately subject to the service requirement under paragraph 5.1 and the Purchase Right under
paragraph 5.2, but only to the extent the Shares are at the time covered by such requirement or right. Appropriate adjustments to reflect the distribution of such securities or property shall be made to the number of Shares at the time subject to
the Purchase Right hereunder and to the price per share to be paid upon the exercise of the Purchase Right in order to reflect the effect of any such transaction upon the Corporation’s capital structure; provided, however, that the
aggregate price paid for such Shares shall remain the same.
 
	  
 	  
 
	  
 	           5.7     Corporate Transaction.
 
	  
 	  
 	  
 
	  
 	  
 	           (i)          Upon the occurrence of a Corporate Transaction, the service
requirement under paragraph 5.1 and the Purchase Right under paragraph 5.2 shall automatically lapse in their entirety, and the Participant shall immediately acquire a vested interest in all the Shares, except to the extent the Purchase Right is to
be assigned to the successor corporation (or its parent company) in connection with such Corporate Transaction.
 
	  
 	  
 	  
 
	  
 	  
 	           (ii)          To the extent the Purchase Right remains in effect
following such Corporate Transaction, it shall apply to the new capital stock or other property (including cash) received in exchange for the Shares in consummation of the Corporate Transaction, but only to the extent the Shares are at the time
covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Purchase Right to reflect the effect of the Corporate Transaction upon the Corporation’s capital structure; provided,
however, that the aggregate price paid for such Shares shall remain the same.
 
	  
 	  
 	  
 
	  
 	 VI.  TERM AND TERMINATION
 
	  
 	  
 	  
 
	  
 	           The term of this Agreement shall commence on September 30, 2002 and continue through June 30, 2005.  The
Corporation shall have the right at any time to terminate this Agreement in its sole discretion upon thirty (30) days prior written notice to the Participant but without prejudice to the rights of Participant’s interest in any Shares for which
the Purchase Right has or will lapse in accordance with paragraph 5.4 prior to such termination.  The Corporation in its sole and absolute discretion may extend the term of this Agreement to include additional awards of common stock in varying
amounts and make conforming changes to this Agreement consistent with such extension of the term and issuance of additional awards of common stock to the Participant.
 
	  
 	  
 	  
 
	  
 	 VII.  ESCROW
 
	  
 	  
 	  
 
	  
 	           7.1     Deposit.  Upon issuance, the certificates for any Unvested Shares
shall be deposited in escrow with the Corporation to be held in accordance with the provisions of this Article VII.  Each deposited certificate shall be accompanied by a duly executed 
 

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 	 Assignment Separate From Certificate in the form of Exhibit B.  The deposited certificates, pursuant to the requirements of this Agreement, shall remain in escrow
until such time or times as the certificates are to be released or otherwise surrendered for cancellation in accordance with paragraph 7.3.  Upon delivery of the certificates to the Corporation, the Owner shall be issued an instrument of
deposit acknowledging the number of Unvested Shares delivered in escrow to the Corporation.
 
	  
 	  
 	  
 
	  
 	           7.2     Recapitalization.  All regular cash dividends on the Unvested
Shares shall be paid directly to the Owner and shall not be held in escrow. However, in the event of any stock dividend, stock split, recapitalization or other change affecting the Corporation’s outstanding Common Stock as a class effected
without receipt of consideration or in the event of a Corporate Transaction, any new, substituted or additional securities or other property which is by reason of such transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporation to be held in escrow under this Article VII, but only to the extent the Unvested Shares are at the time subject to the escrow requirements of paragraph 7.1.
 
	  
 	  
 	  
 
	  
 	           7.3     Release/Surrender.  The Unvested Shares held in escrow hereunder
that have not been forfeited pursuant to paragraph 5.1, shall be subject to the following terms and conditions relating to their release from escrow or their surrender to the Corporation for purchase and cancellation:
 
	  
 	  
 	  
 
	  
 	  
 	           (i)          Should the Corporation (or its assignees) elect
to exercise the Purchase Right under Article V with respect to any Unvested Shares, then the escrowed certificates for such Unvested Shares shall be delivered to the Corporation concurrently with the payment to the Owner in cash or cash equivalent
of an amount equal to the aggregate Issuance Price for such Unvested Shares, and the Owner shall cease to have any further rights or claims with respect to such Unvested Shares.
 
	  
 	  
 	  
 
	  
 	  
 	           (ii)          As the interest of the Participant in the
Unvested Shares (or any other assets or securities attributable thereto) vests and is no longer subject to the Purchase Right in accordance with the provisions of Article V, the certificates for such vested Shares shall be released from escrow and
delivered to the Owner in accordance with the following schedule:
 
	  
 	  
 	  
 
	  
 	  
 	  
 	  
 
	  
 	  
 	  
 	               a.          Shares for which the Purchase Right
lapses in accordance with paragraph 5.4 shall be released within thirty (30) days from escrow and mailed to the last known address of the Owner as shown on the Corporation’s records.
 
	  
 	  
 	  
 	  
 
	  
 	  
 	  
 	               b.          Upon any earlier termination of the
Corporation’s Purchase Right in accordance with the applicable provisions of Article V, the Shares at the time held in escrow hereunder shall be released within 30 days to the Owner as fully vested Shares or other property.
 

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 	 VIII.  CESSATION OF SERVICE
 
	  
 	  
 	  
 	  
 
	  
 	           8.1          The Plan Administrator may in its sole and
absolute discretion waive the surrender and forfeiture of one or more Unvested Shares which would otherwise occur upon cessation of Participant’s Service under paragraph 5.1.
 
	  
 	  
 	  
 
	  
 	           8.2          If Participant dies while holding the Unvested
Shares, then the personal representative of Participant’s estate or the person or persons to whom the Unvested Shares are transferred pursuant to Participant’s will or the laws of inheritance shall have the right to receive the Unvested
Shares.  However, if Participant has designated one or more beneficiaries of Shares, then those persons shall have the exclusive right to receive vested Shares following Participant’s death.
 
	  
 	  
 	  
 
	  
 	           8.3          If Participant ceases Service prior to July 1,
2003 by reason of Permanent Disability while holding the Unvested Shares, then such Unvested Shares may vest at the discretion of the Plan Administrator.
 
	  
 	  
 	  
 
	  
 	           8.4          If Participant’s Service is terminated for
Misconduct or if Participant otherwise engages in any Misconduct while Participant’s Shares are deemed to be Unvested Shares, then all such Unvested Shares shall be forfeited and surrendered for cancellation to the Corporation.
 
	  
 	  
 	  
 
	  
 	 IX.  GENERAL PROVISIONS
 
	  
 	  
 	  
 
	  
 	           9.1          Assignment.  The Corporation may
assign its Purchase Right under Article V to any person or entity selected by the Corporation’s Board of Directors, including (without limitation) one or more shareholders of the Corporation.
 
	  
 	  
 	  
 
	  
 	           If the assignee of the Purchase Right is other than a Parent or Subsidiary corporation of the Corporation,
then such assignee must make a cash payment to the Corporation, upon the assignment of the Purchase Right, in an amount equal to the excess (if any) of (i) the fair market value of the Unvested Shares at the time subject to the assigned Purchase
Right over (ii) the aggregate purchase price payable for the Unvested Shares thereunder.
 
	  
 	  
 	  
 
	  
 	           9.2          No Employment or Service Contract. 
Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the Service of the Corporation for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation
or the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s Service at any time for any reason whatsoever, with or without cause.
 
	  
 	  
 	  
 
	  
 	           9.3          Notices.  Any notice required in
connection with (i) the Purchase Right or (ii) the disposition of any Shares covered thereby shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage
prepaid and addressed to the party entitled to such notice at the address indicated below such party’s signature line on this Agreement or at such 
 

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 	 other address as such party may designate by ten (10) days advance written notice under this paragraph 9.3 to all other parties to this Agreement.
 
	  
 	  
 	  
 
	  
 	           9.4          No Waiver.  No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.
 
	  
 	  
 	  
 
	  
 	           9.5          Cancellation of Shares.  If the
Corporation (or its assignees) shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with Article V of this Agreement, then from and after
such time, the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement), and such Shares shall be
deemed purchased in accordance with the applicable provisions hereof and the Corporation (or its assignees) shall be deemed the Owner and holder of such Shares, whether or not the certificates therefor have been delivered as required by this
Agreement.
 
	  
 	  
 	  
 
	  
 	           9.6          Regulatory Approval.  The inability
of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance of any award of common stock pursuant to this Agreement shall relieve the Corporation of any liability
with respect to the non-issuance of the common stock as to which such approval shall not have been obtained.  The Corporation, however, shall use its best efforts to obtain all such approvals.
 
	  
 	  
 	  
 
	  
 	 X.  MISCELLANEOUS PROVISIONS
 
	  
 	  
 	  
 
	  
 	           10.1        Participant Undertaking.  Participant hereby
agrees to take whatever additional action and execute whatever additional documents the Corporation may in its judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either the
Participant or the Shares pursuant to the express provisions of this Agreement.
 
	  
 	  
 	  
 
	  
 	           10.2        Agreement is Entire Contract.  This Agreement
constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the express terms and
provisions of the Plan.
 
	  
 	  
 	  
 
	  
 	           10.3        Governing Law.  The interpretation,
performance and enforcement of this Agreement shall be governed by the laws of the State of California, as such laws are applied to contracts entered into and performed in such State without resort to that State’s conflict-of-laws
rules.
 
	  
 	  
 	  
 
	  
 	           10.4        Counterparts.  This Agreement may be executed
in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
 
	  
 	  
 	  
 
	  
 	           10.5        Successors and Assigns.  The provisions of
this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and the Participant and the Participant’s legal representatives, heirs, legatees, distributes, 
 

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 	 assigns and transferees by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be
bound by the terms and conditions hereof.
 
	  
 	  
 	  
 
	  
 	 XI.  DEFINITIONS
 
	  
 	  
 	  
 
	  
 	 The following definitions shall be in effect for all purposes of this Agreement:
 
	  
 	  
 	  
 
	  
 	           11.1        Code means the Internal Revenue Code of 1986, as
amended.  
 
	  
 	  
 	  
 
	  
 	           11.2        Corporation means Large Scale Biology Corporation,
a Delaware corporation.
 
	  
 	  
 
	  
 	           11.3        Corporate Transaction means either of the following
shareholder-approved transactions to which the Corporation is a party.
 
	  
 	  
 	  
 
	  
 	  
 	               (i)         a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outside securities are transferred to a person or persons different from the persons holding those securities immediately prior to such
transactions, or
 
	  
 	  
 	  
 
	  
 	  
 	              (ii)         the sale, transfer or other disposition of all
or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation.
 
	  
 	  
 	  
 
	  
 	           11.4        Exchange Act means the securities Exchange Act of
1934, as amended
 
	  
 	  
 	  
 
	  
 	           11.5        1933 Act means the Securities Act of 1933, as
amended.
 
	  
 	  
 	  
 
	  
 	           11.6        Misconduct means the commission of any act of
fraud, embezzlement or dishonesty by the Participant, any unauthorized use or disclosure by Participant of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by Participant
adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner.  The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to
discharge or dismiss any Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan or this Agreement,
to constitute grounds for termination for Misconduct.
 
	  
 	  
 	  
 
	  
 	           11.7        NASDAQ means the NASDAQ National Market.

	  
 	  
 	  
 
	  
 	           11.8        Owner means, the Participant and all subsequent
holders of the Shares who derive their chain of ownership through a permitted transfer from the Participant in accordance with paragraph 4.1 of this Agreement.
 
	  
 	  
 	  
 
	  
 	           11.9        Parent corporation means any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each such corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
 

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 	           11.10      Permanent Disability means the inability of Participant to
engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or
more.
 
	  
 	  
 	  
 
	  
 	           11.11      Plan means the Large Scale Biology Corporation 2000 Stock
Incentive Plan.
 
	  
 	  
 	  
 
	  
 	           11.12      Plan Administrator means either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
 
	  
 	  
 	  
 
	  
 	           11.13      Positive Operating Cash Flows means an amount equal to or
greater than $1.00 and described as “Net cash provided by operating activities” (or some other description that implies the same objective) in the Corporation’s consolidated statement of cash flows as reported in a quarterly or annual
report and filed with the Securities and Exchange Commission.
 
	  
 	  
 	  
 
	  
 	           11.14      Service means the performance of services for the Corporation
or any Parent or Subsidiary Corporation by an individual in the capacity of an employee or an independent contractor or advisor.  The Participant shall be deemed to remain in Service for so long as such individual renders services to the
Corporation or any Parent or Subsidiary corporation on a periodic basis in the capacity of an employee or an independent consultant or advisor.
 
	  
 	  
 	  
 
	  
 	           11.15      Subsidiary corporation means each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
 
	  
 	  
 	  
 
	  
 	           11.16      Unvested Shares means the Shares for which the service
requirement and/or the Purchase Right of the Corporation under Article V have not lapsed in accordance with paragraphs 5.1 and 5.4 of this Agreement.
 

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            IN WITNESS WHEREOF, the parties have Agreement on the day and year first indicated above.

	 LARGE SCALE BIOLOGY CORPORATION
 	  
 	  
 
	  
 	  
 	  
 	 
 
	  
 	  
 	  
 	 Participant1
 
	  
 	  
 	  
 	  
 
	 By
 	  
 	  
 	  
 
	  
 	 
 	  
 	 
 
	   
 	 John D. Fowler, Jr.
 	  
 	 Name of Participant
 
	   
 	   
 	  
 	   
 
	 Title
 	 President
 	  
 	  
 
	  
 	 
 	  
 	 
 
	  
 	  
 	  
 	 Address of Participant
 

 
 
 1 I have received and/or completed, executed and retained the I.R.C. Section 83(b) election that was attached hereto as Exhibit A.  As set forth in Article III, I understand that I am not obligated to make an
I.R.C. Section 83(b) election, but if I intend to make such an election that I, and not the Corporation, will be responsible for completing the form and filing the election with the appropriate offices of the federal and state tax authorities and
that if such filing is not completed within thirty (30) days after the date of each issuance of Shares under this Agreement, I will not be entitled to the tax benefits provided by Section 83(b).  I have read and understand paragraph 3.1 and
that the Corporation recommends that I obtain competent, independent advice from a licensed tax professional as to whether or not I should make an election under Section 83(b) with regard to any Shares awarded to me under this Agreement.

11
 
 

  EXHIBIT A
 SECTION 83(b) ELECTION
             This
statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2. 

	 (1)
 	 The taxpayer who performed the services is:
 
	  
 	  
 
	  
 	 Name: _____________________________________________
 
	  
 	  
 
	  
 	 Address: ___________________________________________
 
	  
 	  
 
	  
 	 Taxpayer Identification No.: ___________________________
 
	  
 	  
 
	 (2)
 	 The property with respect to which the election is being made is «Shares» shares of the common stock of Large Scale Biology Corporation.
 
	  
 	  
 
	 (3)
 	 The property was issued on «Date».
 
	  
 	  
 
	 (4)
 	 The taxable year in which the election is being made is the calendar year ___________.
 
	  
 	  
 
	 (5)
 	 The property is subject to a purchase right pursuant to which the issuer has the right to acquire the property at the original issue price if for any reason taxpayer does not
complete the required service and the Corporation does not achieve positive operating cash flows.  The issuer’s purchase right lapses on July 1, 2005.
 
	  
 	  
 
	 (6)
 	 The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is ________ per
share.
 
	  
 	  
 
	 (7)
 	 No money was paid for such property.
 
	  
 	  
 
	 (8)
 	 A copy of this statement was furnished to Large Scale Biology Corporation for whom taxpayer rendered the services underlying the transfer of property.
 
	  
 	  
 
	 (9)
 	 This statement is executed on __________________________________________.
 

  

	 
 	  
 	 
 
	 Spouse (if any)
 	  
 	 Taxpayer
 

 This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after the issuance of the Shares each quarter.  This filing should be made by registered or certified mail, return receipt requested. 
Participant must retain two (2) copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records.  At the time of the filing, Participant shall
provide one copy of the completed form to the Treasurer of the Corporation.
 
 

  EXHIBIT B
 ASSIGNMENT SEPARATE FROM CERTIFICATE
           FOR VALUE RECEIVED ________________ hereby sell(s), assign(s) and transfer(s) unto Large Scale Biology Corporation (the “Corporation”),
______________________________ (__________) shares of the Common Stock of the Corporation standing in his or her name on the books of the Corporation represented by Certificate No. __________________________ herewith and do(es) hereby irrevocably
constitute and appoint ________________________ (Corporation’s Treasurer) Attorney-in-Fact to transfer the said stock on the books of the Corporation with full power of substitution in the premises.

	 Dated:
 	  
 	  
 	  
 
	  
 	 
 	  
 	  
 
	  
 	  
 	  
 	  
 
	  
 	 Signature:
 	  
 	  
 
	  
 	  
 	 
 	  
 

 Instruction:  Please do not fill in any blanks other than the signature line.  Please
sign exactly as you would like your name to appear on the issued stock certificate.  The purpose of this assignment is to enable the Corporation to exercise the Purchase Right without requiring additional signatures on the part of the
Participant.Research Agreement dated 11/02

   
 Exhibit 10.1
 [CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTIONS OF THIS DOCUMENTS HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
 SPONSORED
RESEARCH AGREEMENT
               This Sponsored Research Agreement (“Agreement”) is entered into as of the
Effective Date by and between Cell Therapeutics, Inc., a Washington corporation with offices at 501 Elliot Avenue West, #400, Seattle, Washington 98119-4240 (“CTI”); and Hope Heart Institute, a Washington non-profit corporation with
offices at 1710 E. Jefferson, Seattle, Washington 98122 (“The Hope”). 
 RECITALS

	  
 	 A.
 	 The mission of The Hope is to advance the knowledge of heart and cardiovascular disease and treatment through laboratory research, clinical study, publication and community
education.
 
	  
 	  
 	  
 
	  
 	 B.
 	 The mission of CTI is the treatment of cancer by developing safer, more effective cancer therapies.
 
	  
 	  
 	  
 
	  
 	 C.
 	 The parties have concluded that it would be in their mutual best interests to enter into this Agreement to further their respective missions by joint research and collaboration in
the areas of cardiovascular and cancer research.
 
	  
 	  
 	  
 
	  
 	 D.
 	 In consideration of rights to be granted to CTI hereunder with respect to Pre-Existing Inventions and Pre-Existing Technology, and the options with respect to Hope Heart Inventions
and Hope Heart Technology (all as defined below), CTI is willing to grant The Hope a warrant to purchase common stock of CTI.
 
	  
 	  
 	  
 
	  
 	 E.
 	 In consideration of the performance of the Research Program and the rights to be granted to CTI hereunder with respect to Sponsored Research Inventions and Sponsored Research
Technology (all as defined below) CTI is willing to fund the Research Program.
 
	  
 	  
 	  
 
	  
 	 F.
 	 In consideration of rights to be granted to CTI hereunder with respect to Hope Heart Inventions and Hope Heart Technology (as defined below) for which CTI elects to receive a
license, CTI is willing to pay certain running royalties as described herein.
 

 - 1 -
 
 

  AGREEMENT
           Now, therefore, in furtherance of the
Recitals set forth hereinabove, the parties agree as follows:
             1.   DEFINITIONS
                    1.1     “Cardiovascular Disease Research” means non-commercial
research related to the treatment of diseases of the cardiovascular system, and excludes Oncology and Supportive Care Applications.
                    1.2     “Effective Date” means November 13, 2002.
                    1.3     “Hope Heart Inventions” means any and all Inventions
conceived or reduced to practice by or for Heart Hope during the term of this Agreement, but excluding the Sponsored Research Inventions.
                              (a)      “Hope
Heart Oncology Inventions” means any and all Hope Heart Inventions that are useful in the field of Oncology and Supportive Care Applications.
                              (b)     “Hope Heart
Non-Oncology Inventions” means any and all Hope Heart Inventions that are not useful in the field of Oncology and Supportive Care Applications.
                    1.4     “Hope Heart Technology” means any and all Technology prepared by or
for Heart Hope during the term of this Agreement, but excluding the Sponsored Research Technology.
                              (a)     “Hope Heart
Oncology Technology” means any and all Hope Heart Technology that is useful in the field of Oncology and Supportive Care Applications.
                              (b)     “Hope Heart
Non-Oncology Technology” means any and all Hope Heart Technology that is not useful in the field of Oncology and Supportive Care Applications.
                    1.5     “Inventions” means any and all ideas and conceptions of
potentially patentable subject matter, including, without limitation, any patent disclosures, whether or not reduced to practice, and whether or not yet made the subject of a pending patent application or applications, and any patents relating
thereto.
                    1.6     “Net Sales” means amounts
received by CTI or one of its affiliates for a Royalty-Bearing Product from an unaffiliated third party, less discounts; sales, use, tariff, import/export duties or other excise taxes; insurance, packaging and shipping; and allowances or credits to
customers because of rejections or returns.  
                    1.7     “Oncology and Supportive Care Applications” means the field of
(a) oncology, including research, development, and commercialization of products and services for 
 - 2 -
 

  the treatment or diagnosis of all cancers (including carcinomas and sarcomas), and neoplastic conditions; and (b) supportive care applications, which includes without limitation
care of manifestations of cancer, prevention and treatment of complications and side-effects of treatment and therapy, management of cancer, and palliative care.
                    1.8     “Patents” means patent applications and any United States,
international and foreign patents issuing therefrom; and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof.
                    1.9     “Pre-Existing Inventions” means all Inventions conceived or
reduced to practice by The Hope as of the Effective Date, including all Inventions embodied in the Pre-Existing Technology and any Inventions described in Schedule I.
                              (a)    
 “Pre-Existing Oncology Inventions” means all Pre-Existing Inventions useful in the field of Oncology and Supportive Care Applications.
                              (b)    
 “Pre-Existing Non-Oncology Inventions” means all Pre-Existing Inventions not useful in the field of Oncology and Supportive Care Applications.
                    1.10   “Pre-Existing Technology” means the Technology described in Schedule I
or any other Technology delivered to CTI under Section 2.5.
                              (a)    
 “Pre-Existing Oncology Technology” means all Pre-Existing Technology useful in the field of Oncology and Supportive Care Applications.
                              (b)    
 “Pre-Existing Non-Oncology Technology” means all Pre-Existing Technology not useful in the field of Oncology and Supportive Care Applications.
                    1.11   “Royalty-Bearing Products” means products that would, but for the license
granted in Section 4.5, infringe a valid claim of a Patent claiming a Hope Heart Oncology Invention in the country in which such product is sold.
                    1.12   “Sponsored Research Inventions” means any and all Inventions conceived or
reduced to practice during the course of the Research Program.
                    1.13   “Sponsored Research Technology” means any and all Technology prepared
during the course of the Research Program.
                    1.14   “Sublicensing Royalties” means amounts received by CTI or one of its
affiliates for licenses to make, use, or sell Royalty-Bearing Products granted to non-affiliates, less taxes and any other expenses, such as license fees payable to non-affiliated third parties, legal and patent prosecution expenses, enforcement and
collection expenses, and audit fees.  In the event CTI licenses the Hope Heart Oncology Inventions along with other technology or intellectual property, CTI may allocate, in a reasonable manner, a portion of such amounts to such other
technology or intellectual property. 
 - 3 -
 

                     1.15   “Technology” means all
tangible materials embodying works of authorship, notes, designs, drawings, reports, data, technical information, know-how, processes, procedures, compositions, devices, methods, formulas, protocols, techniques, designs, or data; and all information
contained therein.
           2.     RESEARCH SERVICES AND COMPENSATION
                    2.1    Project Description.  The Hope shall perform for CTI the research
described in Exhibit A (“Research Program”).
                    2.2    Consideration.  In consideration of the rights granted hereunder CTI
shall pay The Hope the compensation set forth in Exhibit A for the performance of the Research Program.
                    2.3    Royalties.  In consideration of the rights granted to CTI under Section
4.5, CTI shall pay to The Hope, no later than 60 days after the end of each quarter, a running royalty of:
                              (a)      *** % of Net Sales
of Royalty-Bearing Products.
                              (b)     *** % of
Sublicensing Royalties.
                    2.4    Warrant.  CTI shall
grant The Hope a warrant to purchase up to 100,000 shares of common stock of CTI pursuant to a Warrant, the form of which is attached hereto as Exhibit B (the “Warrant”).  
                    2.5    Delivery of Pre-Existing Technology. On or before 10 days after the Effective
Date, The Hope shall deliver to CTI copies of the Pre-Existing Oncology Technology.
           3.     RESEARCH COMMITTEE
AND OPERATIONS. 
                    3.1    Committee.  The parties
shall convene a Joint Research Committee (“Committee”) to (i) oversee the performance of this Agreement and the relationship between the parties, (ii) discuss the current research being conducted by the parties, and possible
opportunities for contracting, joint research and collaboration, and (iii) resolve any disputes arising out of this Agreement.  
                    3.2    Members.  The parties shall select members for the Committee as follows:
the Committee will be comprised of an equal number of representatives from each of the parties.  Each party may select its own members.  Either party may replace its members at any time, upon written notice to the other party.

                   3.3    Meetings. The parties shall co-operate to agree upon locations
and times (no less than two times per year) for meetings of the Committee.  Each party, on a rotating basis, shall (a) provide a location suitable for the Committee to meet, (b) notify the other party of the time and location of the meeting,
and (c) prepare minutes of the meeting and distribute such minutes for the Committee’s approval. Each party will be responsible for any expenses of its
 *** CONFIDENTIAL TREATMENT
REQUESTED
 - 4 -
 

  members associated with attendance of Committee meetings. Committee members may participate in any such meeting in person, by telephone, or, if practical, by
videoconference.  
                    3.4    Decision Making.  Any
meeting of the Committee must involve no less than a quorum of members, which means a majority of the members of the Committee, including at least one member representing each party.  Decisions of the Committee must be made by unanimous
approval.  If the Committee is unable to make a decision, or if a dispute otherwise arises under this Agreement, it should be referred to the CEO of each of the parties for resolution, and such persons shall use their best efforts to resolve
the matter for no less than thirty (30) days. 
                    3.5    Publication.  The Parties recognize that as a nonprofit, IRC 501(c)(3)
tax-exempt organization and recipient of U.S. Public Health Department funding, The Hope actively publishes the results of its research.  Therefore, notwithstanding Section 5 (Confidentiality), The Hope may publish the results of the Research
Program with CTI’s prior written approval.  In addition, The Hope shall submit to the Committee any manuscript proposed for publication that contains or embodies any Hope Heart Oncology Technology, Pre-Existing Oncology Technology, or
Sponsored Research Technology.  In the event CTI believes patentable subject matter is disclosed in the proposed manuscript it shall, within 30 days after its receipt thereof, so notify The Hope (“Publication Delay
Notice”).   In the event CTI delivers a Publication Delay Notice, The Hope shall withhold submission of the manuscript for publication and any other disclosure until the sooner of (a) 60 days after the date of the Publication Delay
Notice, and (b) the date CTI files a patent application thereon.
                    3.6    Grant Proposals.  Further, the parties recognize the value of The Hope
actively pursuing and obtaining peer-reviewed funding such as National Institutes of Health and American Heart Association grants.   CTI and The Hope shall seek to identify possible opportunities to jointly engage in submission of such
grant proposals.  Each grant proposal will be deemed the Confidential Information of each of the parties until the Committee agrees to release such proposal for submission to the applicable potential funder.  However, the foregoing will
not be deemed to prohibit The Hope from seeking such funding without CTI’s participation.
                    3.7    Cooperation.  CTI and The Hope shall use commercially reasonable efforts
to cooperate to seek opportunities to mutually improve their administrative and research operations in areas including the shared use of facilities, equipment, services and personnel.
           4.     OWNERSHIP AND LICENSES 
                    4.1    License to Pre-Existing Inventions and Technology. The Hope hereby grants to
CTI an irrevocable, fully-paid-up, sublicenseable right:
                              (a)     under all of The
Hope’s rights in the Pre-Existing Oncology Inventions, to make, have made, use, offer for sale, sell, and import any products and practice any methods related to the Pre-Existing Oncology Inventions; and
 - 5 -
 

                               
(b)      under all of The Hope’s rights in the Pre-Existing Oncology Technology, the right to reproduce, distribute, prepare derivative works of, publicly perform and publicly display any Pre-Existing Oncology
Technology.  
 The foregoing licenses will be exclusive, even as to The Hope.  
                    4.2    Ownership of Sponsored Research Inventions and Technology.  As between
the parties, CTI will own all right, title and interest in the Sponsored Research Inventions and Sponsored Research Technology.  The Hope hereby transfers and assigns to CTI and shall assign to CTI all right, title and interest in and to the
Sponsored Research Technology and Sponsored Research Inventions and all intellectual property rights therein. 
                    4.3    Grant Back of Rights for Sponsored Research Inventions and Technology. CTI
hereby grants to The Hope, under the rights assigned to CTI under Section 4.2, an irrevocable, fully-paid-up, non-sublicenseable, non-transferable right:
                               (a)     to make and use
any products and practice any methods related to the Sponsored Research Inventions; and 
                               (b)      under all of
CTI’s rights in the Sponsored Research Technology, the right to use, reproduce and prepare derivative works of any Sponsored Research Technology.  
 The foregoing licenses will be
non-exclusive and limited to the field of Cardiovascular Disease Research.  For avoidance of doubts, the foregoing licenses do not grant The Hope any right to sell or distribute products embodying any Sponsored Research Invention or Sponsored
Research Technology.  If The Hope wishes to use any Sponsored Research Inventions or Sponsored Research Technology outside the field of Oncology and Supportive Care Applications, CTI may, in its sole and absolute discretion, grant to The Hope
certain rights to allow The Hope to use or sublicense the Sponsored Research Inventions or Sponsored Research Technology, according to terms to be mutually agreed.
                    4.4    Right of First Refusal for Non-Oncology Inventions and Technology.  The
Hope shall not during the term of this Agreement grant to any third party any license to Hope Heart Non-Oncology Inventions, Hope Heart Non-Oncology Technology, Pre-Existing Non-Oncology Inventions or Pre-Existing Non-Oncology Technology or any
Patents related thereto, without offering CTI an right of first refusal, as follows.   The Hope shall disclose each such Invention and all related Technology to CTI for review whether such Invention or Technology is useful in the field of
Oncology and Supportive Care Applications (i.e. that it should actually be Hope Heart Oncology Technology, a Hope Heart Oncology Invention, a Pre-Existing Oncology Invention or Pre-Existing Oncology Technology) .  CTI shall then, within 30
days, make such determination in good faith, and may : 
                              (a)     confirm that such
Invention or Technology is not useful in the field of Oncology and Supportive Care Applications, in which case The Hope shall be free to practice such Inventions and Technology for its own account or enter into agreements with third parties

 - 6 -
 

  relating to such Inventions and Technology; provided, however, that CTI will have the right to offer a proposal to license such Inventions or Technology outside of the field of
Oncology and Supportive Care Applications on terms and conditions as favorable to, or more favorable to, The Hope as  those proposed by such third party, in which case The Hope will be obligated to accept such offer in lieu of a license to such
third party, or 
                              (b)     determine that such
Invention or Technology is useful in the field of Oncology and Supportive Care Applications, in which case such Inventions and Technology will be deemed Hope Heart Oncology Inventions and Hope Heart Oncology Technology, and CTI may exercise the
licenses granted in Section 4.5 and shall pay the royalties with respect thereto described in Section 2.3.    
                              (c)     CTI shall at all
times use commercially reasonable efforts to develop and commercialize all Hope Heart Oncology Technology and Hope Heart Oncology Inventions.  
                              (d)     In the event that
there is a dispute as to whether any such Technology or Inventions are useful in the field of Oncology and Supportive Care Applications, CTI shall provide a reasonable basis for its determination, and such matter will be resolved by the
Committee.  If the Committee is unable to resolve such dispute, the parties may resolve such dispute as described in Section 7.7.  
                    4.5    Exclusive License to Hope Heart Oncology Inventions and Hope Heart Oncology
Technology.  The Hope hereby grants to CTI an irrevocable, sublicenseable right:
                             (a)     to make, have made, use,
offer for sale, sell, and import any products and practice any methods related to the Hope Heart Oncology Inventions; and
                             (b)      to reproduce,
distribute, prepare derivative works of, publicly perform and publicly display any Hope Heart Oncology Technology.  
                The foregoing licenses will be exclusive, even as to The Hope.  However, The Hope reserves the right to make and use any products
and practice any methods related to the Hope Heart Oncology Inventions; and use, reproduce and prepare derivative works of any Hope Heart Oncology Technology; provided that such reservations are limited to the field of Cardiovascular Disease
Research, and do not include the right to sell or distribute products embodying any Hope Heart Oncology Invention or Hope Heart Oncology Technology.  If The Hope wishes to use any Hope Heart Oncology Inventions or Hope Heart Oncology Technology
outside the field of Oncology and Supportive Care Applications, CTI may, in its sole and absolute discretion, grant to The Hope certain rights to allow The Hope to use or sublicense the Hope Heart Oncology Inventions or Hope Heart Oncology
Technology, according to terms to be mutually agreed.
                    4.6    Further Assurances.  The Hope shall obtain appropriate written agreements
from all personnel involved in the Research Program, such agreements to require that all Inventions and Technology shall be reported promptly and assigned to The Hope.  The Hope 
 -
7 -
 

  shall ensure that personnel performing the Research Program will not collaborate with others not employed by The Hope (other than CTI) in performing the Research Program, without
CTI’s prior written consent.  Upon request by CTI at any time, and at CTI’s cost and expense, The Hope shall execute all documents and instruments and do all other things deemed necessary or useful by CTI in establishing, perfecting,
protecting, prosecuting, defending and enforcing the rights assigned to CTI hereunder.
                    4.7    Prosecution Rights.  CTI will have the sole right, but not the
obligation, to, at its own expense, prosecute any Patent claiming any Pre-Existing Invention, Sponsored Research Invention, or any Hope Heart Oncology Invention.  The Hope hereby irrevocably designates CTI and its agents as The Hope’s
agents and its attorneys-in-fact to act for and on its behalf and instead of it, to execute and file any such document and to do all other lawfully permitted acts to further the prosecution and issuance of Patents.  CTI shall consult with The
Hope regarding the prosecution of any such Patent applications by providing The Hope a reasonable opportunity to review and comment on all proposed submissions to any patent office before submittal; provided, however, that CTI shall have no
obligation to implement or incorporate any such comments other than to consider them in good faith.  In the event The Hope wishes CTI to prosecute such a Patent outside the Field of Oncology and Supportive Care Applications, The Hope may
request that CTI do so, and CTI may determine, in its reasonable discretion, whether it wishes to do so.  If CTI declines to do so, the parties shall cooperate to allow The Hope to prosecute such Patent at its own expense.   The Hope
shall, and shall cause its agents and employees to, furnish CTI with all documents and other assistance, as such may be necessary, for the prosecution of each application.  
                    4.8    Warranties.  The Hope hereby represents and warrants that: (a) all
Technology delivered hereunder will be the original work of The Hope; (b) all Technology provided by The Hope hereunder and the use thereof as contemplated hereunder will not infringe the copyright or trade secret of any third party; (c) to the best
of The Hope’s knowledge, all Technology provided by The Hope hereunder will not infringe the patent rights of any third party; and (d) The Hope has the right to grant the licenses granted herein, and has not entered into any agreement or
license that would conflict with the licenses granted herein.  The foregoing will not be deemed to be a warranty of validity of any Patent. The Hope hereby represents and warrants that The Hope has no outstanding agreement or obligation that is
in conflict with any of the provisions of this Agreement, or that would preclude The Hope from complying with the provisions hereof.  The Hope shall not enter into any such conflicting agreement during the term of this Agreement.  CTI
acknowledges that The Hope may from time to time wish to enter into sponsored research or technology development agreements with private entities or U.S. governmental entities that allow such entities to own or reserve rights in developed
technology.  If The Hope wishes to do so in a fashion that would render it unable to grant exclusive rights in Hope Heart Oncology Inventions or Hope Heart Oncology Technology as required herein, The Hope shall advise CTI prior to entering into
such agreement, and the parties shall cooperate in good faith to agree on terms and conditions relating to such technology, in a manner that would best effectuate the intent of the parties hereunder.
 - 8 -
 

            5.     CONFIDENTIALITY
                    5.1     Definition.  “Confidential Information” means any
proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customers, customer lists, markets, software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing, finances or other business information disclosed by one party to the other either directly or indirectly in writing, orally or by drawings or inspection of parts or
equipment.  Confidential Information does not include information that: (i) is known to the receiving party at the time of disclosure to the receiving party by the disclosing party as evidenced by written records of the receiving party;
(ii) has become publicly known and made generally available through no wrongful act of the receiving party; or (iii) has been received by the receiving party from a third party who is authorized to make such disclosure.
                    5.2     Non-Use and Non-Disclosure by The Hope.  The Hope shall not,
during or subsequent to the term of this Agreement, use CTI’s Confidential Information for any purpose whatsoever other than the performance of the Research Program or disclose CTI’s Confidential Information to any third party.  The
parties acknowledge that CTI’s Confidential Information will remain the sole property of CTI.  The Hope shall take all reasonable precautions to prevent any unauthorized disclosure of such Confidential Information including, but not
limited to, having each employee or consultant of The Hope, if any, with access to any Confidential Information, execute a nondisclosure agreement containing provisions substantially similar to this Section 5.  
                    5.3     Non-Disclosure by CTI.  CTI shall not, during or subsequent to the
term of this Agreement, disclose The Hope’s Confidential Information to any third party other than in connection with the exercise of the licenses granted to CTI hereunder.  The parties acknowledge that such Confidential Information will
remain the sole property of The Hope.  CTI shall take all reasonable precautions to prevent any unauthorized disclosure of The Hope’s Confidential Information including, but not limited to, having each employee or consultant of CTI, if
any, with access to any of The Hope’s Confidential Information, execute a nondisclosure agreement containing provisions substantially similar to this Section 5.  
                    5.4     Return of Materials.  Upon the termination of this Agreement, or
upon CTI’s earlier request, (a) The Hope shall deliver to CTI all of CTI’s property or Confidential Information that The Hope may have in The Hope’s possession or control; and (b) CTI shall deliver to The Hope all of The Hope’s
property or Confidential Information that CTI may have in CTI’s possession or control, except as reasonably necessary to continue to exercise the licenses granted to CTI hereunder.
           6.     TERM AND TERMINATION
                    6.1     Term.  This Agreement will commence on the Effective Date and will
continue until the earlier of:  (i) 24 months after the date the parties agree in writing on a detailed scope for the Research Program (which the parties do not anticipate to occur prior to January 1, 2003); and (ii) termination as
provided below. The term may be extended by written agreement between CTI and The Hope.  
 - 9 -
 

                     6.2     Termination at
Will.  CTI may terminate this Agreement or any Research Program without cause upon giving thirty (30) days prior written notice thereof to The Hope. Any such termination under this Section 6.2 shall be effective thirty (30) days from the
date of the written notice to the Hope.  If CTI terminates this Agreement under this Section 6.2, CTI shall pay The Hope the fees for any work performed before the effective date of termination pursuant to the fee schedule therefor on a
pro-rata basis..  
                    6.3     Termination for Cause by
CTI.  CTI may terminate this Agreement upon sixty (60) days written notice if The Hope refuses to or is unable to perform the Research Program or is in material breach of any provision of this Agreement and such breach is not cured within
such sixty (60) day period. Any such termination under this Section 6.3 shall be effective sixty (60) days from the date of written notice to the Hope, provided that the Hope fails to cure within the sixty (60) day period.  For avoidance of
doubt, if The Hope makes changes in the personnel performing the Research Program, and the parties are unable to agree on substitute personnel, such changes will be deemed a material breach. If CTI terminates this Agreement under this Section 6.3,
CTI shall pay The Hope the fees for any work properly performed before the effective date of termination pursuant to the fee schedule therefor on a pro-rata basis.
                    6.4     Termination for Cause by the Hope.    The Hope may
terminate this Agreement upon sixty (60) days written notice if CTI is in material breach of any provision of this Agreement and such breach is not cured within such sixty (60) day period. Any such termination under this Section 6.4 shall be
effective sixty (60) days from the date of written notice to CTI, provided that CTI ails to cure within the sixty (60) day period.  If The Hope terminates this Agreement pursuant to this Section 6.4, CTI shall pay The Hope fees for any work
performed before the effective date of termination pursuant to the fee schedule therefor on a pro-rata basis..
                    6.5     Survival.  Upon termination all rights and duties of the parties
toward each other will cease except:  (a) CTI shall pay, within thirty (30) days after the effective date of termination, all amounts owing to The Hope for any Research Program completed prior to the termination date in accordance with the
provisions of Section 2 (Research Services and Compensation); and (b) Sections 5 (Confidentiality), 3 (Ownership and Licenses), and 7 (Miscellaneous) will survive termination of this Agreement.
                    6.6     Licenses.  All licenses granted herein are irrevocable. 
Notwithstanding anything to the contrary herein, no breach of this Agreement will entitle either party to terminate or rescind the licenses granted herein, or entitle either party to injunctive or other equitable relief to terminate such licenses,
it being agreed that the licensor’s sole remedy, if any, in the event of a breach will be an action for damages. 
           7.    MISCELLANEOUS
                    7.1     Nonassignment/Binding Agreement. The parties acknowledge that the unique
nature of The Hope’s services are substantial consideration for the parties’ entering into this Agreement.  Neither this Agreement nor any rights under this Agreement may be assigned or otherwise transferred by The Hope, in whole or
in part, whether voluntarily or by operation of 
 - 10 -
 

  law, without the prior written consent of CTI, which consent will not be unreasonably withheld.  Subject to the foregoing, this Agreement will be binding upon and will inure
to the benefit of the parties and their respective successors and assigns. Any assignment in violation of the foregoing will be null and void. CTI may assign this agreement or the rights granted to it hereunder to any party that agrees in writing to
be bound in connection with a merger, acquisition, or sale of all or substantially all of its assets related to this Agreement, upon notice to The Hope.  Any other assignment by CTI of this Agreement may be made only with the prior written
consent of The Hope, which consent will not be unreasonably withheld.
                    7.2     Notices.  Any notice required or permitted under the terms of this
Agreement or required by law must be in writing and must be:  (a) delivered in person; (b) sent by first class registered mail, or air mail, as appropriate; or (c) sent by overnight air courier, in each case properly posted and
fully prepaid to the appropriate address set forth in the preamble to this Agreement.  Either party may change its address for notice by notice to the other party given in accordance with this Section.  Notices will be considered to have
been given at the time of actual delivery in person, three business days after deposit in the mail as set forth above, or one day after delivery to an overnight air courier service.
                    7.3     Waiver.  Any waiver of the provisions of this Agreement or of a
party’s rights or remedies under this Agreement must be in writing to be effective.  Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time, will not be construed as a waiver
of such party’s rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice such party’s right to take subsequent action. No exercise or enforcement by either party of any
right or remedy under this Agreement will preclude the enforcement by such party of any other right or remedy under this Agreement or that such party is entitled by law to enforce.
                    7.4     Severability.  If any term, condition, or provision in this
Agreement is found to be invalid, unlawful or unenforceable to any extent, the parties shall endeavor in good faith to agree to such amendments that will preserve, as far as possible, the intentions expressed in this Agreement.  If the parties
fail to agree on such an amendment, such invalid term, condition or provision will be severed from the remaining terms, conditions and provisions, which will continue to be valid and enforceable to the fullest extent permitted by law.

                   7.5     Integration.  This Agreement contains the entire
agreement of the parties with respect to the subject matter of this Agreement and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties with respect to said subject
matter.  Without limiting the foregoing, the terms of this Agreement will supersede the Confidential Disclosure Agreement signed by the parties dated September 19, 2003.  No terms, provisions or conditions of any purchase order,
acknowledgement or other business form that either party may use in connection with the transactions contemplated by this Agreement will have any effect on the rights, duties or obligations of the parties under, or otherwise modify, this Agreement,
regardless of any failure of a receiving party to object to such terms, provisions or conditions. This Agreement may not be amended, except by a writing signed by both parties.
 - 11
-
 

                     7.6     Counterparts.  This
Agreement may be executed in counterparts, each of which so executed will be deemed to be an original and such counterparts together will constitute one and the same agreement.
                    7.7     Governing Law.  This Agreement will be interpreted and construed in
accordance with the laws of the State of Washington and the United States of America, without regard to conflict of law principles.  
                              (a)    
 Escalation.  If the parties are unable to resolve any dispute arising out of this Agreement between themselves, either party may, upon written notice to the other, submit such dispute to the parties’ chief executive officers,
who shall meet to attempt to resolve the dispute by good faith negotiations.  In the event the parties are unable to resolve such dispute within thirty (30) days after such notice is received, either party may proceed with any other dispute
resolution procedure available under this Agreement.
                              (b)    
 Jurisdiction.  All disputes arising out of this Agreement will be subject to the exclusive jurisdiction of the state and federal courts located in Kings County, Washington, and each party hereby consents to the personal jurisdiction
thereof. 
                    7.8     Independent Contractors. It is the
intention of the parties that The Hope is an independent contractor.  Nothing in this Agreement will in any way be construed to constitute The Hope or any of its employees as an agent, employee or representative of CTI. 
                    7.9     Indemnity 
                              (a)     By The
Hope.  The Hope shall indemnify and hold harmless CTI from any losses, liabilities, damages, claims, payments, liens, judgments, demands, costs and expenses (including reasonable attorney’s fees) (“Claims”) arising out of any
act or omission of The Hope, or The Hope’s performance or breach of this Agreement, including without limitation Claims alleging infringement or misappropriation of third party intellectual property rights arising from facts that compose a
breach of the warranties of The Hope set forth in Section 4.8. The Hope further shall indemnify and hold harmless CTI and its directors, officers, and employees from and against all taxes, losses, damages, liabilities, costs and expenses, including
attorney’s fees and other legal expenses, arising directly or indirectly from:  (i) any negligent, reckless or intentionally wrongful act of The Hope or The Hope’s assistants, employees or agents; (ii) a determination by a
court or agency that The Hope is not an independent contractor; or (iii) any breach by The Hope or The Hope’s assistants, employee or agents of any of the covenants contained in this Agreement.
                              (b)     By
CTI.  CTI shall indemnify and hold harmless The Hope from any Claims arising out CTI’s activities and business practices in manufacturing and selling products under the licenses granted herein, other than those Claims covered by
Section 7.9(a).
                              (c)     Procedures.
 The obligations of each party set forth in this Section 7.9 (“Indemnitor”) will be subject to the other party (“Indemnitee”) promptly notifying Indemnitor of any Claim, allowing Indemnitor sole control of
the defense, and cooperating with
 - 12 -
 

  such defense at Indemnitor’s expense.  Indemnitee shall have the right, but not the obligation, to be represented by counsel of its choice and to participate in the
defense of the claim; provided, however, that the expense of such counsel and such participation shall be borne by Indemnitee; and provided, further, that the Indemnitee shall not settle any such claim without the prior written consent of 
Indemnitor.
 The parties have executed this Agreement below to indicate their acceptance of its terms.

	 HOPE HEART INSTITUTE
 	 CELL THERAPEUTICS, INC
 
	  
 	  
 
	 By:
 	 /s/ PHILIP M. NUDELMAN
 	   
 	 By:
 	 /s/ JAMES BIANCO
 
	  
 	 
 	  
 	  
 	 
 
	 Print Name:
 	 Philip M. Nudelman
 	   
 	 Print Name:
 	 James A. Bianco
 
	  
 	   
 	   
 	  
 	   
 
	 Title:
 	 President and CEO
 	   
 	 Title:
 	 President and CEO
 

 - 13 -
 

  Exhibit A
 Project Description
           Research to be performed by The Hope:
           Description
to be finalized no later than 90 days after Effective Date.
           A. Principal Investigator.  The Research Program will be under the
direction of *** (the “Principal Investigator”).  The Research Program may be modified from time to time with the written consent of CTI, the Principal Investigator and The Hope.
           B. Records.  The Hope shall keep accurate scientific records relating to the Research Program and will make such records available to CTI or CTI’s
authorized representative throughout the term of this Agreement during normal business hours upon reasonable notice.  It is understood that such records must include detailed, witnessed laboratory notebooks sufficient to document any inventions
made in the course of the Research Program.  Upon request by CTI and at CTI’s expense, The Hope shall promptly provide copies of all such materials to CTI.
           C. Review.  To ensure that such activities remain coordinated, CTI shall meet or consult with the Principal Investigator periodically to establish and
revise priorities for work to be performed under the Research Program, including the research experiments and other steps to be taken by Principal Investigator in pursuit of those priorities.  Unless otherwise agreed, such meetings or
consultations shall take place on CTI’s request not more than once per calendar quarter, and the Principal Investigator shall conduct the Research Program in all respects in accordance with the priorities and steps so established by
CTI.
           D. Reports.  The Principal Investigator shall submit to CTI no later than 30 days after the end of each calendar quarter a
written technical report summarizing the research and results obtained therefrom during the prior three month period relating to research in connection with the Research Program.  Within 60 days after the expiration or termination of this
Agreement, the Principal Investigator shall submit to CTI a final written technical report of all activities undertaken and all accomplishments achieved in connection with the Research Program.  
           E. Compensation.  CTI will pay The Hope $15,000 per month during the term of the Research Program, which will commence when the parties agree on a
detailed description for such program (but which the parties do not anticipate to occur prior to January 1, 2003), and will end when the term of this Agreement ends.  Such detailed description may include additional funding, up to $*** per
month, if so agreed in writing by the Committee.  The Hope 
 *** CONFIDENTIAL TREATMENT REQUESTED
 - 14 -
 

  acknowledges that CTI will not be obligated to provide more than $*** per month in funding.  The Hope will invoice CTI for each payment no sooner than 15 days after the
first day of the month during which the Research Program is in progress.  

	 HOPE HEART INSTITUTE
 	  
 	 CELL THERAPEUTICS, INC.
 	  
 
	  
 	  
 	  
 	  
 
	 By: 
 	 /s/ PHILIP M. NUDELMAN
 	 By:  
 	 /s/ JAMES BIANCO
 
	  
 	 
 	  
 	 
 
	 Print Name:
 	 Philip M. Nudelman
 	 Print Name:
 	 James A. Bianco
 
	  
 	   
 	  
 	   
 
	 Title:
 	 President and CEO
 	 Title:  
 	 President and CEO
 
						

 *** CONFIDENTIAL TREATMENT REQUESTED
 - 15 -
 
 

   Exhibit B
 Warrant
 - 16 -

  EXECUTION COPY
 THIS WARRANT AND THE UNDERLYING SHARES HEREOF HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS.  SUCH SECURITES MAY NOT BE SOLD, OFFERED FOR SALE, PLEGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES OR EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
 STOCK PURCHASE WARRANT
 For Purchase of Shares of Common Stock of
 CELL THERAPEUTICS, INC.
           THIS CERTIFIES THAT The Hope Heart Institute, a Washington nonprofit corporation (“Hope”) is entitled, subject to the terms and conditions set forth
in this Warrant, to purchase from Cell Therapeutics, Inc., a Washington corporation (“CTI”), up to one hundred thousand (100,000) (the “Total Exercise Number”) shares of Common Stock of CTI (the “Common
Stock”), at a per share exercise price equal to $10.00 (the “Exercise Price”) at any time during the Exercise Period upon payment in full of the Exercise Price.  This Warrant is issued in connection with a Sponsored
Research Agreement between Hope and CTI dated as of November 13, 2002 (the “Sponsored Research Agreement”).
           Section 1.     Exercise of Warrant.  The purchase rights granted hereunder may be exercised by Hope, in whole or in
part, by surrender of a duly executed exercise notice in the form attached hereto as Exhibit A at the principal office of CTI, and by payment to CTI by Cash Exercise or Net Issuance Exercise (as defined below) with respect to the aggregate
Exercise Price of the shares being purchased.  The term of the Warrant and the right to purchase Common Stock as described herein will expire on November 13, 2007 (the “Exercise Period”).    
           Section 2.     Method of Exercise.  
                                (a)     Cash
Exercise.   The Warrant may be exercised at any time during the Exercise Period, by the presentation and surrender of this Warrant together with the duly executed Election to Purchase in the form attached hereto, which specifies an
exercise date (the “Date of Exercise”), at the principal office of CTI (or at such other address as CTI may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of CTI), and upon
full payment to CTI of the Exercise Price by wire transfer or certified or official bank check or the equivalent thereof acceptable to CTI; or
                                (b)     Net
Issue Exercise.  In lieu of exercising the Warrant by payment of wire transfer or certified or official bank check, Hope may elect to receive shares equal to the value of this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of CTI (or at such other address as CTI may designate by notice in writing to the holder hereof
 

   at the address of such holder appearing on the books of CTI), together with the duly executed Election to Purchase in the form
attached hereto, in which event CTI shall issue to Hope a number of shares of Common Stock computed using the following formula:

	   
 	            Y (A – B)
 
	   
 	 X =           A
 

 

	           Where:
 	 X =
 	 The number of shares of Common Stock to be issued to Hope;
 
	  
 	  
 	  
 
	   
 	 Y =
 	 The number of Shares for which the Warrant is then being exercised;
 
	   
 	  
 	  
 
	   
 	 A =
 	 The fair market value as reported by the Nasdaq National Market of one share of the Common Stock one (1) trading day prior to Exercise Date;
 
	   
 	  
 	  
 
	   
 	 B =
 	 The Exercise Price.
 

           Certificates for shares
purchased hereunder shall be delivered to within a reasonable time after the date on which the Warrant shall have been exercised as aforesaid, provided, however, that the time of delivery may be postponed by CTI for such period as may
be required for it with reasonable diligence to comply with any requirements of law.  CTI at the time of exercise will require in addition that Hope deliver an investment representation in form acceptable to CTI, and CTI will place a legend on
the certificate for such Common Stock restricting the transfer of same.  At no time shall CTI have any obligation or duty to register under the Securities Act of 1933 (the “1933 Act”) the Common Stock issuable upon exercise of
the Warrant.
           Section 3.     Adjustments to Exercise Price and Number of Shares.  The
Exercise Price and number of shares of Common Stock purchasable pursuant to the exercise of the Warrant shall be subject to adjustment from time to time as follows:
                                (a)    
 Adjustment for Combinations or Consolidations of Common Stock.  In the event CTI, at any time or from time to time after the date hereof, effects a subdivision or capital reorganization of its outstanding Common Stock for a greater
or lesser number of shares, then and in each such event the Total Exercise Number and the Exercise Price shall be adjusted proportionately such that Hope is entitled to purchase the same percentage of all shares of CTI’s outstanding capital
stock then issued and issuable for the same aggregate consideration as such Holder was entitled to purchase immediately prior to such event.
                                (b)    
 Adjustment for Certain Dividends and Distributions.  In the event CTI at any time or from time to time after the date hereof shall pay a dividend payable in Common Stock of CTI, or otherwise make a distribution of Common Stock to
its shareholders, then the Exercise Price shall be adjusted, from and after the record date of such dividend or the date of such distribution, to that price determined by multiplying the Exercise Price by a fraction,
                                     
    (i)     the numerator of which shall be the total number of shares of capital stock issued and outstanding or deemed to be issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date; and
 -2-
 

                                       
    (ii)     the denominator of which shall be the number of shares of capital stock issued and outstanding or deemed to be issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of capital stock to be issued;
 provided, however, that if such record date shall have been fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor, the Exercise Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Exercise Price shall be adjusted pursuant to this
Section 5(b) as of the time of actual payment of such dividend or distribution.  Hope shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the
nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon the exercise hereof immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
                                (c)    
 Number of Shares.  Upon any adjustment of the Exercise Price pursuant to Section 3(b) hereof, Hope shall thereafter (until another such adjustment) be entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof
by the new Exercise Price resulting from such adjustment.
           Section 4.     Restricted
Stock.  Unless and until otherwise permitted by this Section, each certificate representing Common Stock initially issued upon the exercise of the Warrant (a “Stock Certificate”), and each certificate for Common Stock
issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:

	  
 	 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.”
 	  
 

           Section 5.     Fractional Shares.  CTI shall not be required to issue a fractional share of stock upon any exercise
of the Warrant.  As to any final fraction of a share that Hope would otherwise be entitled to purchase upon exercise of the Warrant, CTI shall, if it does not issue a fractional share, pay a cash adjustment in respect of such final fraction in
an amount equal to the same fraction of the Exercise Price per share of Common Stock.
           Section 6.     Exchange and Replacement of Warrant.  In the event of loss, theft or destruction of the Warrant, CTI
will make and deliver a new Warrant of like tenor, in lieu of such Warrant, upon receipt by CTI of evidence reasonably satisfactory to it of such loss, theft, or destruction and indemnity or security reasonably satisfactory to it, and reimbursement
to CTI of all reasonable expense incidental thereto.  In the case of mutilation of the Warrant and upon surrender and cancellation of such Warrant, CTI will make and deliver a new Warrant of like tenor, in lieu of such Warrant.
 -3-
 

             Section 7.     No Rights As
Shareholders Prior to Exercise of Warrant.  Prior to any exercise, Hope shall not be entitled to any rights of a shareholder of CTI with respect to the Common Stock for which the Warrant may then be exercisable, including without limitation
the right to vote, to receive dividends or other distributions or to exercise any preemptive rights and shall not be entitled to receive any notice of any proceedings of CTI except as provided herein.
           Section 8.     Stock Fully Paid; Reservation of Shares.  All of the shares issuable upon the exercise of the rights
represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be duly and validly issued, fully paid and nonassessable.  During the Exercise Period, CTI shall at all times have authorized and reserved for issuance
sufficient shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.
           Section 9.     Representations and Covenants of Hope.  This Warrant has been entered into by CTI in reliance upon the
following representations and covenants of Hope:
                                (a)     
       Investment Purpose.  The right to acquire the Common Stock issuable upon exercise of Hope’s rights contained herein will be acquired for investment and not with a view to the sale or distribution
of any part thereof, and Hope has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.  Upon exercise of this Warrant, Hope shall, if so requested by CTI, confirm in
writing, in a form satisfactory to CTI, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.
                                (b)     
       Private Issue.  Hope understands (i) that the Common Stock issuable upon exercise of the Warrant Certificates is not registered under the 1933 Act or qualified under applicable state securities laws on
the ground that the issuance contemplated by this Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that CTI’s reliance on such exemption is predicated on the representations set forth in this
Section 9.
                                (c)     
       Financial Risk.  Hope has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
                                (d)     
       Risk of No Registration.  Hope understands that it may be required to hold such securities for an indefinite period.  Hope also understands that any sale of its rights to purchase Common Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in accordance with the terms and conditions of that Rule.
           Section 10.     General.
                                (a)    
 Notice.  Any notice required to be given pursuant to the terms and provisions of this Agreement shall made in accordance with the Notice provisions of the Sponsored Research Agreement.
                                (b)    
 Assignment and Transferability. This Warrant may be assigned or transferred by Hope only with the prior written approval of CTI.
 -4-
 

                                  (c)    
 Headings and Interpretation.  The headings of the various sections of this Agreement are inserted for convenience only and do not, expressly or by implication, limit, define or extend the specific terms of the section so
designated.
                                (d)    
 Governing Law.  The validity, enforceability, and interpretation of this Agreement shall be determined and governed by the internal laws of the State of Washington (and not the law of conflicts).
 -5-
 

             IN WITNESS WHEREOF, CTI has caused this Warrant to be duly executed and
delivered by its duly authorized officer as an instrument under seal as of the date of first above written.

	  
 	 CELL THERAPEUTICS, INC.
 
	  
 	  
 
	  
 	  
 
	  
 	 By:
 	 /s/ JAMES BIANCO
 
	  
 	  
 	 
 
	   
 	   
 	 James A. Bianco
 President and Chief Executive Officer
 

 -6-

  EXHIBIT A
 ELECTION TO PURCHASE

	 TO:
 	 Cell Therapeutics, Inc. (“CTI”)
 
	  
 	 501 Elliott Avenue West
 
	  
 	 Suite 400
 
	  
 	 Seattle, WA  98119
 

               1.     The undersigned, owner of the accompanying Warrant, hereby irrevocably exercises the option to purchase ____
shares of Common Stock of CTI pursuant to the terms of the attached Warrant. 
               2.     Method of Exercise (Please initial the applicable blank):

	  
 	 —
 	 The undersigned elects to exercise the attached Warrant by means of payment by wire transfer or certified or official bank check, and tenders herewith payment in full for the
purchase price of the shares being purchased, together with all applicable transfer taxes, if any.
 
	  
 	  
 	  
 
	  
 	 —
 	 The undersigned elects to exercise the attached Warrant by means of the net issue exercise provisions of Section 2(b) of the Warrant.
 

               3.     Please issue a certificate or certificates representing said Warrant Shares in the name of the
undersigned or in such other name as is specified below:
 
 (Name)
 
 
 
 (Address)
 
 (Federal ID Tax Number or Social Security Number)
 
 (Date of Exercise (must be at least fifteen days after
the date of this Notice))
 

                 4.     The undersigned
hereby represents and warrants that the aforesaid shares of Warrant Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 9 of the attached Warrant are true and correct as of the date hereof.

	  
 	 
 
	  
 	 (Signature)
 
	  
 
	  
 	  
 
	  
 	 
 
	  
 	 (Title)
 
	  
 
	  
 	  
 
	  
 	 
 
	  
 	 (Date)
 

 2

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