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  Exhibit 10.1    
    

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPERATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 
 

EXECUTION COPY    
    

        
August 10, 2009 

MarkWest
Liberty Gas Gathering, L.L.C.

1515 Arapahoe Street

Tower 2, Suite 700

Denver, Colorado 80202-2126 

Gentlemen: 

        Reference
is made to that certain Amended and Restated Limited Liability Company Agreement (the "First Amended Agreement") of MarkWest
Liberty Midstream & Resources, L.L.C. (the "Company"), dated February 27, 2009, by and between M&R MWE Liberty, LLC
("NGPMR") and MarkWest Liberty Gas Gathering, L.L.C. ("MWE Liberty" and together with NGPMR and the
Company, the "Parties"). Capitalized terms not otherwise defined herein shall have the meaning given to them in the First Amended Agreement. 

        Being
all of the Members of the Company, NGPMR and MWE Liberty desire to amend and restate the First Amended Agreement in its entirety and cause the Company to adopt as its limited
liability company agreement a limited liability company agreement in the form attached hereto as Exhibit A (the "Second
Amended Agreement") upon the satisfaction, or due waiver, of each of the following conditions precedent (each a "Condition
Precedent" and, collectively, the "Conditions Precedent"): 

	1.
	As
a condition precedent to each Party's obligation to execute and adopt the Second Amended Agreement, that certain Credit Agreement, dated as of
February 20, 2008, among MarkWest Energy Partners, L.P. ("MWE"), certain subsidiary guarantors, Royal Bank of Canada, as Administrative
Agent and Collateral Agent, and the other lenders party thereto, shall have been amended as is necessary, in the sole discretion of MWE, to permit MWE Liberty to enter into the Second Amended
Agreement and to consummate the transactions contemplated thereby;

	2.
	As
a condition precedent to each Party's obligation to execute and adopt the Second Amended Agreement, each of NGPMR's Investment Committee and the Board of
Directors of the general partner of MarkWest Energy Partners, L.P. shall have approved the Second Amended Agreement and the transactions contemplated thereby;

	3.
	As
a condition precedent to NGPMR's obligation to execute and adopt the Second Amended Agreement, the ** of  ** of a **, no later than October 31, 2009; and

	4.
	As
a condition precedent to each Party's obligation to execute and adopt the Second Amended Agreement, the Parties shall have mutually agreed upon
(a) revisions to Exhibit B to the Second Amended Agreement to reflect (i) the Aggregate Capital Contributions, (ii) the Cash Capital Contributions and (iii) the
Investment Balances of each Member as of a mutually agreed date, (b) revisions to the Base Project list which shall be attached as Exhibit C to the Second Amended Agreement and
(c) a revised Initial Budget which shall be attached as Exhibit D to the Second Amended Agreement. 

        Each
Party hereby agrees to execute and adopt the Second Amended Agreement as the limited liability company agreement of the Company on the second Business Day after all of the
Conditions Precedent have been satisfied or duly waived by the Party or Parties entitled to waive the applicable Condition Precedent, or at such other time and date as is agreed to in writing by the
Parties; provided, however, that notwithstanding anything to the contrary, neither Party shall have any
obligations to execute and adopt the Second Amended Agreement if all of the Conditions Precedent are not satisfied, or duly waived by the Party or Parties entitled to waive each applicable Condition
Precedent, on or prior to October 31, 2009 (or such later date as is mutually agreed to by the Parties in writing). 

        Each
Party hereby acknowledges and agrees that upon the execution and adoption of the Second Amended Agreement in accordance with the terms hereof, the Company shall close the Escrow
Account (as such term is defined in the First Amended Agreement) and all funds in the Escrow Account shall be released from escrow to one of the Company's other bank accounts. The Parties hereby
instruct the appropriate officers of the Company to take such actions as are necessary and advisable in order to in order to close the Escrow Account and accomplish the release of funds described in
the immediately preceding sentence and hereby agree to execute such joint instruction letters or other documents as may be reasonably requested by the Escrow Agent or otherwise in order to effect such
actions. 

        Nothing
contained herein shall be considered to amend, modify, supplement, discharge or waive any provision of the First Amended Agreement unless the Second Amended Agreement is executed
and adopted in accordance with the terms hereof. 

        This
letter agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. This letter agreement contains the entire agreement between the parties hereto with respect to the matters contemplated hereby and supersedes all previous
written or oral negotiations, commitments and understandings. This letter agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument. 

[Signature Page Follows] 

        If
the foregoing meets with your understanding, please evidence your agreement by signing below and returning a copy to me. 

 

			
	 	 	Sincerely,

M&R MWE LIBERTY, LLC

By: /s/ JOHN RAYMOND

  Name:

  Title:

 
	ACKNOWLEDGED AND AGREED

THIS 10th DAY OF AUGUST, 2009:

MARKWEST LIBERTY GAS

GATHERING, L.L.C.

By: /s/ FRANK M. SEMPLE

  Name: Frank M. Semple

  Title: President and CEO

 	 	 

 

 SIGNATURE PAGE TO

LETTER AGREEMENT REGARDING

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

MARKWEST LIBERTY MIDSTREAM & RESOURCES, L.L.C.

 
 

  EXHIBIT A    
    

(See
attached) 

SIGNATURE PAGE TO

LETTER AGREEMENT REGARDING

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

MARKWEST LIBERTY MIDSTREAM & RESOURCES, L.L.C.

 [UNEXECUTED FORM]  

 
    EXHIBIT A    
    

SECOND

AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT 

of

MARKWEST
LIBERTY MIDSTREAM & RESOURCES, L.L.C. 

Dated
as of [                                    ]
[            ], 2009 

 

 
 

TABLE OF CONTENTS    

 

 

						
	 
	 	 
	 	Page 
	  ARTICLE 1 DEFINED TERMS
	 	1
	 	 Section 1.1
	 	 Definitions
	 	1
	  ARTICLE 2 FORMATION AND TERM
	 	

13
	 	 Section 2.1
	 	 Formation
	 	13
	 	 Section 2.2
	 	 Name
	 	13
	 	 Section 2.3
	 	 Term
	 	13
	 	 Section 2.4
	 	 Registered Agent and Office
	 	13
	 	 Section 2.5
	 	 Principal Place of Business
	 	14
	 	 Section 2.6
	 	 Qualification in Other Jurisdictions
	 	14
	  ARTICLE 3 PURPOSE AND POWERS OF THE COMPANY
	 	

14
	 	 Section 3.1
	 	 Purpose
	 	14
	 	 Section 3.2
	 	 Powers of the Company
	 	14
	 	 Section 3.3
	 	 Projects, Restricted Projects, Exempted Projects and Out of Scope Projects
	 	14
	  ARTICLE 4 CAPITAL CONTRIBUTIONS, MEMBER INTERESTS, CAPITAL ACCOUNTS AND FUTURE CAPITAL REQUIREMENTS
	 	

16
	 	 Section 4.1
	 	 Capital Contributions
	 	16
	 	 Section 4.2
	 	 Capital Contribution Defaults
	 	20
	 	 Section 4.3
	 	 Member's Interest
	 	20
	 	 Section 4.4
	 	 Status of Capital Contributions
	 	20
	 	 Section 4.5
	 	 Capital Accounts
	 	21
	 	 Section 4.6
	 	 Capital Accounts Generally
	 	21
	 	 Section 4.7
	 	 Preferred Return
	 	21
	 	 Section 4.8
	 	 Investment Accounts
	 	22
	 	 Section 4.9
	 	 Equalization Target Date
	 	22
	  ARTICLE 5 MEMBERS, MEETINGS AND AMENDMENTS
	 	

23
	 	 Section 5.1
	 	 Powers of Members
	 	23
	 	 Section 5.2
	 	 No Resignation or Expulsion
	 	23
	 	 Section 5.3
	 	 Additional Members
	 	23
	 	 Section 5.4
	 	 Confidentiality Obligations of Members
	 	24
	 	 Section 5.5
	 	 Initial Budget
	 	25
	 	 Section 5.6
	 	 Incentive Interests to MWE Liberty Upon Transfer of NGPMR's Interest
	 	25
	 	 Section 5.7
	 	 Preemptive Rights
	 	26
	 	 Section 5.8
	 	 Registration Rights
	 	26
	  ARTICLE 6 MANAGEMENT
	 	

27
	 	 Section 6.1
	 	 Management Under Direction of the Board
	 	27
	 	 Section 6.2
	 	 Number, Tenure and Qualifications
	 	27
	 	 Section 6.3
	 	 Votes Per Manager; Quorum; Required Vote for Board Action; Meetings of the Board
	 	28
	 	 Section 6.4
	 	 Power to Bind Company
	 	29
	 	 Section 6.5
	 	 Liability for Certain Acts
	 	29
	 	 Section 6.6
	 	 Manager Has No Exclusive Duty to Company
	 	30
	 	 Section 6.7
	 	 Resignation and Withdrawal
	 	30
	 	 Section 6.8
	 	 Removal
	 	30
	 	 Section 6.9
	 	 Vacancies
	 	30
	 	 Section 6.10
	 	 Delegation of Authority; Officers
	 	30

 

 i

 
 

 

						
	 
	 	 
	 	Page 
	 	 Section 6.11
	 	 Designation of Operator
	 	31
	 	 Section 6.12
	 	 Approval of Members
	 	32
	 	 Section 6.13
	 	 Reliance by Third Parties
	 	34
	 	 Section 6.14
	 	 Fees and Expenses of the Managers
	 	35
	 	 Section 6.15
	 	 Budgets
	 	35
	  ARTICLE 7 ASSIGNABILITY OF MEMBER INTERESTS
	 	

36
	 	 Section 7.1
	 	 Prohibition on Assignment During Project Period
	 	36
	 	 Section 7.2
	 	 Transfers After the Project Period
	 	37
	 	 Section 7.3
	 	 Recognition of Assignment by Company or Other Members
	 	39
	 	 Section 7.4
	 	 Effective Date of Assignment
	 	39
	 	 Section 7.5
	 	 Limitations on Transfer
	 	40
	 	 Section 7.6
	 	 Transferee Not a Substitute Member
	 	40
	  ARTICLE 8 DISTRIBUTIONS TO MEMBERS
	 	

40
	 	 Section 8.1
	 	 Available Cash
	 	40
	 	 Section 8.2
	 	 Incentive Interest Percentage Distributions
	 	41
	 	 Section 8.3
	 	 Withholding
	 	41
	 	 Section 8.4
	 	 Limitations on Distribution
	 	41
	 	 Section 8.5
	 	 Tax Distributions
	 	41
	  ARTICLE 9 ALLOCATIONS
	 	

42
	 	 Section 9.1
	 	 Profits and Losses
	 	42
	 	 Section 9.2
	 	 Special Allocations
	 	42
	 	 Section 9.3
	 	 Curative Allocations
	 	43
	 	 Section 9.4
	 	 Income Tax Allocations
	 	44
	 	 Section 9.5
	 	 Allocation and Other Rules
	 	44
	  ARTICLE 10 BOOKS AND RECORDS
	 	

45
	 	 Section 10.1
	 	 Inspection Rights Pursuant to Law
	 	45
	 	 Section 10.2
	 	 Books and Records
	 	45
	 	 Section 10.3
	 	 Financial Statements and Reports
	 	45
	 	 Section 10.4
	 	 Accounting Method
	 	46
	 	 Section 10.5
	 	 Bank Accounts; Investments
	 	46
	  ARTICLE 11 TAX MATTERS
	 	

46
	 	 Section 11.1
	 	 Taxation of Company
	 	46
	 	 Section 11.2
	 	 Tax Returns
	 	46
	 	 Section 11.3
	 	 Member Tax Return Information
	 	46
	 	 Section 11.4
	 	 Tax Matters Representative
	 	46
	 	 Section 11.5
	 	 Right to Make Section 754 Election
	 	47
	 	 Section 11.6
	 	 Tax Elections
	 	47
	 	 Section 11.7
	 	 Tax Reimbursement
	 	47
	  ARTICLE 12 LIABILITY, EXCULPATION AND INDEMNIFICATION
	 	

48
	 	 Section 12.1
	 	 Liability
	 	48
	 	 Section 12.2
	 	 Exculpation
	 	48
	 	 Section 12.3
	 	 Indemnification
	 	48
	 	 Section 12.4
	 	 Expenses
	 	48
	 	 Section 12.5
	 	 Insurance
	 	49
	 	 Section 12.6
	 	 Certain Liabilities
	 	49
	 	 Section 12.7
	 	 Acts Performed Outside the Scope of the Company
	 	49
	 	 Section 12.8
	 	 Liability of Members to Company or Other Members
	 	49

 

 ii

 
 

 

						
	 
	 	 
	 	Page 
	 	 Section 12.9
	 	 Attorneys' Fees
	 	49
	 	 Section 12.10
	 	 Subordination of Other Rights to Indemnity
	 	49
	 	 Section 12.11
	 	 Survival of Indemnity Provisions
	 	49
	  ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION
	 	

50
	 	 Section 13.1
	 	 No Dissolution
	 	50
	 	 Section 13.2
	 	 Events Causing Dissolution
	 	50
	 	 Section 13.3
	 	 Notice of Dissolution
	 	50
	 	 Section 13.4
	 	 Liquidation
	 	50
	 	 Section 13.5
	 	 Termination
	 	51
	 	 Section 13.6
	 	 Claims of the Members or Third Parties
	 	51
	 	 Section 13.7
	 	 Distributions In-Kind
	 	51
	  ARTICLE 14 REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	

52
	 	 Section 14.1
	 	 Representations, Warranties and Covenants
	 	52
	  ARTICLE 15 MISCELLANEOUS
	 	

53
	 	 Section 15.1
	 	 Notices
	 	53
	 	 Section 15.2
	 	 Failure to Pursue Remedies
	 	53
	 	 Section 15.3
	 	 Cumulative Remedies
	 	53
	 	 Section 15.4
	 	 Binding Effect
	 	53
	 	 Section 15.5
	 	 Interpretation
	 	54
	 	 Section 15.6
	 	 Severability
	 	54
	 	 Section 15.7
	 	 Counterparts
	 	54
	 	 Section 15.8
	 	 Integration
	 	54
	 	 Section 15.9
	 	 Amendment or Restatement
	 	54
	 	 Section 15.10
	 	 Governing Law
	 	54
	 	 Section 15.11
	 	 Dealings in Good Faith
	 	54
	 	 Section 15.12
	 	 Partition of the Property
	 	55
	 	 Section 15.13
	 	 Third Party Beneficiaries
	 	55
	 	 Section 15.14
	 	 Tax Disclosure Authorization
	 	55
	 	 Section 15.15
	 	 Waivers and Consents
	 	55
	 	 Section 15.16
	 	 Deadlocks; Negotiations
	 	55
	 	 Section 15.17
	 	 Dispute Resolution
	 	56
	 	 Section 15.18
	 	 Transaction Expenses
	 	58

 

  

 

 

			
	EXHIBITS:	 	 
	
 Exhibit A	
 	
Area of Mutual Interest
	Exhibit B	 	Members and Capital Contributions
	Exhibit C	 	Base Project
	Exhibit D	 	Initial Budget
	Exhibit E	 	Illustrative Example Calculation of Incentive Interests
	Exhibit F	 	[Reserved]
	Exhibit G	 	Capital Expenditures for Agreements
	Exhibit H	 	Pre-Approved Affiliated Transactions
	Exhibit I	 	[Reserved]
	Exhibit J	 	[Reserved]
	Exhibit K	 	[Reserved]

 

 iii

 

 
 

SECOND    
    
    AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT    
    
    OF    
    
    MARKWEST LIBERTY MIDSTREAM & RESOURCES, L.L.C.    

        THIS
SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of MarkWest Liberty Midstream & Resources, L.L.C., a Delaware limited liability
company (the "Company"), is executed and agreed to as of [                        ]
[      ], 2009, by
and among MarkWest Liberty Gas Gathering, L.L.C., a Delaware limited liability company ("MWE Liberty"), M&R MWE Liberty, LLC, a Delaware limited
liability company ("NGPMR"), and such other Persons who may become Members of the Company from time to time pursuant hereto. 

        WHEREAS,
MWE Liberty, as the then sole member of the Company, entered into that certain Limited Liability Company Agreement (the "Original
Agreement") of the Company, dated as of January 20, 2009; 

        WHEREAS,
pursuant to Section 11 of the Original Agreement, the Original Agreement was amended and restated in its entirety as set forth in that certain Amended and Restated
Limited Liability Company Agreement (the "First Amended Agreement") of the Company, dated as of February 27, 2009, and in connection therewith
MWE Liberty and NGPMR became the sole Members of the Company; 

        WHEREAS,
contemporaneously with the execution of the First Amended Agreement and in order to effect the contribution of the cash consideration comprising NGPMR's initial Capital
Contribution and the assets comprising MWE Liberty's initial Capital Contribution, the Company, MWE Liberty and NGPMR entered into that certain Contribution Agreement, dated January 22, 2009
(the "Contribution Agreement"), pursuant to which MWE Liberty agreed to contribute, convey, assign and transfer to the Company all of MWE Liberty's
right, title and interest in and to the assets referenced thereunder; 

        WHEREAS,
contemporaneously with the execution of the First Amended Agreement and in order to provide for the provision of certain services to the Company, the Company, MWE Liberty and
MarkWest Hydrocarbon, Inc., a Delaware corporation ("MWE Hydrocarbon") entered into that certain Services Agreement, dated February 27,
2009, (the "Services Agreement"); 

        WHEREAS,
pursuant to Section 15.9 of the First Amended Agreement, the Company and the Members desire to amend and restate the First Amended Agreement in its entirety to, among
other things, revise the amount and timing of the additional Capital Contributions that certain of the Members have agreed to make to the Company; 

        NOW
THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the First Amended Agreement is
hereby amended and restated in its entirety to read as follows: 

 
 

  ARTICLE 1
  DEFINED TERMS    
    

        Section 1.1    Definitions.    

        Unless
the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified. 

        "AAA" shall have the meaning set forth in Section 6.15(e). 

        "Accountants" shall have the meaning set forth in Section 4.1(a)(iii). 

        "Act" means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as
it may be amended from time to time, and any successor statute thereto. 

        "Additional Member" shall have the meaning set forth in Section 5.3(a). 

 

        "Additional Projects" shall have the meaning set forth in Section 3.3(a). 

        "Adjusted Capital Account" means the Capital Account maintained for each Member (a) increased by any amounts the Member is
obligated to contribute or restore to the Company pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), and
(b) decreased by any amounts described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) with respect to such Member. 

        "Adjusted Capital Account Deficit" means a deficit balance in the Adjusted Capital Account of a Member. 

        "Affiliate" means with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by, or is under Common
Control with, the specified Person. 

        "Affiliate Contract" means any contract between the Company or any Subsidiary of the Company, on the one hand, and a Member or an
Affiliate of a Member, on the other hand. 

        "Affiliated Member Group" means (a) the MWE Liberty Group, (b) the NGPMR Group and (c) any other Member and
transferee of Interests directly or indirectly (in the chain of title) from such Member that is an Affiliate of such transferee Member; provided, however, that once a Person is
designated as a member of any Affiliated Member Group, such Person shall, as long as it owns any Interests, at all times be a member of such Affiliated Member Group and not a member of any other
Affiliated Member Group, and provided, further, that for purposes of this clause (c) of this definition, an Affiliate shall not include a member of the MWE Liberty Group or the NGPMR Group. 

        "Agreement" means this Second Amended and Restated Limited Liability Company Agreement, as amended, modified, supplemented or restated
from time to time. 

        "Annual Financial Statements" shall have the meaning set forth in Section 10.3(a). 

        "Approved Budget" shall have the meaning set forth in Section 6.15(b). 

        "Arbitration Panel" shall have the meaning set forth in Section 6.15(e). 

        "Area of Mutual Interest" means the area ** identified  ** as Exhibit A. 

        "Assumed Tax Liability" shall have the meaning set forth in Section 8.5(a). 

        "Available Cash" means, with respect to any period prior to the dissolution of the Company, all cash and cash equivalents of the Company
on hand at the end of such period less the amount of any cash reserves established by the Operator to provide for the proper conduct of the business of the Company, including reserves for: future
capital expenditures; current, future or contingent liabilities; anticipated future credit needs of the Company; and debt service and repayments; provided that such reserves shall not equal less than  **
as authorized in the Approved Budget nor more than ** in the Approved Budget, without the approval of
the Board and Requisite Member Approval. 

        "Base Project" shall have the meaning set forth in Section 3.3(a). 

        "Board" shall have the meaning set forth in Section 6.1. 

        "Budget Rejection Notice" shall have the meaning set forth in Section 6.15(b). 

        "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks are required or authorized by law to be
closed in the State of Texas or the State of Colorado. 

        "Capital Account" means, with respect to any Member, the capital account maintained for such Member in accordance with the provisions of
Section 4.5. 

2

 

        "Capital Call" means a call or request for additional capital in writing (which may include electronic mail) by or on behalf of the
Company, specifying the amount of capital requested to be contributed by each Member receiving such notice in accordance with the terms of this Agreement. 

        "Capital Contribution" means, with respect to any Member, the aggregate amount of cash and the initial Gross Asset Value of any property
other than cash contributed to the Company pursuant to Article 4 hereof by such Member. Any reference in this Agreement to a Capital Contribution of a Member shall include a Capital
Contribution contributed by its predecessors in interest. 

        "Cash Capital Contribution" means, with respect to any Member, the aggregate amount of cash contributed to the Company by such Member
disregarding (A) any Investment Balance credit pursuant to Section 4.1(b)(iv) and (B) any accrued Preference Amount. 

        "Certificate" means the Certificate of Formation of the Company filed on behalf of the Company with the office of the Secretary of State
of the State of Delaware pursuant to the Act on January 20, 2009, and any and all amendments thereto and restatements thereof. 

        "Claims" shall have the meaning set forth in Section 6.5. 

        "Class A Interest" means an Interest in the Company which is classified on Exhibit B as a Class A Interest and which
has the rights, powers and privileges enjoyed by a Member holding a Class A Percentage Interest (under the Act, the Certificate, this Agreement or otherwise) in its capacity as a Member, and
all obligations, duties and liabilities imposed on such a Member (under the Act, the Certificate, this Agreement or otherwise) in its capacity as a Member. 

        "Class A Manager" shall have the meaning set forth in Section 6.2. 

        "Class A Member" means a Member who is designated on Exhibit B as a Class A Member, in its capacity as a holder of a
Class A Percentage Interest. 

        "Class A Percentage Interest" means, with respect to a Class A Member, the quotient (expressed as a percentage) obtained by
dividing such Class A Member's Investment Balance by the aggregate Investment Balances of all Class A Members. 

        "Class B Interest" means an Interest in the Company which is classified on Exhibit B as a Class B Interest and which
has the rights, powers and privileges enjoyed by a Member holding a Class B Percentage Interest (under the Act, the Certificate, this Agreement or otherwise) in its capacity as a Member, and
all obligations, duties and liabilities imposed on such a Member (under the Act, the Certificate, this Agreement or otherwise) in its capacity as a Member. 

        "Class B Manager" shall have the meaning set forth in Section 6.2. 

        "Class B Member" means a Member who is designated on Exhibit B as a Class B Member, in its capacity as a holder of a
Class B Percentage Interest. 

        "Class B Percentage Interest" means, with respect to a Class B Member, the quotient (expressed as a percentage) obtained by
dividing such Class B Member's Investment Balance by the aggregate Investment Balances of all Class B Members. 

        "Class B Seller" shall have the meaning set forth in Section 7.2(b). 

        "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding federal tax statute enacted after the
date of this Agreement. 

        "Company" shall have the meaning set forth in the preamble. 

        "Company Minimum Gain" shall have the meaning assigned to the term "partnership minimum gain" in Treasury Regulations
Sections 1.704-2(b)(2) and 1.704-2(d). 

3

 

        "Company Nonrecourse Liability" shall have the meaning assigned to the term "nonrecourse liability" in Treasury Regulations
Section 1.704-2(b)(3) 

        ** shall have the meaning set forth in Section 4.9(b). 

        ** shall have the meaning set forth in Section 4.9(c). 

        "Confidential Information" shall mean all information provided or made available by or on behalf of the Company or its Representatives to
a Member or its Representatives, including all information, data, reports, interpretations, contract terms and conditions, forecasts and records containing or otherwise reflecting information
concerning the Company or its Affiliates, potential counterparties or customers or their Affiliates, potential projects, business plans or proposals, market or economic data, identities of actual or
potential counterparties or customers, designs, concepts, trade secrets and other business, operational or technical information (irrespective of the form of communication of such information) and
together with analyses, compilations, studies or other documents, whether prepared by or on behalf of a Member or its Representatives, which contain or otherwise reflect such information (irrespective
of the form of communication of such information). "Confidential Information" also includes information of third parties, including such information as may be subject to any Third Party
Confidentiality Agreements. Notwithstanding the foregoing, Confidential Information shall not include the following: (a) information which at the time of disclosure by or on behalf of the
Company is publicly available or which later becomes publicly available through no act or omission of the disclosing Member or its Representatives; (b) information which a Member can
demonstrate was in its possession on a non-confidential basis prior to disclosure by or on behalf of the Company hereunder; (c) information received by a Member from a third party
who is not prohibited from transmitting the information by a contractual, legal or fiduciary obligation; or (d) information which a Member can demonstrate was independently developed by it or
for it and which was not derived or obtained, in whole or in part, from Confidential Information or from the Company or its Representatives hereunder. 

        "Contributing Class A Member" shall mean a Class A Member who makes a Quarterly Budgeted Funding Election in accordance with
Sections 4.1(c) or (d). 

        "Contributing Class B Member" shall mean a Class B Member who makes a Quarterly Budgeted Funding Election in accordance with
Section 4.1(d). 

        "Contribution Agreement" shall have the meaning set forth in the recitals. 

        "Control," including the correlative terms "Controlling," "Controlled by" and "Under Common Control with" means possession, directly or
indirectly (through one or more intermediaries), of the power to direct or cause the direction of the management or policies (whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a Person. For the purposes of this definition, ownership of more than 50% of the voting interests of any entity shall be conclusive evidence that
Control exists. 

        "Covered Person" means, in each case, whether or not a Person continues to have the applicable status referred to in the following list: a
Member; a Manager; the Operator; any Affiliate of a Member or a Manager or of the Operator; any officers of the Company, whether or not such officers are employees of the Company; any officers,
directors, members, managers, stockholders, partners, employees, representatives or agents of any Manager or Member or of the Operator, or of any of their respective Affiliates; any employee or agent
of the Company or its Affiliates; and any Tax Matters Member of the Company. 

        "CP Index" means the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index—All Urban Consumers,
U.S. City Average, Not Seasonally Adjusted, or, if such index is 

4

 

discontinued,
any successor or substitute index, which, in the Board's reasonable opinion, is most nearly equivalent to such index. 

        "Debt" for any Person means, without duplication: (a) indebtedness of such Person for borrowed money, including obligations under
letters of credit and agreements relating to the issuance of letters of credit or acceptance financing; (b) obligations of such Person evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations of such Person to pay the deferred purchase price of property or services (including, without limitation, obligations that are non-recourse to the
credit of such Person but are secured by the assets of such Person, but excluding trade accounts payable); (d) obligations of such Person under capital leases; and (e) obligations of
such Person under guarantees in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (d) above; provided that "Debt" shall not include the incurrence
of trade debt in the ordinary course of business. 

        "Default Rate" means a per annum rate of interest equal to the lower of ** and the maximum
rate of interest then permitted by law. 

        "Defaulting Member" shall have the meaning set forth in Section 4.2. 

        "Depreciation" means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery
deduction allowable for federal income tax purposes with respect to an asset for such Fiscal Year or other period and in a manner consistent with the methodologies employed by MWE or otherwise
determined by the Board; provided, however, that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other
period, Depreciation for such Fiscal Year or other period shall equal to the amount of book basis recovered for such Fiscal Year or other period under the rules prescribed by Treasury Regulation
Section 1.704-3(d)(2) and provided further, that if the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Board. 

        "Designated MWE Employees" has the meaning ascribed to such term in the Services Agreement. 

        "Dispute" has the meaning set forth in Section 15.17(a). 

        "Economic Risk of Loss" shall have the meaning assigned to that term in Treasury Regulation Section 1.752-2(a). 

        "Effective Time" means 12:01 a.m. on January 1, 2009. 

        "Election Period" shall have the meaning set forth in Section 5.7(b). 

        "Electing Member" shall have the meaning set forth in Section 5.7(b). 

        "Eligible Member" shall have the meaning set forth in Section 5.7(a). 

        "Enforcement Activities" shall have the meaning set forth in Section 6.3(a). 

        "Equalization Date" shall mean the first date after ** on which the quotient (expressed as
a percentage) obtained by dividing the aggregate Investment Balances of all members of the MWE
Liberty Group by the aggregate Investment Balances of all members of the MWE Liberty Group plus all members of the NGPMR Group is equal to or greater than 51%. 

        "Equalization Target Date" shall have the meaning set forth in Section 4.9(a). 

        "Exchange Act" means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, as amended and any
successor statutes thereto. 

        "Exempted Project" shall have the meaning set forth in Section 3.3(b). 

5

 

 

        "Final Impasse" shall have the meaning set forth in Section 15.16(b). 

        "First Amended Agreement" shall have the meaning set forth in recitals. 

        "First Notice" shall have the meaning set forth in Section 5.7(b). 

        "Fiscal Year" means (i) the period commencing at the Effective Time and ending on December 31, 2010 and (ii) any
subsequent 12 month period commencing on January 1 and ending on December 31. 

        "Fractionation and NGL Purchase Agreement" means that certain Fractionation and NGL Purchase Agreement, dated February 27, 2009, by
and between MWE Hydrocarbon and the Company, as amended, restated and supplemented from time to time. 

        "G&A Services" has the meaning ascribed to such term in the Services Agreement. 

        "GAAP" means generally accepted accounting principles in the United States. 

        ** means that certain ** by and between MarkWest Liberty Gas Gathering, L.L.C. and  **, as amended, restated and
supplemented from time to time. 

        "Gross Asset Value" means, with respect to any asset, such asset's adjusted basis for federal income tax purposes, except as follows: 

        (a)   the
initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as agreed to by the contributing
Member and the Board, except that MWE Liberty's initial Capital Contribution shall have the gross asset value determined in accordance with Section 4.1(a); 

        (b)   the
Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board, in connection with:
(i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution or in exchange for the performance of
services to or for the benefit of the Company; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company assets as consideration for an interest in the
Company; and (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g) (other than pursuant to Section 708(b)(1)(B)
of the Code) or any other event to the extent determined by the Board to be necessary to properly reflect the Gross Asset Values in accordance with the standards set forth in Treasury Regulations
Section 1.704-1(b)(2)(iv)(q); provided, however, that adjustments pursuant to clause (i) and clause (ii) of this sentence shall be made only if the Board reasonably
determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; 

        (c)   the
Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution, as determined by the
Board and the distributee Member; and 

        (d)   the
Gross Asset Values of Company assets shall be adjusted to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m). 

If
the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraph (a) or paragraph (b) above, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. 

        "Impasse" shall have the meaning set forth in Section 15.16(a). 

6

 

        "Impasse Notice" shall have the meaning set forth in Section 15.16(a). 

        "Incentive Interest Transaction" shall have the meaning set forth in Section 5.6. 

        "Indentures" has the meaning ascribed to such term in the Contribution Agreement. 

        "Indemnitee" shall have the meaning set forth in Section 12.7. 

        "Indemnitor" shall have the meaning set forth in Section 12.7. 

        "Initial Budget" shall have the meaning set forth in Section 5.5. 

        "Interest" means the interest of a Member in the Company, including both Class A Percentage Interests and Class B Percentage
Interests, including rights to distributions (liquidating or otherwise), allocations, notices and information, rights to approve of or consent to certain matters (if applicable) and all other rights,
benefits and privileges enjoyed by that Member (under the Act, the Certificate, this Agreement, or otherwise) in its capacity as a Member; and all obligations, duties and liabilities imposed on that
Member (under the Act, the Certificate, this Agreement, or otherwise) in its capacity as a Member. 

        "Investment Account" shall have the meaning set forth in Section 4.8. 

        "Investment Balance" shall have the meaning set forth in Section 4.8. 

        "Investment Threshold" shall have the meaning set forth in Section 4.1(c). 

        "IPO Issuer" means (a) the Company or (b) an Affiliate of the Company which will be a successor to the Company and the
issuer in a Qualified Public Offering. 

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. 

        "Liquidating Trustee" shall have the meaning set forth in Section 13.4(a). 

        "Manager" shall have the meaning set forth in Section 6.1. 

        "Member" means any Person (but not any Affiliate or entity in which such Person has an equity interest) executing this Agreement and any
Person admitted as an Additional Member or a Substitute Member pursuant to the provisions of this Agreement, in such Person's capacity as a Member of the Company, and "Members" means two or more of
such Persons, in their capacities as Members of the Company. Such terms do not include any Person or Persons who have ceased to be Members in the Company. 

        "Member Nonrecourse Debt" has the meaning assigned to the term "partner nonrecourse debt" in Treasury Regulation
Section 1.704-2(b)(4). 

        "Member Nonrecourse Debt Minimum Gain" shall have the meaning assigned to the term "partner nonrecourse debt minimum gain" in Treasury
Regulation Section 1.704-2(i)(2). 

        "Member Nonrecourse Deductions" shall have the meaning assigned to the term "partner nonrecourse deductions" in Treasury Regulation
Section 1.704-2(i)(1). 

        "Minimum Gain" shall have the meaning assigned to that term in Treasury Regulation Section 1.704-2(d). 

        "Minimum Price" shall have the meaning set forth in Section 7.2(b)(ii). 

        "Monthly Reports" shall have the meaning set forth in Section 10.3(c). 

        "MWE" means MarkWest Energy Partners, L.P., a Delaware limited partnership. 

        "MWE Hydrocarbon" shall have the meaning set forth in the recitals. 

7

 

        "MWE Liberty" shall have the meaning set forth in the preamble. 

        "MWE Liberty Group" means MWE Liberty and each transferee of Interests directly or indirectly (in the chain of title) from MWE Liberty
that is an Affiliate of MWE Liberty; provided, however, that once a Person is designated as a member of the MWE Liberty Group such Person shall, as long as it owns any Interests, at all times be a
member of the MWE Liberty Group and not a member of any other Affiliated Member Group; provided further, that for purposes of this definition, an Affiliate shall not include a member of any other
Affiliated Member Group. 

        "New Interests" shall have the meaning set forth in Section 5.7(a). 

        "NGPMR" shall have the meaning set forth in the preamble. 

        "NGPMR Covered Persons" has the meaning ascribed to such term in the Contribution Agreement. 

        "NGPMR Exit Transaction" means ** involving the Company in which  ** in which the ** prior to the ** of the Company  ** or a ** of the Company**. For the avoidance of doubt,
any **

        "NGPMR Group" means NGPMR and each transferee of Interests directly or indirectly (in chain of title) from NGPMR that is an Affiliate of
NGPMR; provided, however, that once a Person is designated as a member of the NGPMR Group such Person shall, as long as it owns any Interests, at all times be a member of the NGPMR Group and not a
member of any other Affiliated Member Group, and, provided further, that for purposes of this definition, an Affiliate shall not include a member of any other Affiliated Member Group. 

        "NGPMR Portfolio Companies" shall have the meaning set forth in Section 3.3(c). 

        "NGPMR Representatives" shall mean the members, managers and employees of NGPMR or any Affiliate thereof, together with all other persons
serving as representatives of NGPMR, including those Persons who are serving as Managers at the request of NGPMR pursuant to this Agreement. 

        "Non-Contributing Class A Member" shall mean a Class A Member who does not elect to make a Quarterly Budgeted
Funding Election in accordance with Section 4.1(c). 

        "Non-Contributing Class B Member" shall mean a Class B Member who does not elect to make a Quarterly Budgeted
Funding Election in accordance with Section 4.1(d). 

        "Nonrecourse Deductions" shall have the meaning assigned to that term in Treasury Regulation Section 1.704-2(b). 

        "Operator" means the Person designated as the "Operator" of the Company in accordance with Section 6.11. 

        "Original Agreement" shall have the meaning set forth in the recitals. 

        "Out of Scope Project" means any project, activity, or business venture (a) outside the Area of Mutual Interest or (b) not
within the scope of the Primary Business of the Company (whether inside or outside the Area of Mutual Interest). 

        "Over-Allotment Amount" shall have the meaning set forth in Section 5.7(b). 

        "Overfunded Capital" means, as of any determination date (a) on or prior to **, the
difference (expressed as a dollar amount) between **, and (b) after **, the difference (expressed
as a dollar amount) between **. 

        "Partial NGPMR Exit Transaction" means ** after which the  ** in the **
after which the **

8

 

        "Percentage Interest" means: 

        (a)   at
any time on or prior to December 31, 2010: 

          (i)  with
respect to a Class A Member, the product (expressed as a percentage) of (1) 40% and (2) such Member's Class A Percentage Interest; and 

         (ii)  with
respect to a Class B Member, the product (expressed as a percentage) of (1) 60% and (2) such Member's Class B Percentage Interest. 

        (b)   at
any time after December 31, 2010, but prior to the earlier to occur of the Equalization Date and **: 

          (i)  with
respect to a Class A Member, the product (expressed as a percentage) of (1) 49% and (2) such Member's Class A Percentage Interest; and 

         (ii)  with
respect to a Class B Member, the product (expressed as a percentage) of (1) 51% and (2) such Member's Class B Percentage Interest. 

        (c)   at
any time on or after the earlier to occur of the Equalization Date and **, with respect to any Member (including any
Class A Member or Class B Member), the quotient (expressed as a percentage) obtained by dividing the Investment Balance of such Member by the Investment Balances of all Members. 

        "Permitted Liens" means (a) statutory liens for current taxes or assessments not yet due and delinquent or the validity of which is
being contested in good faith by appropriate proceedings and for which adequate reserves have been established; (b) mechanics', carriers', workers', repairers' and other similar liens arising
or incurred in the ordinary course of business; and (c) all applicable zoning ordinances and land use restrictions. 

        "Permitted Transfers" shall have the meaning set forth in Section 7.1. 

        "Personnel Services" has the meaning ascribed to such term in the Services Agreement. 

        "Person" means any natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company,
joint venture, association, company, estate, trust, bank trust company, land trust, business trust, or other organization, whether or not a legal entity, custodian, trustee-executor, administrator,
nominee or entity in a representative capacity and any government or agency or political subdivision thereof. 

        "Preference Amount" means an amount calculated on the last day of each calendar quarter following the Effective Time and prior to the
Equalization Date by determining the difference between (a) the amount of Overfunded Capital as of the last day of such quarter, multiplied by the Preference Rate and (b) the amount of
all distributions made during such calendar quarter pursuant to Section 8.1(b)(i)(A). The Preference Amount for the prior calendar quarter shall be added to the Investment Balance as of the
first day of the following calendar quarter. 

        "Preference Rate" means a quarterly rate expressed as a percentage equal to ** per annum,
divided by four. 

        "Primary Business" shall have the meaning set forth in Section 3.1(a). 

        "Profits" or "Losses" means, for each Fiscal Year, an amount equal to the Company's
taxable income or loss for such Fiscal Year, determined in accordance with Section 703(a) of the Code (but including in taxable income or loss, for this purpose, all items of income, gain, loss
or deduction 

9

 

required
to be stated separately pursuant to Section 703(a)(1) of the Code), with the following adjustments: 

        (a)   any
income of the Company exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added
to such taxable income or loss; 

        (b)   any
expenditures of the Company described in Section 705(a)(2)(B) of the Code (or treated as expenditures described in Section 705(a)(2)(B) of the Code
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be subtracted
from such taxable income or loss; 

        (c)   in
the event the Gross Asset Value of any Company asset is adjusted in accordance with paragraph (b) or paragraph (c) of the definition of "Gross Asset
Value", the amount of such adjustment shall be taken into account as gain (if the adjustment increases the Gross Asset Value of the Company asset) or loss (if the adjustment decreases the Gross Asset
Value of the Company asset) from the disposition of such asset for purposes of computing Profits or Losses; 

        (d)   gain
or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; 

        (e)   in
lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year or other period, computed in accordance with the definition of "Depreciation"; 

        (f)    to
the extent an adjustment to the adjusted tax basis of any asset pursuant to Code Section 734(b) is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Account balances as a result of a distribution other than in liquidation of a Member's interest in
the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or an item of loss (if the adjustment decreases such basis) from the
disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and 

        (g)   notwithstanding
any other provisions of this definition, any items which are specially allocated pursuant to Section 9.2 or 9.3 shall not be taken into account in
computing Profits or Losses. 

        "Project Period" shall have the meaning set forth in Section 7.1. 

        "Projects" shall have the meaning set forth in Section 3.3(a). 

        "Property" means all of the assets and property now owned or hereafter acquired by the Company. 

        "Proposed Budget" shall have the meaning set forth in Section 6.15(a). 

        "Proposed Purchaser" shall have the meaning set forth in Section 5.7(a). 

        "Prudent Industry Practices" means, at a particular time, any of the practices, methods and acts which,  ** based upon the **, and the **, at such time, is  ** operation and maintenance of the Company assets and shall include, without limitation, the practices, methods and
acts engaged in or approved by
** at such time with respect to the assets of the same or similar types as the Company assets. Prudent Industry Practices are not intended to be limited
to ** to the exclusion of all others, but 

10

 

rather
is ** practices, methods and acts which ** at a  ** as well as with the **. Prudent Industry Practices are intended to entail the  **, in the **, use from time to time.
 

        "Qualified Public Offering" means any underwritten initial public offering by the IPO Issuer of equity securities pursuant to an effective
registration statement under the Securities Act and for which aggregate cash proceeds to be received by the IPO Issuer from such offering (without deducting underwriting discounts, expenses and
commissions) are at least $50,000,000. 

        "Qualifying Third Party Offer" shall have the meaning set forth in Section 7.2(a)(ii). 

        "Quarterly Budgeted Funding Election" shall have the meaning set forth in Sections 4.1(c) and (d). 

        "Quarterly Financial Statements" shall have the meaning set forth in Section 10.3(b). 

        "Regulatory Allocations" shall have the meaning set forth in Section 9.3. 

        "Remaining Members" shall have the meaning set forth in Section 7.2(a). 

        "Representatives" means (a) with respect to the Company, any of: (i) the Company's Affiliates; and (ii) directors,
officers, managers, employees, members, partners, agents and authorized representatives (including attorneys, accountants, consultants, bankers, lenders and financial advisors) of the Company
and the Company's Affiliates and (b) with respect to a Member, any of: (i) such Member's Affiliates; (ii) directors, officers, managers, employees, members, stockholders,
partners, agents and authorized representatives (including attorneys, accountants, consultants, bankers, lenders and financial advisors) of the Member and the Member's Affiliates; and
(iii) Persons who are (or who are prospective) beneficial owners of equity interests in such Member. 

        "Requisite Member Approval" means the approval of each Affiliated Member Group holding Interests with (i) an aggregate Percentage
Interest equal to or exceeding ** or (ii) an **. 

        "Restricted Project" has the meaning set forth in Section 3.3(b). 

        "ROFO Interest" shall have the meaning set forth in Section 7.2(a). 

        "ROFO Offer" shall have the meaning set forth in Section 7.2(a). 

        "Rules" shall have the meaning set forth in Section 6.15(e). 

        "Sale Proposal" shall have the meaning set forth in Section 7.2(b)(i). 

        "Securities Act" means the Securities Act of 1933, and the rules and regulations promulgated thereunder, as amended and any successor
statutes thereto. 

        "Services Agreement" shall have the meaning set forth in the recitals. 

        "Solicitation Notice" shall have the meaning set forth in Section 7.2(b)(ii). 

        "Solicitation Period" shall have the meaning set forth in Section 7.2(a)(ii). 

        "Solicitation Response" shall have the meaning set forth in Section 7.2(b)(ii). 

        "Subsidiary" means, with respect to any Person, (a) any corporation, of which a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote generally in the election of directors thereof is at the time owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person or a combination thereof or (b) any limited liability company, partnership, association or other business entity, of which a majority of
the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes of this definition, a Person or Persons will be deemed to have a 

11

 

majority
ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons will be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses, or is or controls the managing member or general partner of such limited liability company, partnership, association or other
business entity. 

        "Substitute Member" means a Person who is admitted to the Company as a Member pursuant to Article 7, and then designated as a
"Member" on an amended Exhibit B to this Agreement. 

        "Tag-Along Members" shall have the meaning set forth in Section 7.2(b). 

        "Tag-Along Notice" shall have the meaning set forth in Section 7.2(b)(i). 

        "Tag-Along Notice Period" shall have the meaning set forth in Section 7.2(b)(i). 

        "Tag-Along Rights" shall have the meaning set forth in Section 7.2(b). 

        "Tax Distribution Date" shall have the meaning set forth in Section 8.5(a). 

        "Tax Matters Member" shall have the meaning set forth in Section 11.4(a). 

        "Third Party Confidentiality Agreements" means that certain ** among MWE Liberty,  **, the **, that certain ** between
** and MWE Liberty, that certain ** between ** and MWE
Liberty ** and that certain ** between ** and MWE
Liberty ** or any other third party agreement entered into by or on behalf of the Company and delivered to a Member. 

        "Third Party Offer" shall have the meaning set forth in Section 7.2(a)(ii). 

        "** Payout" shall mean the dollar threshold, if any, at which the NGPMR Group has received a cumulative cash amount in respect of the
NGPMR Group's Interests (whether as distributions from the Company or as cash payment in an Incentive Interest Transaction) equal to the ** as of the
date of such cash payment ** where ** is equal to the **
determined as of the date of such cash payment or distribution. 

        "** Payout Threshold" shall mean the receipt by the NGPMR Group of a cumulative cash amount in respect of the NGPMR Group's Interests
(whether as distributions from the Company or as cash payment in an Incentive Interest Transaction) equal to the ** where  ** is equal to the ** determined as of the date of such distribution or cash payment. 

        "** Percentage" shall mean **. 

        **

        "Transaction Documents" shall have the meaning set forth in Section 5.1(b). 

        "Transfer" means any direct or indirect transfer, assignment, sale, conveyance, license, lease, or partition of any Interest, and includes
any "involuntary transfer" such as a sale of any part of the Interest therein in connection with any bankruptcy or similar insolvency proceedings, or any other disposition of any Interest. A Transfer
shall not include any pledge, hypothecation or encumbrance of any Interest. 

        "Transferring Member" shall have the meaning set forth in Section 7.2(a). 

        "Treasury Regulations" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of succeeding regulations). 

        "True-Up Contribution" shall have the meaning set forth in Section 4.9(a). 

        ** means that certain ** by and between MWE Liberty and  ** as amended by Amendment No. 1 to ** by and between MWE Liberty and  **. 

12

 

        "Unrelated Information" shall have the meaning set forth in Section 10.2. 

        "Weighted Average Capital Contribution Factor" shall mean as of any date of calculation, a weighted average  ** the amounts determined for each date on which NGPMR has
made Capital Contributions (including without limitation the Capital Contributions funded on
the date hereof) calculated as ** of the total ** years from the date of each Capital Contribution until
the date of such calculation (with a partial year being expressed as a decimal determined by dividing the number of days which have passed since the most recent anniversary by 365). Solely for
purposes of determining Capital Contributions under this definition, (i) ** shall be treated as a Capital Contribution made by the NGPMR Group as
of the date **, and (ii) any other amounts ** shall be treated as Capital Contributions made by
the NGPMR Group as of the date **. 

 
 

  ARTICLE 2
  FORMATION AND TERM    
    

        Section 2.1    Formation.    

        (a)   The
Company was organized as a Delaware limited liability company under and pursuant to the Act by the filing of the Certificate by an authorized person and is being
continued pursuant to the terms of this Agreement. 

        (b)   The
name and mailing address of each Member and the total amount which has been contributed to the capital of the Company through the date hereof is listed on
Exhibit B. The Board shall cause Exhibit B to be updated, from time to time, as may be necessary to accurately reflect the information therein. Any amendment or revision to
Exhibit B made in accordance with this Agreement shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to Exhibit B shall be deemed to be a reference to Exhibit B, as amended, revised and in effect from time to time. 

        Section 2.2    Name.    

        The
business and affairs of the Company shall be conducted under the name "MarkWest Liberty Midstream & Resources, L.L.C." and such name shall be used at all times in connection
with the Company's business and affairs, except to the extent the Board agrees to the use by the Company of assumed names or other trade names or fictitious names. The Company's Managers or officers
or the Operator shall execute such assumed or fictitious name certificates as may be desirable or required by law to be filed in connection with the business and affairs of the Company and shall cause
such certificates to be filed in all appropriate public records. 

        Section 2.3    Term.    

        The
term of the Company commenced upon the effectiveness of the Certificate and shall continue perpetually, unless the Company is dissolved in accordance with the provisions of this
Agreement. 

        Section 2.4    Registered Agent and Office.    

        The
registered office of the Company required by the Act to be maintained in Delaware shall be the office of the initial registered agent named in the Certificate or such other office
(which need not be a place of business of the Company) as the Board may designate in the manner provided by law. The registered agent of the Company in Delaware shall be the initial registered agent
named in the Certificate or such other Person or Persons as the Board may designate in the manner provided by law. 

13

 

 

        Section 2.5    Principal Place of Business.    

        The
principal place of business of the Company shall be 1515 Arapahoe Street, Tower 2, Suite 700, Denver, CO 80202. At any time, the Board may change the location of the Company's
principal place of business. The Company may have such other places of business as the Board or the Operator may designate. 

        Section 2.6    Qualification in Other Jurisdictions.    

        The
Managers, the officers of the Company or the Operator shall cause the Company to be qualified, formed or registered under assumed or fictitious name statutes or similar laws in any
jurisdiction in which the Company transacts business. The Managers, the officers of the Company or the Operator shall execute, deliver and file any certificates (and any amendments and/or restatements
thereof) necessary or appropriate for the Company to qualify and continue to do business in a jurisdiction in which the Company may wish to conduct business. At the request of the Board or the
Operator, each Member shall execute, acknowledge, swear to and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue and
terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business, provided that no Member shall be required to file any general consent
to service of process or to qualify as a foreign corporation, limited liability company, partnership or other entity in any jurisdiction in which it is not already so qualified. 

 
 

  ARTICLE 3
  PURPOSE AND POWERS OF THE COMPANY    
    

        Section 3.1    Purpose.    

        (a)   The
purpose of the Company is to engage in the natural gas midstream business, including but not limited to natural gas gathering and processing, and the natural gas
liquids processing, fractionation, transportation, storage and marketing businesses in the Area of Mutual Interest and to fulfill the obligations of the Company pursuant to any contract entered into
by the Company or under which the Company has assumed obligations of any Person (the "Primary Business"), and to engage in any other business or
activity that now or in the future may be necessary, incidental, proper, advisable or convenient to accomplish the foregoing purpose and that is not forbidden by the law of the jurisdiction in which
the Company engages in such business or activity. 

        (b)   In
no event shall this Agreement be held or construed to imply the existence of a partnership (including a limited partnership) or joint venture among the Members and no
Member shall be held or construed to be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes. No Member shall have any power or authority under
this Agreement to act as the agent or representative of the Company or any other Member with regard to any matter beyond the scope of this Company. 

        Section 3.2    Powers of the Company.    

        The
Company shall have all powers and privileges granted by the Act, any other law, or by this Agreement, including incidental powers thereto, to the extent that such powers and
privileges are necessary, customary, convenient or incidental to the attainment of the Company's purpose. 

        Section 3.3    Projects, Restricted Projects, Exempted Projects and Out of Scope Projects.    

        (a)   As
part of the Primary Business, the Company shall use commercially reasonable efforts to pursue the acquisition, development, construction and operation of natural gas
gathering and processing, and natural gas liquids fractionation, transportation, storage and marketing assets 

14

 

described
on Exhibit C (such activities, the "Base Project"). From time to time, the Company may also pursue the acquisition, development,
construction and operation of additional midstream assets in the Area of Mutual Interest in accordance with this Agreement (such activities, the "Additional
Projects" and, collectively with the Base Project, the "Projects"). 

        (b)   No
Class B Member (either directly or indirectly through one or more Affiliates) shall, own, operate, manage, control, engage in, participate in, invest in,
finance, render services for, assist others in, or otherwise carry out any Primary Business (a "Restricted Project") other than through the Company,
without Requisite Member Approval, except as follows (any Restricted Project engaged in pursuant to one of the following exceptions is an "Exempted
Project"): 

          (i)  MWE
Liberty or its Affiliates may engage in a Restricted Project outside the Company without Requisite Member Approval if the pursuit of such Restricted Project by the
Company does not receive approval of the Board pursuant to Section 6.1 and Requisite Member Approval pursuant to Section 6.12, and the Company therefore is unable to pursue the
Restricted Project; 

         (ii)  MWE
Hydrocarbon may perform its obligations under the Fractionation and NGL Purchase Agreement; and 

        (iii)  A
Class B Member or its Affiliates may ** as part of **
Restricted Projects, provided that ** such Class B Member ** the Company  **
of ** as ** the Class B Member. In connection
with ** the Company and the other Members **. Members holding Interests with an aggregate Percentage
Interest ** Class B Member ** shall have the **
this Section 3.3(b)(iii) (which, for clarity purposes, shall not **). Such Members may, by written notice to the Company  ** the Class B Member
** the Class B Member  ** the Class B Member **. For the avoidance of doubt,  ** the Restricted Project shall have ** prior to **. In
the event that ** the Restricted Project, the ** the Class B Member  ** the Class B Member or
** the Class B Member.  ** Class B Member ** the Company. 

        Each
Member recognizes and affirms that in the event of breach by such Member of any of the provisions of this Section 3.3(b), money damages may be inadequate and the
non-breaching Members may have no adequate remedy at law. Accordingly, each Member agrees that the non-breaching Members shall have the right, in addition to any other rights
and remedies existing in their favor, to enforce their rights and each of the Members' obligations under this Section 3.3(b) not only by an action or actions for damages, but also by an action
or actions for specific performance, injunctive and/or other equitable relief in order to enforce or
prevent any violations (whether anticipatory, continuing or future) of the provisions of this Section 3.3(b). 

        (c)   The
Company and the Members recognize that: (i) NGPMR and its Affiliates own and will own substantial equity interests in other companies (existing and future)
that participate in the energy industry ("NGPMR Portfolio Companies") and have in the past and will in the future enter into advisory service agreements
with such NGPMR Portfolio Companies; (ii) the NGPMR Representatives who serve as Managers also serve as principals of other NGPMR Portfolio Companies; and (iii) at any time, other NGPMR
Portfolio Companies may be in direct or indirect competition with the Company and/or its Subsidiaries. The Company and the Members acknowledge and agree that NGPMR, its Affiliates and NGPMR
Representatives: (A) shall not be prohibited or otherwise restricted by their relationship with the Company and its Subsidiaries from engaging in the business of investing in NGPMR Portfolio
Companies, entering into agreements to provide services to such NGPMR Portfolio Companies or acting as directors or advisors to, or other principals of, such NGPMR Portfolio Companies, regardless of
whether such activities are in direct or indirect competition with the Company or the Primary Business, (B) shall not have any obligation to offer the Company or its Subsidiaries any business
opportunity resulting from NGPMR and its Affiliates' ownership in the NGPMR Portfolio Companies, and (C) the Company 

15

 

and
the Members hereby renounce any interest or expectancy in any such business opportunity pursued by NGPMR, its Affiliates, the NGPMR Representatives or another NGPMR Portfolio Company and waive any
claim that any such business opportunity constitutes a corporate, partnership or other business opportunity of the Company or any of its Subsidiaries; provided, however, that nothing contained in this
Section 3.3(c) is intended to limit the confidentiality obligations in Section 5.4 and NGPMR, its Affiliates, the NGPMR Portfolio Companies and the NGPMR Representatives are expressly
prohibited from using any Confidential Information (i) to pursue any such business opportunity, (ii) in providing services to the NGPMR Portfolio Companies or (iii) in acting as
directors or advisors to, or other principals of, such companies. 

        (d)   No
Member or its Affiliates shall have any obligation to communicate or offer any Out of Scope Projects to the Company or the other Members. The Members acknowledge and
agree that each Member, and their respective Affiliates, may presently or in the future engage in and/or possess an interest in other business ventures of every nature and description, independently
or with others, outside of the Area of Mutual Interest, whether or not such business ventures are within the scope of the Primary Business, or within the Area of Mutual Interest, so long as such
ventures constitute Out of Scope Projects or Exempted Projects, and neither the Company nor any other Members shall have any right by virtue of this Agreement in and to any Out of Scope Projects or
Exempted Projects, or to the income or profits derived therefrom. 

 
 

  ARTICLE 4
  CAPITAL CONTRIBUTIONS, MEMBER INTERESTS,
  CAPITAL ACCOUNTS AND FUTURE CAPITAL REQUIREMENTS    
    

        Section 4.1    Capital Contributions.    

        (a)   Current
Capital Contributions. On or prior to the date hereof, MWE Liberty and NGPMR have made the respective Capital Contributions to the Company in the amounts set
forth on Exhibit B in exchange for the Percentage Interest and the type of Interest set forth on Exhibit B. The Members hereby acknowledge and agree that the Capital Contributions set
forth on Exhibit B include the gross fair market value of MWE Liberty's initial Capital Contribution of $107,501,953, as such amount was finally determined in accordance with
Section 4.1(a) of the First Amended Agreement. 

        (b)   Additional
Capital Contributions Prior to the Equalization Date. 

          (i)  The
Class A Members have collectively contributed Cash Capital Contributions through the date hereof in the amount listed on Exhibit B. The Class A
Members hereby agree to make additional Cash Capital Contributions to the Company, on an as needed basis, until such time as the Class A Members have made aggregate Cash Capital Contributions
of **. At each time when the Company requires additional capital pursuant to this Section 4.1(b)(i), the Board shall issue a Capital Call to the
Class A Members and such Members shall contribute to the Company the amount of capital so required within ten Business Days after receipt of such Capital Call. Capital Calls issued pursuant to
this Section 4.1(b)(i) shall not be made more frequently than 30 days following the prior Capital Call. 

         (ii)  After
the Class A Members have made aggregate Cash Capital Contributions equal to **, the Class A Members
and the Class B Members hereby collectively agree to make additional Capital Contributions to the Company, on an as needed basis, such contributions to be made on a  ** (Class A Members) and
** (Class B Members) relative basis, until such time as the
Class A Members have made aggregate Cash Capital Contributions of **. At each time when the Company requires additional capital pursuant to this
Section 4.1(b)(ii), the Board 

16

 

shall
issue a Capital Call to the Class A Members and the Class B Members and such Members shall contribute to the Company the amount of capital so required within ten Business Days
after receipt of
such Capital Call. Capital Calls issued pursuant to this Section 4.1(b)(ii) shall not be made more frequently than 30 days following the prior Capital Call. At such time as the
Class A Members have made aggregate Cash Capital Contributions of **, no Class A Member shall have any obligation to make additional
Capital Contributions to the Company, unless such Class A Member elects to contribute capital pursuant to Sections 4.1(b)(iii), 4.1(c) or 4.1(d). 

        (iii)  After
the Class A Members have made aggregate Cash Capital Contributions equal to **, the Class B Members
hereby agree to make additional Capital Contributions to the Company, on an as needed basis, until the occurrence of the Equalization Date. Prior to the occurrence of the Equalization Date, at each
time when the Company requires additional capital pursuant to this Section 4.1(b)(iii), the Board shall issue a Capital Call to the Class A Members and the Class B Members.
Concurrent with the issuance of each such Capital Call, the Class B Members shall make an initial election of the minimum percentage of such requested capital that the Class B Members
desire to contribute to the Company. Such initial election shall be ** of the additional capital so requested by the Board and the  ** of the Class B
Members shall be included in the Capital Call. Within five Business Days after the receipt of such Capital Call, each
Class A Member shall elect whether to contribute additional capital to the Company. Each Class A Member may elect to contribute an amount up to and including  **. The election of each
Class A Member shall be irrevocable and shall be made in writing (which may include electronic mail) to the Company. In
the event any Class A Member fails to provide a written election within such five Business Day period, such Class A Member will be deemed to have elected not to participate in such
Capital Call. Promptly following such five Business Day period, the Company shall provide written notice to the Class B Members of their respective obligation with respect to such Capital Call,
giving effect to the elections of the Class A Members. Within 15 Business Days after receipt of such Capital Call, the electing Class A Members shall contribute to the Company the amount
of capital elected to be contributed by such Class A Members pursuant to this Section 4.1(b)(iii), and the Class B Members shall contribute to the Company the remainder of the
additional capital requested by the Board in such Capital Call. Capital Calls issued pursuant to this Section 4.1(b)(iii) shall not be made more frequently than 30 days following the
prior Capital Call. Notwithstanding the foregoing, the Class A Members and the Class B Members shall not make any Capital Contributions pursuant to this Section 4.1(b)(iii) and
the Company shall not issue any Capital Calls for any such Capital Contributions unless and until each of the Capital Contributions by the Class A Members and the Class B Members set
forth in Sections 4.1(b)(i) and (ii) have been spent by the Company or committed to be spent in accordance with an Approved Budget. 

        (iv)  The
Class B Members hereby agree that, any distributions of Available Cash payable to a Class B Member pursuant to Section 8.1(a) prior to
December 31, 2010 shall be distributed and automatically reinvested by each Class B Member as additional Capital Contributions without the issuance of any Capital Call. In accordance
with Section 8.1(a), the Class A Members acknowledge and agree that they shall not receive any distributions of Available Cash prior to December 31, 2010; provided, however that
the amount that each Class A Member would have received if Available Cash were distributed prior to December 31, 2010, shall increase the Investment Balance of such Class A Member
on a dollar-for-dollar basis. Once December 31, 2010 has occurred, Available Cash shall be distributed in accordance with Section 8.1(b)(ii). 

17

 

         (v)  It
is the intent of the Members that Capital Calls will generally only be made for amounts required by the Company with respect to the 90 day period following the
date the applicable Capital Contributions are to be made, and that Capital Calls will only be made for expenses approved or authorized in accordance with this Agreement. 

        (c)   Capital
Contributions After the Equalization Date But Prior to Investment Threshold. 

          (i)  If
the Company requires additional capital to pursue any Project or in connection with the operation of the Primary Business after the Equalization Date but prior to
the time that ** the Class A Members and Class B Members is ** (the
"Investment Threshold"), then, with respect to funding for Projects or operations within the then current Approved Budget, the Class A Members
shall elect (such election, a "Quarterly Budgeted Funding Election") on a quarterly basis whether to contribute additional capital that may be required
to fund such Projects or operations for the upcoming calendar quarter. The Class A Members may elect to contribute an amount up to and including their then applicable respective Percentage
Interests of the additional capital so requested by the Board. Such Quarterly Budgeted Funding Election shall be irrevocable, and shall be made in writing (which may include electronic mail) to the
Company no less than 30 days prior to the commencement of the upcoming calendar quarter. If one or more Class A Members elect not to participate, or fail to make any election (which
shall be deemed to be an election not to contribute), then such Non-Contributing Class A Member(s) shall have no obligation to contribute additional capital to fund Projects or
operations within the then current Approved Budget for such upcoming calendar quarter. With respect to each Contributing Class A Member, at least ten days prior to the beginning of such
calendar quarter, the Board shall issue to such Contributing Class A Member a Capital Call that identifies the amount of capital that the Company needs in connection with such Projects or
operations for such quarter. Each Contributing Class A Member shall in accordance with such Class A Member's Quarterly Budgeted Funding Election contribute such requested capital to the
Company within ten Business Days after the issuance of each such quarterly Capital Call. 

         (ii)  After
the Equalization Date but prior to the satisfaction of the Investment Threshold, the Class B Member(s) may contribute on a quarterly basis all additional
capital (less any capital to be contributed by the Contributing Class A Members for such upcoming calendar quarter) required to fund Projects or operations within the then current Approved
Budget for the upcoming calendar quarter, including any capital required to reduce any capital shortfall that may result from Non-Contributing Class A Member elections during such
calendar quarter; provided, that the Class B Member(s) shall provide written notice to the other Members on a quarterly basis regarding their decision to fund additional capital and the amount
of such Capital Contribution. 

        (iii)  If
elections to contribute capital by the Contributing Class A Members and the Class B Member(s) are less than the total amount of capital required by
the Company pursuant to this Section 4.1(c), then the Company may seek to obtain the requested capital from third parties, which may include issuing additional Interests in the Company pursuant
to and subject to Section 5.3 and Section 5.7, if applicable. 

        (d)   Capital
Contributions After the Equalization Date and Investment Threshold. 

          (i)  If
the Company requires additional capital to pursue any Project or in connection with the operation of the Primary Business after the Equalization Date and the
satisfaction of the Investment Threshold, then, with respect to funding for Projects or operations within the then current Approved Budget, the Class B Members shall initially elect (such
election, also a Quarterly Budgeted Funding Election) on a quarterly basis whether to contribute additional capital that may be required to fund such Projects or operations for the upcoming calendar 

18

 

quarter.
Each Class B Member may elect to contribute up to a percentage of such additional capital so requested by the Board equal to the **.
Such Quarterly Budgeted Funding Election shall be irrevocable, and shall be made in writing (which may include electronic mail) to the Company no less than 30 days prior to the commencement of
the upcoming calendar quarter. If one or more Class B Members elect not to participate, or fail to make any election (which shall be deemed to be an election not to contribute), then such
Non-Contributing Class B Member(s) shall have no obligation to contribute additional capital to fund Projects or operations within the then current Approved Budget for such upcoming
calendar quarter. With respect to each Contributing Class B Member, at least ten days prior to the beginning of such calendar quarter, the Board shall issue to such Contributing Class B
Member a Capital Call that identifies the amount of capital that the Company needs in connection with such Projects or operations for such quarter. Each Contributing Class B Member shall in
accordance with such Class B Member's Quarterly Budgeted Funding Election and any further election pursuant to Section 4.1(d)(iii) contribute such requested capital to the Company within
ten Business Days after the issuance of each such quarterly Capital Call. 

         (ii)  After
the Equalization Date and the satisfaction of the Investment Threshold, the Class A Member(s) may contribute on a quarterly basis additional capital in an
amount up to and including their then applicable respective Percentage Interests of the additional capital ** required to fund Projects or operations
within the then current Approved Budget for the upcoming calendar quarter. Twenty-five days prior to the commencement of the upcoming calendar quarter, the Company shall notify the
Class A Members of any election by the Class B Members to contribute capital for such upcoming calendar quarter made in accordance with Section 4.1(d)(i). Within five days, the
Class A Members shall elect whether to contribute additional capital required to fund such Projects or operations for the upcoming calendar quarter. Any such election shall state the percentage
of such additional capital that such Class A Member desires to contribute. Such Quarterly Budgeted Funding Election shall be irrevocable, and shall be made in writing (which may include
electronic mail) to the Company and the Class B Members. If one or more Class A Members elect not to participate, or fail to make any election (which shall be deemed to be an election
not to contribute), then such Non-Contributing Class A Member(s) shall have no obligation to contribute additional capital to fund Projects or operations within the then current
Approved Budget for such upcoming
calendar quarter. With respect to each Contributing Class A Member, at least ten days prior to the beginning of such calendar quarter, the Board shall issue to such Contributing Class A
Member a Capital Call that identifies the amount of capital that the Company needs in connection with such Projects or operations for such quarter. Each Contributing Class A Member shall in
accordance with such Class A Member's Quarterly Budgeted Funding Election contribute such requested capital to the Company within ten Business Days after the issuance of such quarterly Capital
Call. 

        (iii)  Within
fifteen days prior to the commencement of the upcoming calendar quarter, the Contributing Class B Members may elect to contribute additional capital to
the Company to reduce any capital shortfall that may result from the Quarterly Budgeted Funding Elections made pursuant to Sections 4.1(d)(i) and (ii), but only if the Class B Members
have elected to contribute an amount that is at least equal to the product of the Percentage Interests of all of the Class B Members and the aggregate amount of additional capital requested by
the Board for the upcoming calendar quarter pursuant to Section 4.1(d)(i). Such an election (also a Quarterly Budgeted Funding Election) with respect to a capital shortfall shall be
irrevocable, and shall be made in writing (which may include electronic mail) to the Company and the Class A Members. 

19

 

        (iv)  If
elections to contribute capital by the Contributing Class B Members and the Contributing Class A Member(s) pursuant to Sections 4.1(d)(i),
(ii) and (iii) are less than the total amount of capital required by the Company pursuant to this Section 4.1(d), then the Company may seek to obtain the requested capital from
third parties, which may include issuing additional Interests in the Company pursuant to and subject to Section 5.3 and Section 5.7, if applicable. 

        (e)   Percentage
Interests Adjustment. For the avoidance of doubt, the Percentage Interests of the Members shall be subject to adjustment (upward and downward) pursuant to
Sections 4.1(c) and (d), based upon the Members' respective Investment Balances giving effect to any additional Capital Contributions. 

        Section 4.2    Capital Contribution Defaults.    

        If
a Member fails to contribute any capital to the Company that is required to be so contributed pursuant to Section 4.1, such Member shall be considered in default (a
"Defaulting Member"), but shall remain fully obligated to contribute such capital to the Company. The Company shall be entitled to pursue all remedies
available at law or in equity against the Defaulting Member, including any one or more of the following: 

        (a)   the
Company may take all actions, including court proceedings, as the other Members may deem appropriate, to obtain payment by the Defaulting Member of the required
amount of the Capital Contribution remaining unpaid, together with interest thereon at the Default Rate from the date that the required Capital Contribution was required to be contributed to the
Company until the date it is so contributed, at the cost and expense of the Defaulting Member; and 

        (b)   the
non-defaulting Members may advance the portion of the Defaulting Member's Capital Contribution that is in default, in accordance with the
non-defaulting Members' respective Percentage Interests, and, at the option of the non-defaulting Members, the non-defaulting Members making such advance may be
deemed to have made a loan to the Defaulting Member in the amount of the Capital Contribution so advanced, which loan shall bear interest at the Default Rate from the date that such advance is made
until the loan is repaid in full, and until such loan is repaid in full, the non-defaulting Members making such loan to the Defaulting Member shall be entitled to receive all distributions
of Available Cash that would otherwise be payable to the Defaulting Member hereunder, in accordance with the non-defaulting Members' respective Percentage Interests. 

        Section 4.3    Member's Interest.    

        A
Member's Interest shall for all purposes be personal property. Title to the Company's assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member, Manager, Operator or officer of the Company shall have any ownership interest in such Company assets. 

        Section 4.4    Status of Capital Contributions.    

        (a)   Except
as otherwise provided in this Agreement, no Member, or the successor or assign of a Member, may demand a return of its Capital Contributions, in whole or in part.
An unrepaid Capital Contribution is not a liability of the Company or of any Member. 

        (b)   No
Member or Affiliate of any Member shall receive any interest, return, compensation or drawing with respect to its Capital Contributions or its Capital Account, except
as otherwise specifically provided in this Agreement. 

20

 

        (c)   Except
as otherwise provided in this Agreement, no Member shall be required to lend any funds or make any additional Capital Contributions to the Company. No Member
shall have any personal liability for the repayment of any other Member's Capital Contribution or be required to contribute or lend any cash or property to the Company to enable the Company to repay
any Member's Capital Contributions. 

        Section 4.5    Capital Accounts.    

        (a)   A
separate Capital Account shall be established and maintained for each Member in accordance with the requirements of Treasury Regulations
Section 1.704-1(b)(2)(iv). The original Capital Account established for any Member who acquires an Interest by virtue of an assignment in accordance with the terms of this Agreement
shall be in the same amount as and shall replace the Capital Account of the assignor of such Interest. To the extent such Member acquires less than all of the Interest of the assignor of the Interest
so acquired by such Member, the original Capital Account of such Member and its Capital Contributions shall be in proportion to the Interest it acquires, and the Capital Account of the assignor who
retains an Interest shall be reduced in proportion to the Interest it retains. 

        (b)   The
Capital Account of each Member shall be maintained in accordance with the following provisions: 

          (i)  to
such Member's Capital Account there shall be credited such Member's Capital Contributions, such Member's distributive share of Profits, special allocations of income
and gain, and the net amount of any Company liabilities that are assumed by such Member or that are secured by any Company assets distributed to such Member; 

         (ii)  to
such Member's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Company assets distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive share of Losses, special allocations of loss and deduction, and the net amount of any liabilities of such Member that are assumed by the Company
or that are secured by any property contributed by such Member to the Company; 

        (iii)  in
determining the amount of any liability for purposes of this Section 4.5(b), there shall be taken into account Section 752(c) of the Code and any
other applicable provisions of the Code and the Treasury Regulations; and 

        (iv)  the
Capital Accounts shall be increased or decreased upon a revaluation of Company property pursuant to clause (b) of the definition of Gross Asset Value in the
manner prescribed in Treasury Regulation Section 1.704-1(b)(2)(iv)(f). 

        Section 4.6    Capital Accounts Generally.    

        (a)   Except
as otherwise provided in this Agreement, whenever it is necessary to determine the Capital Account of any Member for any purpose hereunder, the Capital Account of
such Member shall be determined after giving effect to all adjustments provided for in Section 4.5 for the current Fiscal Year in respect of transactions effected prior to the date such
determination is to be made. 

        (b)   No
Member shall be entitled to withdraw any part of its Capital Account, or to receive any distribution from the Company except as specifically provided in this
Agreement. 

        Section 4.7    Preferred Return.    

        For
the avoidance of doubt, the Class A Interests shall accrue the Preference Amount until the Equalization Date, after which time the Preference Amount shall no longer accrue. 

21

 

        Section 4.8    Investment Accounts.    

        The
Company shall maintain an investment account (an "Investment Account") for each Member, the balance of which (the
"Investment Balance") shall represent the sum of a Member's initial Capital Contribution, any additional Capital Contributions made by a Member pursuant
to Sections 4.1(b), 4.1(c), 4.1(d) and 4.9, and with respect to each Class A Member, (i) the Preference Amount and (ii) the amount that is retained by the Company in
accordance with Section 4.1(b)(iv) and which such Class A Member would have otherwise received if Available Cash were distributed prior to December 31, 2010. The Investment
Balance for each Class A Member shall be reduced by any actual distributions to such member of Available Cash pursuant to Section 8.1(b)(i)(A) and Sections 13.4(a)(i)(A) and (B).
For the avoidance of doubt, the Investment Balance of each Member as of the date hereof is set forth on Exhibit B. An assignee of all or any portion of an Interest shall succeed to a portion of
the assignor Member's Investment Account in proportion to the Interest acquired. 

        Section 4.9    Equalization Target Date.    

        (a)   All
distributions of Available Cash received by the MWE Liberty Group after ** pursuant to any provision of this
Agreement shall automatically be contributed to the Company as additional Capital Contributions until the Equalization Date occurs. If the Equalization Date has not occurred on or before
December 31, 2012 (the "Equalization Target Date"), then the Class A Members holding at least a majority of the Class A Percentage
Interests may elect by written notice to require MWE Liberty to make an additional cash Capital Contribution (the "True-Up Contribution")
sufficient to result in the Equalization Date occurring within ** after the Equalization Target Date. MWE Liberty shall cause such True-Up
Contribution to be made and the Equalization Date to occur within ** of the requesting notice of the requisite Class A Members. To the extent
that the Company does not have commitments to spend the True-Up Contribution in accordance with the Approved Budget (and any amendments or modifications to such Approved Budget approved
prior to the date of the True-up Contribution) in effect at the time MWE Liberty is required to make the True-Up Contribution, then, at the end of the first full fiscal quarter
following the date of the True-Up Contribution, the Company shall distribute any amount of the True-Up Contribution not spent or committed to be spent in accordance with such
Approved Budget, and any approved amendments thereto, to the Members in accordance with their Percentage Interests. For clarification purposes, it is the intent of the Members that the
True-Up Contribution be an amount such that after payment of the True-Up Contribution is made by MWE Liberty, the Percentage Interest of the MWE Liberty Group is 51% and the
Percentage Interest of the NGPMR Group is 49%. 

        (b)   If
MWE Liberty fails to make the True-Up Contribution in accordance with Section 4.9(a) above, then the Interests held by the MWE Liberty Group shall
not be ** of the Company; provided, however, that the
then controlling Members shall not ** to the MWE Liberty Group in any material respect ** of the MWE
Liberty Group. Additionally, NGPMR shall have the ** subject to the provisions of ** to any Person,
other than an Affiliate or partner of any member of the NGPMR Group or any NGPMR Portfolio Company, **, (B) all Members  ** any Person, other than an
Affiliate or partner of any member of the NGPMR Group or any NGPMR Portfolio Company, of all of  ** or (C) the Company to ** other than an Affiliate or
partner of any member of the NGPMR Group
or any NGPMR Portfolio Company, **. 

22

 

        (c)   Within
five days after receipt of any notice of **, the Board shall notify each Member, in writing,  ** shall identify the **, including the form of the **
and provide a copy of **. Each Member agrees that ** it will (i) take such action as may
reasonably be required, including **, (ii) cause its designated Managers to take such action required, to  **, (iii) provide for the execution of
such agreements and such instruments and other actions reasonably necessary to provide, to the extent
necessary, ** relating to such **, in each case only to the extent that  **; provided
that, no Affiliated Member Group shall be obligated in respect of any  ** and referred to in the immediately preceding clause in such ** for an  ** to such Affiliated Member Group in **. The Member proposing  ** shall have the right in
connection with ** (or in connection with the
**) to require the Company to cooperate fully with ** by taking all customary and other actions
reasonably requested by the Member **, including making the ** reasonably available  **, establishing a
** in connection with such processes and making  ** activities, in each case subject to **. The Company and
each Member shall provide assistance with
respect to these actions as reasonably requested by the Member **. In addition, once ** under this
Section 4.9, the Board shall be entitled to take all steps reasonably necessary to carry out **, including  **; provided, however, that the rights granted the Board
in this sentence shall not permit the Board to **. 

 
 

  ARTICLE 5
  MEMBERS, MEETINGS AND AMENDMENTS    
    

        Section 5.1    Powers of Members.    

        (a)   Except
for the right to consent to or approve certain matters as expressly provided in this Agreement, the Members in their capacity as Members shall not have any other
power or authority to manage the business or affairs of the Company or to bind the Company or enter into agreements on behalf of the Company. 

        (b)   To
the fullest extent permitted by law and notwithstanding any provision of this Agreement or any other document executed in connection with this Agreement (a
"Transaction Document") to the contrary, no Member in its capacity as a Member shall have any duty, fiduciary or otherwise, to the Company or any other
Member in connection with the business and affairs of the Company or any consent or approval given or withheld pursuant to this Agreement or any other Transaction Document. 

        (c)   Any
matter requiring the consent or approval of the Members pursuant to this Agreement may be taken without a meeting, without prior notice and without a vote, by a
consent in writing, setting forth such consent or approval, and signed by Members holding Interests not less than the requisite Interests necessary to consent to or approve such action; provided that
at least one Class A Member shall be required to sign such consent or approval in order for such consent to be effective in the event that the Class A Members did not receive prior
written notice of the action to be so taken. Prompt notice of such consent or approval shall be given by the Company to those Members who have not joined in such consent or approval. 

        Section 5.2    No Resignation or Expulsion.    

        A
Member may not take any action to resign, withdraw or retire as a Member voluntarily, and a Member may not be expelled or otherwise removed involuntarily as a Member, prior to the
dissolution and winding up of the Company, other than as a result of a Permitted Transfer of all of such Member's Interests in accordance with Article 7 and each of the transferees of such
Interests being admitted as a Substitute Member. 

        Section 5.3    Additional Members.    

        (a)   After
the Board makes a Capital Call pursuant to Section 4.1(c) or Section 4.1(d) that was not fully funded by the Members and subject to the preemptive
rights set forth in Section 5.7 

23

 

to
the extent applicable, the Company is authorized to issue additional Interests and to admit any Person as an additional member of the Company (each, an "Additional
Member" and collectively, the "Additional Members"). Upon receipt of requisite approval of the Board and the Members, the
Company is authorized to issue additional Interests and to admit any Person as an additional member of the Company (each, an "Additional Member" and
collectively, the "Additional Members"). Each such Person receiving additional Interests shall be admitted as an Additional Member at the time such
Person (i) executes a counterpart signature page agreeing to be bound hereby and such other documents or instruments as may be required in the Board's reasonable judgment to effect the
admission, and (ii) is designated as a Member (with a corresponding Percentage Interest) on an amended or supplemental Exhibit B. The Company may issue additional Interests or additional
classes of
membership interests to existing Members or to new or Additional Members in exchange for such Capital Contributions, including cash, property or services or any combination thereof. 

        (b)   Additional
Members shall not be entitled to any retroactive allocation of the Company's income, gains, losses, deductions, credits or other items; provided that, subject
to the restrictions of Section 706(d) of the Code, Additional Members shall be entitled to their respective share of the Company's income, gains, losses, deductions, credits and other items
arising under contracts entered into before the effective date of the admission of any Additional Members to the extent that such income, gains, losses, deductions, credits and other items arise after
such effective date. To the extent consistent with Section 706(d) of the Code and Treasury Regulations promulgated thereunder, the Company's books may be closed at the time Additional Members
are admitted (as though the Company's tax year had ended) or the Company may credit to the Additional Members pro rata allocations of the Company's income, gains, losses, deductions, credits and items
for that portion of the Company's Fiscal Year after the effective date of the admission of the Additional Members. 

        Section 5.4    Confidentiality Obligations of Members.    

        (a)   Each
Member agrees that all Confidential Information shall be kept confidential by the Member, shall only be used for the purpose of reviewing and evaluating the
performance of the Company and the Member's Interest therein, and shall not be disclosed in any manner, except to such of the Member's Representatives who have a need to know and who agree to be, or
are otherwise, bound by the Member's obligations hereunder and except as otherwise expressly permitted in this Section 5.4. Each Member shall be responsible for any breach of this
Section 5.4 by itself or any of its Representatives, and each Member covenants and agrees that it shall promptly notify the Company of any actual, potential or threatened breach of this
Section 5.4 and shall, at its own expense, enforce, and assist the Company in its enforcement of, the provisions of this Section 5.4, including, to the extent reasonably necessary,
seeking specific enforcement through court proceedings. Subject to Section 5.4(b), if a Member or any of its Representatives is requested or required by applicable law, rule or regulation,
regulatory authority, subpoena, civil investigation, court order, demand or similar legal process to disclose any Confidential Information, the Member shall, to the maximum extent permitted by
applicable law, provide the Company with prompt written notice thereof and will use reasonable efforts to resist disclosure, until an appropriate protective order or motion to quash may be sought or a
waiver of compliance with this Section may be granted. If, in the absence of a protective order or the receipt of a waiver hereunder, such Member or any of its Representatives is, in the opinion of
its legal counsel, legally required to disclose Confidential Information, then such Member or its Representatives may disclose only that portion of the Confidential Information legally required to be
disclosed, without liability hereunder, provided that such Member or its Representatives uses reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the
Confidential Information. Each Member acknowledges and agrees that the Company and the other Members may be irreparably 

24

 

harmed
by disclosure of the Confidential Information, that money damages would not be a sufficient remedy for any breach of this Section 5.4 by such Member or its Representatives and that, in
addition to any other remedies available at law or in equity, specific performance and injunctive or other equitable remedies shall be available to the Company and the Members as a remedy for any such
breach or threatened breach, without the requirement of posting bond or other security. The Company and the other Members shall be entitled to recover their costs and expenses, including attorneys'
fees, incurred in connection with any successful action brought by them to enforce the terms of this Agreement. With respect to Confidential Information that is subject to confidentiality agreements
under any Third Party Confidentiality Agreements, each Member covenants and agrees to, and shall cause its Representatives to, treat such Confidential Information confidentially in accordance with,
and to comply with the terms of, the confidentiality provisions contained in those Third Party Confidentiality Agreements that have been disclosed to such Member, including, any provisions thereof
that impose more stringent or additional obligations than those set forth herein (provided such has been disclosed to such Member). The obligations of a Member pursuant to this Section 5.4
shall continue following the time such Person ceases to be a Member, but thereafter such Person shall not have the right to enforce the provisions hereof. Notwithstanding anything set forth herein,
all covenants made herein by a Member are for the sole benefit of the Company and the other Members and there shall be no third party beneficiaries of any of such covenants. 

        (b)   Notwithstanding
anything to the contrary in this Agreement, each Member may disclose any information about the Company, including any Confidential Information, without
any liability to the Company or to any other Member or to their respective Affiliates and without any notice to any Member, to the extent that such disclosing Member believes that such disclosure is
necessary or appropriate to satisfy its public disclosure obligations under the Securities Act, the Exchange Act, the rules of any stock exchange, or any similar public disclosure obligations. 

        Section 5.5    Initial Budget.    

        By
execution of this Agreement, the Members hereby approve and consent to the initial budget attached hereto as Exhibit D (the "Initial
Budget") and acknowledge and agree that such Initial Budget shall be deemed to be an Approved Budget for all purposes of this Agreement. 

        Section 5.6    Incentive Interests to MWE Liberty Upon Transfer of NGPMR's Interest.    

        In
the event NGPMR receives cash from any NGPMR Exit Transaction or Partial NGPMR Exit Transaction (for the purposes of this section, such transaction an
"Incentive Interest Transaction") that would result in **
Payout**, simultaneously with the consummation of any such transaction, NGPMR shall pay to MWE Liberty as a fee the following
amount**, to the extent applicable: 

        **    Following ** Payout Threshold, if any, an amount equal to the  ** of (i) the cash proceeds
of all Incentive Interest Transactions plus cumulative cash distributions to NGPMR in respect of its Interest,  **

        **    

Exhibit E
contains illustrative examples of the calculation and operation of amount** payable pursuant to
Section 5.6** based upon hypothetical Incentive Interest Transactions. This Section 5.6 shall be interpreted and applied in a manner
consistent with the examples set forth in Exhibit E. The obligations of NGPMR to make payment** to MWE Liberty pursuant to this
Section 5.6 shall survive the closing of any NGPMR Exit Transaction or Partial NGPMR Exit Transaction and any liquidation, dissolution or winding up of the Company until such payment to MWE
Liberty has been made. 

25

 

        Section 5.7    Preemptive Rights.    

        (a)   After
the Equalization Date, prior to the Company issuing any Interests or options or rights to acquire Interests (other than (i) any equity issuance associated
with an acquisition previously approved by NGPMR, (ii) Interests issued in connection with any split, distribution or recapitalization of the Company, (iii) Interests issued in any
initial public offering registration statement filed under the Securities Act, or (iv) in connection with any capital raising or financing efforts by the Company the purpose of which is to fund
any activities of the Company which were the subject of a Capital Call made pursuant to Section 4.1(c) or Section 4.1(d) that was not fully funded by the Members; provided, however, that
any Interests to be issued in such capital raising or financing efforts, and the pricing of such Interests, are equivalent to the terms of such Capital Call), whether through exchange, conversion or
otherwise (the "New Interests"), to a proposed third party purchaser (the "Proposed Purchaser"), each
Member who is not in default of this Agreement and which certifies to the Company's reasonable satisfaction that it is an "accredited investor" within the meaning of Rule 501 under the
Securities Act (an "Eligible Member") shall have the right to purchase a portion of the New Interests in accordance with this Section 5.7. 

        (b)   The
Company shall give each Eligible Member prior written notice (the "First Notice") of any proposed issuance of New
Interests, which shall set forth in reasonable detail the proposed terms and conditions thereof (as determined by the Board in good faith) and shall offer to each Eligible Member the opportunity to
purchase its Percentage Interest (as of the date of such notice) of the New Interests, on the same terms and conditions and at the same time as the New Interests are proposed to be issued by the
Company. If any Eligible Member desires to exercise its preemptive rights under this Section 5.7, it must deliver an irrevocable written notice within 30 days after the Eligible Member's
receipt of the First Notice (the "Election Period") setting forth the dollar amount of the New Interests the Eligible Member (the
"Electing Member") is electing to purchase, up to its Percentage Interest plus any additional amount of New Interests it desires to purchase in excess
of its Percentage Interest (the "Over-Allotment Amount") if other Eligible Members do not exercise their preemptive rights hereunder. The
right of each Electing Member to purchase New Interests in excess of its Percentage Interest shall be based on the relative Percentage Interests of the Electing Members desiring to purchase
Over-Allotment Amounts. 

        (c)   If
the Eligible Members do not subscribe for all of the New Interests, the Company shall have the right, but not the obligation, to issue and sell the unsubscribed
portion of the New Interests to the Proposed Purchaser at any time during the 90 days following the end of the Election Period, at the same price and pursuant to the terms and conditions set
forth in the First Notice. The Board may, in its reasonable discretion, impose such other reasonable and customary terms and procedures such as setting a closing date and requiring customary closing
deliveries in connection with any preemptive rights offering. In the event any Electing Member refuses to purchase the New Interests for which it subscribed pursuant to this Section 5.7, then
in addition to any other rights the Company may have at law or in equity, such Electing Member and any transferee thereof shall not be considered an Eligible Member for any future rights granted under
this Section 5.7 unless the Board expressly designates otherwise (which the Board may, in its sole discretion, do on an offer-by-offer basis or not at all) and shall be
deemed a Defaulting Member under Section 4.2. 

        Section 5.8    Registration Rights.    

        If
the Board with Requisite Member Approval determines to effect a Qualified Public Offering, each of the Members shall be granted customary registration rights, including piggyback
registration rights, with respect to such Qualified Public Offering. 

26

 
 
 

  ARTICLE 6
  MANAGEMENT    
    

        Section 6.1    Management Under Direction of the Board.    

        Except
as otherwise expressly provided in this Agreement or required under the Act, the business and affairs of the Company shall be managed by a board of managers (the
"Board" and each member of the Board, a "Manager"), and the Board shall have full and complete
authority, power, and discretion to manage and control the business, affairs, and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts or
activities customary or incidental to the management of the Company's business. Without limiting the generality of the foregoing the
approval of the Board shall be required for all matters not delegated by the Board to the Operator, the officers of the Company or to other authorized persons in accordance with Section 6.10,
including approval of the following matters, which the Board shall not have the power to delegate to any Person, in each case except as otherwise approved in any Approved Budget: 

        (a)   Proposed
Budgets for the Company, other than the Initial Budget; 

        (b)   distributions
of Available Cash (including Tax Distributions); 

        (c)   efforts
by the Company to raise additional capital, including the issuance of additional Interests or any options to acquire Interests and the issuance of additional
equity interests or options to acquire equity interests in the Company's subsidiaries; 

        (d)   incurrence
or guarantee of Debt by the Company in excess of $**; 

        (e)   acquisitions
or dispositions of assets by the Company in excess of $**; 

        (f)    commencing
or resolving litigation; 

        (g)   election
or removal of officers of the Company; 

        (h)   material
contracts to which the Company (or a subsidiary of the Company) is a party or by which it is bound; and 

        (i)    the
registration of any equity or debt securities of the Company or its subsidiaries under applicable United States federal or foreign securities laws or any public
offering of equity or debt securities of the Company or its subsidiaries (including any Qualified Public Offering). 

        Section 6.2    Number, Tenure and Qualifications.    

        (a)   Prior
to the Equalization Date, the Board shall be comprised of six Managers, designated as follows: 

          (i)  three
Managers (each, a "Class A Manager") designated by Class A Members with an aggregate Class A
Percentage Interest of at least 50%; and 

         (ii)  three
Managers (each, a "Class B Manager") designated by Class B Members with an aggregate Class B
Percentage Interest of at least 50%. 

        The
initial Managers of the Company shall be: John T. Raymond, Jeffrey Rawls and Patrick Wade, who are the Class A Managers, and John Mollenkopf, Randy Nickerson and Frank
Semple, who are the Class B Managers. 

        (b)   On
and after the Equalization Date, each Affiliated Member Group shall be entitled to designate the number of Managers determined by their Percentage Interests as
follows: 

          (i)  Each
Affiliated Member Group with a Percentage Interest less than or equal to ** shall not be allowed to designate any
Managers; 

27

 

         (ii)  Each
Affiliated Member Group with a Percentage Interest greater than ** but less than or equal to  **, shall be allowed to designate one Manager; 

        (iii)  Each
Affiliated Member Group with a Percentage Interest greater than ** but less than  ** shall be allowed to designate two Managers; and 

        (iv)  Each
Affiliated Member Group with a Percentage Interest equal to or greater than **, shall be allowed to designate three
Managers. 

        Any
Manager designated in accordance with this section shall be immediately removed from the Board at any time that the Affiliated Member Group that designated such Manager ceases to own
aggregate Percentage Interests that would permit such Affiliated Member Group to designate such Manager in accordance with the first sentence of this section. Notwithstanding the foregoing, so long as
the Class A Members have **, such Class A Members shall be entitled to appoint no less than one Manager to the
Board and the size of the Board shall be, if necessary, increased by one to enable the Class A Members to make such appointment. The Board shall be comprised of the total number of Managers
that all Affiliated Member Groups are entitled to so designate pursuant to the first sentence of this Section 6.2(b), plus any additional Manager whom the Class A Members are entitled to
designate pursuant to the immediately preceding sentence. At any time that any Affiliated Member Group acquires aggregate Percentage Interests sufficient to permit such Affiliated Member Group to
designate one or more additional Managers in accordance with the first sentence of this Section, then a new Manager position shall be created and such Affiliated Member Group shall be entitled to fill
such the vacancy in such position in accordance with Section 6.9. 

        (c)   A
Manager need not be a resident of the State of Delaware. A Manager shall hold office until the Manager's successor shall be duly elected and shall qualify or until the
earlier of such Manager's withdrawal, death, removal or resignation. 

        Section 6.3    Votes Per Manager; Quorum; Required Vote for Board Action; Meetings of the Board.    

        (a)   Each
Manager shall have one vote. Except as provided below, Managers comprising at least a majority of the total number of Managers entitled to be designated in
accordance with Section 6.2 shall constitute a quorum for the transaction of business at a meeting of the Board. Except as otherwise expressly provided in this Agreement, any action or event
shall be deemed approved by the Board of Managers comprising at least a majority of the total number of Managers then entitled to be designated at the time of such approval in accordance with
Section 6.2 vote in favor of or approve such action or event at a meeting at which a quorum is present. Any actions by the Company in response to a breach of or default (or alleged breach or
default) under an Affiliate Contract or other transaction with an Affiliate of a Member (such as a waiver of the breach or default, notice of breach or event of default or notice of termination for
breach or default in accordance with the terms of the Affiliate Contract) or enforcement or exercise of any of the Company's rights or remedies in respect to such breach or default (or alleged breach
or default) (collectively, "Enforcement Activities") shall be conducted by or under the direction of the Board, provided that any Manager designated by
a Member that is a party to, or has an Affiliate (other than the Company) that is a party to, such Affiliate Contract or transaction ** at any meeting
of the Board and ** of the Board; provided further that the foregoing proviso shall not apply to **,
which shall be **. 

        (b)   Except
as otherwise required by applicable law, the Board may hold meetings in such place or places, within or outside of the State of Delaware, as the Board may
determine from time to time. Business shall be conducted at such meetings in such order as the Board shall determine from time to time. 

28

 

        (c)   Regular
meetings of the Board shall be held at least quarterly and at such times and places as shall be designated from time to time by the Board. Notice of such regular
meetings shall not be required if held at the times and places as previously determined by the Board and provided to each Manager. Special meetings of the Board may be called by any Manager upon at
least 24 hours prior notice, which may be given via electronic mail, and which notice must include dial-in or other information so as to permit each Manager to participate in such
meeting by telephone conference or other electronic means. Such notice must state the purpose of such meeting. 

        (d)   Any
action required or permitted to be taken at any meeting of the Board may be taken without a meeting if a consent in writing, setting forth the action so taken, shall
be signed by a majority of the Managers then entitled to be designated in accordance with Section 6.2; provided that at least one Manager designated by the NGPMR Group (if there is such a
Manager) and at least one Manager designated by the MWE Liberty Group (if there is such a Manager) shall be required to sign such consent or approval, solely for purposes of providing an
acknowledgement of receipt of notice of the action to be taken rather than approval or rejection thereof, in order for such consent or approval to be effective in the event that at least one Manager
designated by the NGPMR Group (if there is such a Manager) or at least one Manager designated by the MWE Liberty Group (if there is such a Manager), as applicable, did not receive prior written notice
of the action to be so taken. 

        (e)   Members
of the Board may participate in any meeting by means of conference telephone or similar communications equipment by means of which all persons participating in
the meeting can hear each other and participation in such a meeting such constitute presence in person at such meeting, except as provided in clause (f). 

        (f)    Attendance
of a Manager at any meeting of the Board (including by telephone) shall constitute a waiver of notice of such meeting, except where such Manager attends the
meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened and notifies the other Managers at such meeting of
such purpose. 

        Section 6.4    Power to Bind Company.    

        Unless
authorized to do so by this Agreement or by the Board, no Member of the Company shall have any power or authority to bind the Company in any way, to pledge the Company's credit or
to render it liable pecuniarily for any purpose. However, a Person may act by a duly authorized attorney-in-fact executed in writing by the Board. 

        Section 6.5    Liability for Certain Acts.    

        No
Manager or officer of the Company (solely in such individual's capacity as a Manager or officer of the Company), nor any of their Affiliates or their respective successors or assigns,
shall be liable to the Company or to any Member for any claims, losses, expenses, costs, obligations, liabilities, actions, suits, proceedings, judgments, or settlements (including attorneys' fees)
(whether civil, criminal, administrative or investigative) (collectively, "Claims") arising or resulting from or relating to the performance of any of
such Manager's or officer's obligations or duties under this Agreement in its capacity as Manager or officer, or otherwise attributable to any breach of duty owed by such Manager or officer (by virtue
of being a Manager or officer) to the Company or the Members, except to the extent such Claims or breach of duty is based upon such person's fraud, bad faith or willful misconduct as established by a
non-appealable court order, judgment, decree or decision by a court of competent jurisdiction. Without limiting the generality of the foregoing, the doing of any act or the failure to do
any act by any Manager or officer, which shall not constitute fraud, bad faith or willful misconduct (as established by a non-appealable court order, judgment, decree or decision by a
court of competent 

29

 

jurisdiction),
the effect of which may cause or result in loss or damage to the Company, shall not subject any Manager or officer to any liability. Each Manager and officer shall be fully protected in
relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters such Manager or officer reasonably
believes are within such other Person's professional or expert competence, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid. The Managers do not, in any way, guarantee the return of the
Members' Capital Contributions or a profit for the Members from the operations of the Company. No Manager shall be responsible to any Members because of a loss of their investments or a loss in
operations, unless the loss shall have been the result of fraud, bad faith or willful misconduct established as set forth in this Section 6.5. 

        Section 6.6    Manager Has No Exclusive Duty to Company.    

        A
Manager shall not be required to manage the Company as the Manager's sole and exclusive occupation, and a Manager may have other business interests and may engage in other investments,
occupations and activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such other
investments or activities of a Manager or to the income or proceeds derived therefrom. 

        Section 6.7    Resignation and Withdrawal.    

        A
Manager of the Company may resign from the position of Manager at any time by giving written notice to the Members of the Company. The resignation of a Manager shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it
effective. Upon the
withdrawal of a Manager, such Manager shall be treated as having resigned as of the date of withdrawal and shall automatically cease to be a Manager as of the date of such withdrawal. Except in the
case of resignation by reason of withdrawal, the resignation of a Manager who is also a Member pursuant to this Section 6.7 shall not affect such Manager's rights as a Member and shall not
constitute a withdrawal of such Member. 

        Section 6.8    Removal.    

        Subject
to Section 6.2(b), a Manager may only be removed by the consent of the Member or Members then entitled to designate such Manager in accordance with Section 6.2. The
removal of a Manager who is also a Member shall not affect such Manager's rights as a Member and shall not constitute a withdrawal of such Member. 

        Section 6.9    Vacancies.    

        Any
vacancy in the position of a Manager that is created by the withdrawal, death, resignation or removal of a Manager or by the creation of a new Manager position pursuant to
Section 6.2(b) shall be filled only by consent of the Member or Members then entitled to designate such Manager in accordance with Section 6.2. A Manager elected to fill a vacancy shall
hold office until a successor shall be elected and shall qualify, or until the Manager's earlier death, resignation, withdrawal or removal. 

        Section 6.10    Delegation of Authority; Officers.    

        The
Board shall have the power to elect, delegate authority to, and remove such officers, employees, agents and representatives of the Company as the Board may from time to time deem
appropriate. Any delegation of authority to take any action must be approved in the same manner as would be required for the Board to approve such action directly. The salaries of all officers,
employees and agents of the Company shall be fixed by the Board in accordance with the Approved Budget. 

30

 

        Section 6.11    Designation of Operator.    

        (a)   The
Company hereby designates MWE Liberty as the initial "Operator" of the Company. Subject to any required Board or Member approvals rights set forth in this Agreement,
MWE Liberty shall be responsible for, shall make all decisions regarding and shall have full power and authority to manage the day-to-day operations of the Company's business,
including, the development, construction and operation of the Company's facilities and business development activities and the oversight of G&A Services and Personnel Services provided to the Company
by MWE Hydrocarbon pursuant to the Services Agreement, which includes the day-to-day management and supervision of all Designated MWE Employees. The appointment of MWE Liberty
as the Operator shall be exclusive to MWE Liberty, except to the extent that MWE Liberty elects to cause such duties to be provided by third parties (and, in any case MWE Hydrocarbon and MWE Liberty
remain fully responsible for compliance with the Services Agreement). MWE Liberty shall have the power and authority to execute contracts, and to take such other actions, on behalf of the Company as
may be necessary or appropriate to carry out the Company's business in accordance with the Approved Budget. 

        (b)   For
the avoidance of doubt, the power and authority granted to MWE Liberty as the Operator pursuant to Section 6.11(a) shall specifically include the ability to
perform (or cause to be performed) the following services and activities (subject to compliance with any Board or Member approval rights with respect to such services and activities required pursuant
to this Agreement): 

          (i)  investigation,
analysis and selection of acquisition and business development opportunities; 

         (ii)  with
respect to prospective acquisitions or dispositions by the Company, conducting negotiations with sellers and purchasers and their respective agents,
representatives and advisors (including, without limitation, investment bankers); 

        (iii)  administering
the day-to-day operations of the Company and performing and supervising the performance of such other administrative functions
necessary in the management of the Company as may be agreed upon by MWE Liberty as Operator and the Board, including the collection of revenues and the payment of the Company's debts and obligations
and maintenance of appropriate computer services to perform such administrative functions; 

        (iv)  monitoring
the operating performance of the Company's assets and providing periodic reports with respect thereto to the Board, including comparative information with
respect to such operating and performance and budgeted or projected operating results; 

         (v)  assisting
the Company to retain qualified accountants and legal counsel, as applicable, to assist in developing appropriate accounting procedures and compliance
procedures; 

        (vi)  causing
the Company to qualify to do business in all applicable jurisdictions and to obtain and maintain all appropriate licenses; 

       (vii)  negotiating,
executing, amending and terminating the Company's agreements with unaffiliated third parties, managing and administering the Company's rights and
obligations under all agreements with unaffiliated third parties to which the Company is a party or by which the Company is bound and monitoring compliance by the Company and by such unaffiliated
third parties to such agreements with the terms and conditions thereof; 

      (viii)  taking
all necessary actions to enable the Company to make required tax filings and reports; 

31

 

        (ix)  handling
and resolving all claims, disputes or controversies (including, without limitation, all litigation, arbitration, settlement or other proceedings or
negotiations) with unaffiliated third parties in which the Company may be involved or to which the Company may be subject arising out of the Company's day-to-day operations,
subject to such limitations or parameters as may be imposed from time to time by the Board; 

         (x)  purchasing,
selling, leasing, operating and maintaining the Company's assets; 

        (xi)  establishing
and maintaining the Company's bank accounts and banking arrangements, and to the extent of funds available, reinvesting Company funds as MWE Liberty as
Operator may deem appropriate and consistent with MWE Liberty's practices; 

       (xii)  performing
such other services as may be required from time to time for management and other activities relating to the assets of the Company as the Board shall
reasonably request or MWE Liberty shall deem appropriate under the particular circumstances; and 

      (xiii)  using
commercially reasonable efforts to cause the Company to comply with all applicable laws. 

        The
Operator shall operate the Company and perform the services and activities referred to in clauses (i) through (xiii) above in accordance with Prudent Industry
Practices. 

        (c)   MWE
Hydrocarbon shall receive the fees and reimbursement for its services as set forth in the Services Agreement. The Company and the Members hereby acknowledge and
agree that the liability of Operator and MWE Hydrocarbon to the Company and the Members, and the Operator's obligation to satisfy any claim for indemnification in connection with any such liability,
shall be limited in the manner and to the extent set forth in the Services Agreement, and the Members hereby consent to, approve, and agree to be bound by the terms thereof with regard to such
limitations of the liability of the Operator and MWE Hydrocarbon to the Company and the Members, in the same manner and to the same extent as though such provisions were set forth herein. The Operator
shall serve as the Operator until the termination of the Services Agreement. Upon the termination of the Services Agreement, the Board with the Requisite Member Approval may cause the Company to
designate a new operator and enter into a new services agreement. 

        (d)   MWE
Liberty hereby agrees to notify NGPMR of any notice of default or other material notices received by MWE Liberty in connection with the agreements listed on
Exhibit H. 

        Section 6.12    Approval of Members.    

        The
following matters shall require Requisite Member Approval (provided that an explicit approval of such matter in the Approved Budget or related Member resolution shall constitute a
Requisite Member Approval if such approval is explicitly identified as a Requisite Member Approval): 

        (a)   Prior
to the Equalization Date to the extent not in accordance with Section 8.1, any distributions of Available Cash (including Tax Distributions); 

        (b)   The
approval of the Proposed Budgets for the Company, other than (i) the Initial Budget, which shall be deemed approved upon the execution of this Agreement and
(ii) budget items associated with capital expenditures relating to the agreements set forth on Exhibit G; provided that the Company may not without the Requisite Member Approval
(i) enter into any additional **, (ii) enter into any agreements or transactions referred to in  ** or **, or (iii) extend the term of any of the agreements set forth on Exhibit G. In
connection with any such approval, the Members having the authority to approve the Proposed Budget shall give the notice required by Section 6.15(d) below; 

32

 

        (c)   Material
deviations from Approved Budgets, including (i) with respect to any Approved Budget, any modification or amendment of any  ** or other ** contained
therein, the satisfaction of which results in the  ** pursuant to such budget, (ii) with respect to the capital expenditure budget, changes of more than  ** to the **, but excluding any items prior to the Equalization Date requiring aggregate capital
expenditures of less than $** associated with a Project **, and excluding any items after the
Equalization Date requiring aggregate capital expenditures of less than $** associated with a Project **
and (iii) with respect to the operating expenditure budget, increases of more than $** to the **
or increases of more than $** to the ** calculated on a  **; provided that, in any case, a Project, operation,
 venture, agreement or activity that has received Requisite Member Approval shall automatically be
incorporated within the Approved Budget and any changes or deviations required to incorporate such Project, operation, venture, agreement or activity into the then current Approved Budget shall not
require additional Requisite Member Approval; provided further that any additional changes or deviations associated with such Project, operation, venture, agreement or activity shall be subject to
Requisite Member Approval to the extent they involve material deviations to the Approved Budget, as modified to include such new Project, operation, venture, agreement or activity, under this
clause (c); provided, further, that changes in budget items listed in Section 6.15(a)(iii) through (vi) shall not be considered material deviations for purposes of this
Section 6.12(c); 

        (d)   Any
material change in the Primary Business or in the Company's purpose; 

        (e)   The
incurrence of Debt and the granting of Liens on the Company's Property in an aggregate amount in excess of
(A) $** prior to the Equalization Date and (B) $** after the Equalization Date, in each
case excluding the Permitted Liens; 

        (f)    Any
interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement, or other interest, currency or commodity hedging
arrangement entered into by the Company, including any forward sales, calls, puts, swaps and other derivative transactions, whether financially or physically settled; provided that transactions to be
settled (i) within ** based on ** or
(ii) ** based on the **, shall not require Requisite Member Approval; 

        (g)   The
acquisition or sale of any assets of the Company or its subsidiaries for consideration in excess of (i) $**
prior to the Equalization Date and (ii) $** after the Equalization Date; 

        (h)   Entry
into, termination or renewal of, or material modification or amendment of, (i) any commercial contractual commitment reasonably expected to
(A) result in expenditures or liabilities in excess of $**, which $** threshold shall be subject
to increase by ** per year, (B) generate annual revenues in excess of $**, which
$** threshold shall be subject to increase by ** per year, or (C) result in the commitment of
more than ** of the capacity of any Company facility **, (ii) any joint venture, partnership or
other similar arrangement involving the sharing of profits of the Company or any of its subsidiaries with any third-party, (iii) any contractual commitment that limits the freedom of the
Company or any of its subsidiaries to compete within the Area of Mutual Interest, (iv) any contract for the lease of real property for ** and
(v) settlement agreements or other agreements related to or proposing to resolve actual or threatened litigation, which involves (A) payment of greater than
$** or (B) provides for restrictions or limitations on the Company's ability to operate in the form of an equitable remedy; 

        (i)    The
formation of any subsidiary of the Company; 

        (j)    Transactions
or agreements (including amendments, terminations and renewals thereof) between the Company on the one hand, and a Member or an Affiliate of a Member on the
other hand, unless such transaction or agreements (including amendments, terminations and renewals thereof) (i) has been approved by the other Members that are not a party to, or Affiliates of
a 

33

 

Party
to, such transaction or agreement and whose consent is required pursuant to this Section or (ii) is identified on Exhibit H, all of which are hereby approved by the Members; 

        (k)   The
sale, exchange or other disposition of all, or substantially all, of the Company's assets in one transaction or a series of related transactions, 

        (l)    Any
merger into or with or consolidation with any other entity (i) in which the interests in the Company will be exchanged for a security with different rights,
preferences or privileges or (ii) pursuant to which the Members will own less than 50% of the voting securities of the surviving entity; 

        (m)  Any
repurchase by the Company of Interests in the Company or any equity interests in any of its subsidiaries; 

        (n)   Prior
to the Equalization Date, other than in accordance with the obligations of the Members pursuant to Section 4.1, any efforts by the Company to raise
additional capital, including the issuance of additional Interests or options to acquire Interests or any equity interests or options to acquire equity interests in any of the Company's subsidiaries; 

        (o)   The
registration of any equity or debt securities of the Company or its subsidiaries under applicable United States federal or foreign securities laws or any public
offering of equity or debt securities of the Company or its subsidiaries (including any Qualified Public Offering). 

        (p)   Any
declaration of bankruptcy, or the filing of a petition, or seeking protection, under any federal or state bankruptcy, insolvency or reorganization law; 

        (q)   The
dissolution of the Company or the voluntary liquidation of the Company's assets; 

        (r)   Designating
a new Operator of the Company; 

        (s)   Approval
of the maintenance of reserves less than the ** as authorized in the Approved Budget or more than the  ** in the Approved Budget; 

        (t)    Permit
the Company to create any Debt in favor of any Person; 

        (u)   Distributions
in-kind of any assets of the Company pursuant to Section 13.7; 

        (v)   Hiring
any employees of the Company or accepting secondments of employees; 

        (w)  After
the ** in ** becomes operational, and thereafter to the extent
there is available **, elections by the Company to ** to MWE Hydrocarbon under the Fractionation and NGL
Purchase Agreement; 

        (x)   Any
action by the Company that would cause it to be ** under the **; and 

        (y)   The
entry into any agreement to effect any of the foregoing. 

        Section 6.13    Reliance by Third Parties.    

        Any
Person dealing with the Company, a Manager or the Operator may rely upon a certificate signed by a Manager or an appropriate officer as to: 

        (a)   the
identity of the Managers; 

        (b)   the
existence or non-existence of any fact or facts which constitute a condition precedent to acts by the Board or in any other manner germane to the affairs
of the Company; 

        (c)   the
Persons who are authorized to execute and deliver any instrument or document of or on behalf of the Company; and 

34

 

        (d)   any
act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member. 

        Section 6.14    Fees and Expenses of the Managers.    

        A
Class A Manager shall receive an annual amount of $** for serving as a Manager. A Class B Manager shall not be entitled to
any fees for serving as a Manager. A Manager shall be entitled to reimbursement for all reasonable out-of-pocket costs and expenses incurred by such Manager in the capacity as
a Manager. 

        Section 6.15    Budgets.    

        By
** of each calendar year following the Effective Time, the Operator shall prepare and submit the following budgets and forecasts for
the upcoming year (to the extent such budgets or forecasts are
applicable to such upcoming year) to the Board for approval and to the appropriate Members for Requisite Member Approval in accordance with Section 6.12: 

        (a)   (i)
an operating expenditure oversight budget, which shall consist of the operating expenditure budget broken down by general categories of expenses for categories
exceeding an aggregate **; (ii) a capital expenditure budget which shall include, to the extent applicable, maintenance capital expenditures and
growth capital expenditures; (iii) a cost of goods sold budget or forecast; (iv) a volume budget or forecast; (v) a revenue budget or forecast; and (vi) a forecast of
distributions or capital contributions (collectively, the "Proposed Budget"). 

        (b)   The
Board and the Members with Requisite Member Approval Rights shall have 15 days to review and to either approve or to reject the Proposed Budget, in whole or
in part. Any rejection of the Proposed Budget in whole or in part must be made in good faith, based on commercially reasonable standards and submitted in writing to the Board, the other Members with
Requisite Member Approval rights and the Operator and must describe proposed modifications in reasonable detail (a "Budget Rejection Notice"). If a
Budget Rejection Notice is not received within the requisite 15 day period, then the Proposed Budget will be deemed to be approved in all respects. If a Budget Rejection Notice is received
within the requisite 15 day period, the Operator, the Board and the Members with Requisite Member Approval rights to approve the Proposed Budget will work together in good faith to promptly
resolve the issues identified in a mutually agreeable manner and, if such dispute is not resolved prior to the commencement of the calendar year to which the Proposed Budget relates, the Approved
Budget for the prior calendar year, increased by the percentage increase in the CP Index since the first day of the previous calendar year, shall be in effect until such dispute is resolved. If such
dispute is not resolved by January 30th of the calendar year to which the Proposed Budget relates, such dispute shall be submitted to arbitration pursuant to
Section 6.15(e) below. The Proposed Budget as approved, or as deemed approved, by the Board and Requisite Member Approval in accordance with Section 6.12, and as modified in accordance
with Section 6.15(c) below, is referred to herein as an "Approved Budget." 

        (c)   Subject
to the remaining provisions of this clause (c), the Operator shall update the Approved Budget from time to time to reflect amendments or modifications
that the Operator deems necessary or appropriate, and shall promptly provide such updates to the Board; provided that any material deviations which require the consent of the Board or Requisite Member
Approval in accordance with Section 6.12(c) shall not become part of the Approved Budget unless approved by the Board and Requisite Member Approval. 

        (d)   Once
a Proposed Budget or material deviations from an Approved Budget pursuant to Section 6.12(c) have been approved by the Board and have received Requisite
Member Approval pursuant to Section 6.12, each Member that has the right to approve such Proposed Budget (or deviations from an Approved Budget) shall at the time of the approval, give notice
to the Board of 

35

 

their
intent to fund any budget item to the extent that such item would require the Board to make a Capital Call in order to fund such budget item. 

        (e)   The
binding arbitration shall be administered by the American Arbitration Association ("AAA") in accordance with its
Commercial Arbitration Rules (the "Rules"). The "Arbitration Panel" shall consist of three members. The
Class A Members and the Class B Members, acting by the vote of Members holding Class A Interests or Class B Interests with an aggregate Class A Percentage Interest
or Class B Percentage Interest, respectively, equal to or exceeding 50% shall appoint one member of the Arbitration Panel. The third member of the Arbitration Panel shall be chosen by the
appointed members and shall act as chairman of the Arbitration Panel. Should any arbitrator fail to be appointed in accordance with the foregoing, then such arbitrator shall be appointed by the AAA in
accordance with the Rules. The arbitration shall be held in Houston, Texas, and the proceeding shall be conducted and concluded as soon as reasonably practicable, based upon the schedule established
by the Arbitration Panel, but in any event the decision of the Arbitration Panel shall be rendered within 90 days following the selection of the chairman of the Arbitration Panel. The decision
of the Arbitration Panel shall be final and binding upon the Company and the Members. Judgment upon the award rendered by the Arbitration Panel may be entered in, and enforced by, any court of
competent jurisdiction. Each class of Members shall bear its own expenses related to the arbitration, including its attorneys' fees and the fees and expenses of the arbitrator it appointed. Each class
of Members shall pay 50% of the fees and expenses of the chairman of the Arbitration Panel. 

 
 

  ARTICLE 7
  ASSIGNABILITY OF MEMBER INTERESTS    
    

        Section 7.1    Prohibition on Assignment During Project Period.    

        Prior
to ** (the "Project Period"), no Member may, directly or indirectly, Transfer its
Interest or any portion thereof without the prior written consent of the other Members except for Permitted Transfers. For purposes of this Agreement, "Permitted
Transfers" shall include the following: (a) a Member may Transfer all or a portion of its Interest to any of its Affiliates, (b) Interests held by any member of
the MWE Liberty Group may be (i) Transferred, in whole or in part, in connection with any sale of all or substantially all of the assets of MWE, or (ii) indirectly Transferred by way of
a sale of Control of MWE, or any merger of MWE with or into, or any consolidation of MWE into, any other entity and (c) Interests held by NGPMR may be transferred to the limited partners of
NGPMR, if and to the extent required by the governance documents of NGPMR. In the event of a Transfer pursuant to the foregoing clause (c), the NGPMR Group shall designate a single
representative to exercise all of the NGPMR Group's rights hereunder. If a Member Transfers an Interest during the Project Period in accordance with this Section 7.1, such Transfer shall
entitle the assignee to become a Substitute Member and to exercise or receive the rights, powers or benefits of a Member if the assigning Member designates, in a written instrument delivered to the
Board and the other Members, its assignee to become a Substitute Member and such assignee executes an instrument reasonably satisfactory to the Board, which shall include an acceptance and agreement
by the Substitute Member to abide by all of the terms and conditions of this Agreement. A Member may not Transfer Interests in a Permitted
Transfer if such Permitted Transfer has as a purpose the avoidance of the restrictions on Transfers in this Agreement (it being understood that the purpose of this sentence is to prohibit the Transfer
of Interests to a transferee in a Permitted Transfer followed by a change in the relationship between the transferor and the transferee (or a change of Control of such transferor or transferee) after
the Permitted Transfer with the result and effect that the transferor has indirectly Transferred Interests to a transferee in a Transfer which would not have been directly permitted as a Permitted
Transfer under this Section 7.1 had such change in such relationship occurred prior to such Transfer). 

36

 

        Section 7.2    Transfers After the Project Period.    

        After
the Project Period, a Member may Transfer its Interest, or any portion thereof, without the consent of any other Member or the Board, provided that such Member complies with the
requirements of this Section 7.2 in all instances except in connection with Permitted Transfers: 

        (a)   In
the event that a Member (the "Transferring Member") desires to Transfer, directly or indirectly, all or any portion of
its Interest (the "ROFO Interest") and such Transfer is not a Permitted Transfer, then the Transferring Member shall give written notice thereof to the
other Members (the "Remaining Members"). For a period of 30 days thereafter, all or a portion of the Remaining Members shall have the right, but
not the obligation, to submit a written offer to purchase the ROFO Interest (with each offering Remaining Member to purchase its pro rata portion of the ROFO Interest as is determined in accordance
with the respective Percentage Interests of the Remaining Members, or such other portion as the Remaining Members may mutually agree upon) (the "ROFO
Offer"), on such terms and conditions as the offering Remaining Members may determine and which terms and conditions shall be described in the ROFO Offer. Upon receipt of the
ROFO Offer, the Transferring Member may elect in its sole discretion to accept or reject the ROFO Offer. 

          (i)  In
the event that the Transferring Member elects to accept the ROFO Offer, then the Transferring Member shall be bound to Transfer to the offering Remaining Members,
and the offering Remaining Members shall be bound to purchase from the Transferring Member, the ROFO Interest on the terms and conditions set forth in the ROFO Offer (with such modifications as may be
mutually agreed upon by the offering Remaining Members and the Transferring Member), and the closing of such Transfer of the ROFO Interest shall occur within 30 days of the Transferring
Member's acceptance of the ROFO Offer or on such other date as may be set forth in the ROFO Offer (subject to extension to the extent necessary to pursue any required regulatory approvals, including
to allow for the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976). 

         (ii)  In
the event that the Transferring Member rejects the ROFO Offer, then for a 60-day period after the date on which the Transferring Member rejects the ROFO
Offer (the "Solicitation Period"), the Transferring Member may solicit an offer to purchase the ROFO Interest from one or more third parties as the
Transferring Member may determine in its discretion. If the Transferring Member receives a third party offer (a "Third Party Offer") to purchase the
ROFO Interest within the Solicitation Period, and the consideration payable for the ROFO Interest pursuant to such Third Party Offer exceeds the consideration payable for the ROFO Interest pursuant
the ROFO Offer (such Third Party Offer is referred to as a "Qualifying Third Party Offer"), the Transferring Member may elect to Transfer the ROFO
Interest to such third party in accordance with the Qualifying Third Party Offer within 30 days after the end of the Solicitation Period, subject to the Transferring Member's compliance with
the provisions of Section 7.2(b). Any noncash consideration set forth in the ROFO Offer or a Third Party Offer shall be valued at its fair market value, as agreed by the Transferring Member and
the offering Remaining Members, and failing such agreement, as determined by an independent third party appraiser selected by the Transferring Member and reasonably acceptable to the offering
Remaining Members (the costs for which third party appraiser shall be shared equally by the Transferring Member, on the one hand, and the offering Remaining Members, on the other hand). The
Transferring Member may not Transfer the ROFO Interest to any third party pursuant to a Third Party Offer that is not a Qualifying Third Party Offer without the offering Remaining Members' prior
written consent, which may be withheld in their sole discretion. Such transferee shall become a Substitute Member if the Transferring Member designates, in a written instrument delivered to the Board
and the other Members, the transferee to become a Substitute Member and such transferee executes an instrument 

37

 

reasonably
satisfactory to the Board, which shall include an acceptance and agreement by the Substitute Member to abide by all of the terms and conditions of this Agreement. If such closing does not
occur within the required 30-day period, then the ROFO Interest in question shall once again become subject to the restrictions of this Section 7.2, and the Transferring Member
shall no longer be permitted to Transfer such ROFO Interest without again fully complying with the provisions of this Section 7.2 

        (b)   Except
for any Transfer to another Member and except for Permitted Transfers, each Class B Member hereby agrees, whether in one transaction or in a series of
related transactions, not to Transfer for value, all or any portion of its Interest, directly or indirectly, without first complying with Section 7.2(a) and then permitting each of the
Remaining Members (the "Tag-Along Members") to participate as sellers in such transaction (the
"Tag-Along Rights"), such that each Tag-Along Member shall be entitled to sell, on the same terms as the Class B Member
proposing to sell its Interest (the "Class B Seller"), a portion of such Tag-Along Member's Interest, determined by multiplying the
Interest that the purchaser is willing to acquire by the Percentage Interest of each such Tag-Along Member desiring to participate. 

          (i)  Before
accomplishing or entering into a binding contract for any Transfer for value of any Interest that would be covered by the Tag-Along Rights, the
Class B Seller agrees to give each Tag-Along Member written notice (the "Tag-Along Notice") of any such proposed sale
(the "Sale Proposal"). The Tag-Along Notice shall state that such Tag-Along Member shall be entitled to exercise its
Tag-Along Rights. Each Tag-Along Member shall notify the Class B Seller in writing within 10 days after receipt of the Tag-Along Notice as to whether
or not such Tag-Along Member wishes to exercise Tag-Along Rights and participate in the proposed Transfer (the "Tag-Along Notice
Period"). Failure by any Tag-Along Member to respond within such period shall be deemed to be a declination of such Tag-Along Member's
Tag-Along Rights with respect to such proposed transfer. The Class B Seller shall use its commercially reasonable efforts to obtain the agreement of the prospective transferee(s) to
the participation of the Tag-Along Members in any contemplated Sale Proposal and to the inclusion of the Tag-Along Members' Interests in such transaction, and no Class B
Seller shall transfer any portion of the Interest to any prospective transferee if such prospective transferee(s) declines to allow the participation of the Tag-Along Members or the
inclusion of their Interests as contemplated herein. Each Tag-Along Member that elects to participate pursuant to this paragraph shall pay its pro rata share (based on the Interests to be
Transferred) of the expenses incurred by the Class B Seller in connection with such Sale Proposal and shall be obligated to join on a pro rata basis (based on the Interests to be Transferred)
in any indemnification or other obligations that Class B Seller agrees to provide in connection with such Sale Proposal (other than any such obligations that relate specifically to a particular
Member such as indemnification with respect to representations and warranties given by a Member regarding such Member's title to and ownership of its Interest); provided that no Tag-Along
Member shall be obligated in connection with such Sale Proposal to agree to indemnify or hold harmless the transferee with respect to an amount in excess of the net cash proceeds paid to such
Tag-Along Member in connection with such Sale Proposal. If the Tag-Along Members decline, or are deemed to decline, their Tag-Along Rights for any proposed
transfer, the Class B Seller may sell its offered Interest; provided, however, that (i) such Sale Proposal is consummated within 90 days after the end of the Tag-Along
Notice Period and (ii) the terms of the actual transaction involve exactly the same consideration and other terms and conditions set forth in the Tag-Along Notice. Any transferee
pursuant to the Sale Proposal shall become a Substitute Member if the Class B Seller designates, in a written instrument delivered to the Board and the other Members, the transferee to become a
Substitute Member and such transferee executes an instrument reasonably satisfactory to the Board, which shall include an acceptance and agreement by the Substitute Member to abide 

38

 

by
all of the terms and conditions of this Agreement. Failure to close the Sale Proposal within the required 90-day period shall again subject the offered Interest to the
Tag-Along Rights set forth in this Section 7.2(b), whereupon the Class B Seller shall be required to give each Tag-Along Member a new written notice with respect
to the proposed transfer, and each Tag-Along Member shall again have the right to exercise Tag-Along Rights in respect of such proposed transfer. 

         (ii)  If
a Class B Seller wishes to solicit Sale Proposals from third parties involving a Company Sale, it shall first notify the other Members of its desire to
solicit a Company Sale ("Solicitation Notice"). The other Members shall notify the Class B Seller in writing within 10 days after receipt
of the Solicitation Notice as to whether or not such Members wish to participate in a Company Sale and shall specify a
minimum price ("Minimum Price") at which such Members are willing to sell their Interest thereunder ("Solicitation
Response"). If the Class B Seller obtains Solicitation Responses from all of the Members indicating each Member's desire to enter into a Company Sale and a Minimum Price
with respect to each Member, then the Class B Seller may solicit offers for a Company Sale. If the Class B Seller obtains an offer within 90 days of its receipt of the
Solicitation Responses for a Company Sale in excess of each of the Minimum Prices set forth in the Solicitation Responses, it may cause a Company Sale  **. If the Class B Seller does not obtain an
offer for a Company Sale in excess of the minimum prices set forth in the Solicitation Responses
within 90 days of its receipt of the Solicitation Responses, then the Class B Seller may not pursue a Company Sale. For the avoidance of doubt, this Section 7.2(b)(ii) shall only
apply to a Company Sale to be solicited by a Class B Member. Any sale of the Interest of a Class B Seller that is not a Company Sale shall remain subject to the provisions of
Section 7.2(b)(i) above. 

        (c)   The
consideration or value allocated to the Members under this Section 7.2 shall be allocated among the Transferring Member and other Members (whether
Tag-Along Members or otherwise) in accordance with their respective rights to distributions from the Company as if the Company had been liquidated pursuant to Section 13.4 and the
Company had sold all of its Property for an Appraised Value using the implied valuation of such Property that may be derived from the sales process described in Section 7.2, provided, that, for
purposes of determining whether the ** Payout, ** has been met, only the actual cash proceeds from the
sale received by NGPMR shall be considered rather than the proceeds allocable to NGPMR from an implied valuation based upon a sale of all of the Company's Property and, except for such consideration,
no Member will receive any payments of any nature whatsoever from the transferee in connection with or arising from such sale transaction. 

        Section 7.3    Recognition of Assignment by Company or Other Members.    

        No
Transfer of an Interest that is in violation of this Article 7 shall be valid or effective, and neither the Company nor the Board nor any Member shall recognize the same for
any purpose of this Agreement, including the purpose of making distributions of Available Cash pursuant to this Agreement with respect to such Interest or part thereof. Neither the Company nor the
Board shall incur any liability as a result of refusing to make any such distributions to the assignee of any such invalid assignment. 

        Section 7.4    Effective Date of Assignment.    

        Any
valid Transfer of a Member's Interest, or part thereof, pursuant to the provisions of this Article 7 shall be effective as of the later of (i) the date of Transfer set
forth on the written instrument of Transfer, (ii) the date on which the Company has received the written instrument of Transfer and such other documents as may be required by the Company
pursuant to this Agreement and such Transfer has been recorded on the books of the Company, and (iii) the date on which the requirements of this Article 7 have been satisfied. The
Company shall, from the effective date of such Transfer, 

39

 

thereafter
pay all further distributions on account of the Interest (or part thereof) so assigned to the assignee of such Interest, or part thereof. As between any Member and its assignee, Profits and
Losses for the Fiscal Year of the Company in which such assignment occurs shall be apportioned for federal income tax purposes in accordance with any convention permitted under Section 706(d)
of the Code and selected by the Board. 

        Section 7.5    Limitations on Transfer.    

        No
Transfer of an Interest may be effectuated unless in the opinion of counsel satisfactory to the Board, the Transfer (a) would comply with the Securities Act and applicable
securities laws of any other jurisdiction; (b) would not cause the Company to be terminated for purposes of Code Section 708; or (c) would not violate any other applicable laws,
provided that the provisions of this Section 7.5 may be waived by the Board. 

        Section 7.6    Transferee Not a Substitute Member.    

        In
the event that a transferee is not designated, or does not become, a Substitute Member pursuant to this Article 7, then such transferee shall not be entitled to exercise or
receive any of the rights, powers or benefits of a Member other than the right to receive distributions to which the assigning Member would be entitled. 

 
 

  ARTICLE 8
  DISTRIBUTIONS TO MEMBERS    
    

        Section 8.1    Available Cash.    

        Available
Cash shall be determined by the Board on a quarterly basis within 30 days after the end of each calendar quarter. Subject to the remaining provisions of this
Article 8 and any preferential or disproportionate distributions to the extent expressly provided for in this Agreement, and other than upon a liquidation of the Company pursuant to
Section 13.4, the Company shall distribute such Available Cash within 45 days following the end of each calendar quarter to the Members of record, as follows. 

        (a)   Following
the end of each calendar quarter prior to December 31, 2010, all Available Cash shall be allocated for distribution among the Members in accordance with
their respective Percentage Interests, and all Available Cash which is so allocated for distribution shall, (x) with respect to the Class A Members be retained by the Company for
reinvestment without being distributed to such Class A Members, and (y) with respect to the Class B Members be distributed to such Class B Members and automatically
reinvested (pursuant to Section 4.1(b)(iv)) in accordance with their Class B Percentage Interests. With respect to each Class A Member, the amount retained in accordance with
clause (x) of the immediately preceding sentence shall increase the Investment Balance of such Class A Member on a dollar-for-dollar basis and, with respect to
each Class B Member, the amount distributed and automatically invested and deemed contributed to the Company in accordance with clause (y) of the immediately preceding sentence shall
increase the Investment Balance of such Class B Member on a dollar-for-dollar basis. 

        (b)   Following
the end of each calendar quarter ending on or after December 31, 2010, Available Cash shall be distributed to the Members as follows: 

          (i)  If
the Equalization Date has not yet occurred, then: 

        (A)  First,
100% to the Class A Members in accordance with their Class A Percentage Interests, until the Preference Amount accruing for such calendar quarter is
reduced to zero; and 

40

 

 

        (B)  Thereafter,
to the Members in accordance with their respective Percentage Interests. 

         (ii)  If
the Equalization Date has occurred, then to the Members in accordance with their respective Percentage Interests. 

        Section 8.2    Incentive Interest Percentage Distributions.    

        Notwithstanding
the preceding provisions in Sections 8.1(a) and (b), any Available Cash remaining after a **
Payout** has occurred shall be distributed as follows: 

        **    Following the ** Payout, if any, (x) first calculated in accordance
with their respective Percentage Interests, then (y) adjusted by reducing NGPMR's pro rata amount of Available Cash as determined in (x) by the  ** and (z) increasing MWE Liberty's pro
rata amount of Available Cash as determined in (x) by the amount determined in
(y) **

        **    

Exhibit E
contains illustrative examples of the determination of the amounts to be distributed to NGPMR and MWE Liberty pursuant to Section**
8.2** based on hypothetical distributions of Available Cash. This Section 8.2 shall be interpreted and applied in a manner consistent with the
examples set forth in Exhibit E. 

        Section 8.3    Withholding.    

        All
amounts withheld pursuant to the Code or any provision of any foreign, state or local tax law or treaty with respect to any payment, distribution or allocation to the Company or the
Members shall be treated as amounts distributed to the Members pursuant to this Article 8 for all purposes of this Agreement. The Board is authorized to withhold from distributions, or with
respect to allocations, to the Members and to pay over to any federal, foreign, state or local government any amounts required to be so withheld pursuant to the Code or any provision of any other
federal, foreign, state or local law or treaty and shall allocate such amounts to those Members with respect to which such amounts were withheld. 

        Section 8.4    Limitations on Distribution.    

        Except
as provided in this Agreement, no Member shall be entitled to any distribution of cash or other property from the Company. Notwithstanding any provision to the contrary contained
in this Agreement, the Company shall not make a distribution to any Member on account of its Interest in the Company if such distribution would violate the Act or other applicable law. 

        Section 8.5    Tax Distributions.    

        (a)   Each
Member shall be entitled to receive, on the date which is two Business Days prior to each date on which estimated income tax payments are required to be made by an
individual calendar year taxpayer and each due date for the income tax return of an individual calendar year taxpayer (each a "Tax Distribution Date"),
cumulative cash distributions in an amount equal to such Member's Assumed Tax Liability, if any. The "Assumed Tax Liability" of each Member means an amount equal to (i) the cumulative amount of
federal income taxes (including any applicable estimated taxes), determined taking into account the character of income and loss allocated to such Member as it affects the applicable tax rate, that
the Board estimates would be due from such Member as of such Tax Distribution Date, assuming such Member were an individual that earned solely the items of income, gain, deduction, loss and/or credit
allocated to such Member pursuant to Section 9.4 (after reflecting any adjustments thereto by reason of Code Sections 732(d), 734, or 743), reduced by (ii) all previous
distributions made to such Member pursuant to this Article 8 (other than distributions distributed and reinvested pursuant to Section 8.1(a)). 

41

 

        (b)   Distributions
under this Section shall be treated as an advance distribution under and shall offset future distributions that such Member would otherwise be entitled to
receive pursuant to Section 8.1 or, if not previously offset, Section 13.4. 

        (c)   If
on a Tax Distribution Date there are not sufficient funds on hand to distribute to each Member the full amount of such Member's Assumed Tax Liability, distributions
pursuant to this Section 8.5 shall be made to the Members to the extent of the available funds in proportion to each Member's Assumed Tax Liability. 

 
 

  ARTICLE 9
  ALLOCATIONS    
    

        Section 9.1    Profits and Losses.    

        (a)   After
giving effect to the special allocations set forth in Section 9.2 and 9.3 and subject to the allocations contained in Section 13.4(b), all Profits
and Losses from operations for each Fiscal Year (or part thereof) shall be allocated to the Class A Members and the Class B Members in accordance with their Percentage Interests;
provided, no Losses shall be allocated to any Member to the extent that such Losses would result in a Member having an Adjusted Capital Account Deficit. 

        Section 9.2    Special Allocations.    

        Notwithstanding
anything in this Agreement to the contrary, the following special allocations shall be made: 

        (a)    Nonrecourse Deductions.    Nonrecourse Deductions for any taxable year shall be allocated to the Members in
accordance with their Percentage Interests. 

        (b)    Member Nonrecourse Deductions.    Member Nonrecourse Deductions for any taxable year shall be allocated 100% to
the Member that bears the Economic Risk of Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation
Section 1.704-2(i). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, Member Nonrecourse Deductions
attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss. This Section 9.2(b) is intended to comply
with the provisions of Treasury Regulation Section 1.704-2(i) and shall be interpreted consistently therewith. 

        (c)    Company Minimum Gain Chargeback.    Notwithstanding any other provision of this Agreement, if there is a net
decrease in Minimum Gain during any taxable year, each Member shall be allocated items of Company income and gain for such year (and, if necessary, subsequent taxable years) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(f)(6), (g)(2) and (j)(2)(i). For purposes of this Section 9.2, each Member's Capital Account shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Article 9 with respect to such taxable year. This
Section 9.2(c) is intended to comply with the partner minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith. 

        (d)    Member Nonrecourse Debt Minimum Gain Chargeback.    Notwithstanding the other provisions of this Agreement
(other than Section 9.2(c) above), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any taxable year, any Member with a share of Member Nonrecourse Debt Minimum Gain at
the beginning of such taxable year shall be allocated items of Company income and gain for such year (and, if necessary, subsequent taxable years) in the manner and amounts provided in Treasury
Regulation Section 1.704-2(i)(4) and (j)(2)(ii). For 

42

 

purposes
of this Section 9.2, each Member's Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Article 9, other than Section 9.2(c) above, with respect to such taxable year. This Section 9.2(d) is intended to comply with
the partner nonrecourse debt minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith. 

        (e)    Qualified Income Offset.    Except as provided in Sections 9.2(c) and 9.2(d) above, in the event any
Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income
and gain shall be allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by such Treasury Regulation, the deficit balance, if any, in its Adjusted Capital
Account created by such adjustment, allocation or distribution as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Sections 9.2(c), 9.2(d) or 9.2(f). This
Section 9.2(e) is intended to constitute a qualified income offset described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith. 

        (f)    Priority Allocation.    

          (i)  Items
of Company gross income and gain shall be allocated to the Class A Members in accordance with their Class A Percentage Interests, until the
aggregate amounts of such items allocated to the Class A Members for such Fiscal Year equals the amount distributed to the Class A Members pursuant to Section 8.1(b)(i)(A) for all
Fiscal Years that have not been previously reflected by an allocation pursuant to this Section 9.2(f). 

         (ii)  After
giving effect to all preceding allocations in Section 9.2(f)(i), all or a portion of the remaining items of Company income or gain for the Fiscal Year, if
any, shall be allocated to MWE Liberty in an amount equal to the cumulative cash distributed to MWE Liberty pursuant to Sections 8.2(a), 8.2(b) or 8.2(c) (to the extent of such
distributions in excess of MWE Liberty's Percentage Interest), less the cumulative amount of income and gain previously allocated to MWE Liberty pursuant to this
Section 9.2(f)(ii). 

        (g)   Gross
Income Allocation. In the event any Member has a deficit balance in its Adjusted Capital Account at the end of any taxable year, such Member shall be allocated
items of Company gross income and gain in the amount of such excess as quickly as possible; provided, however, that an allocation pursuant to this Section 9.2(g) shall be made only if and to
the extent that such Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 9.2 (other than Section 9.2(e)) have been
tentatively made as if Section 9.2(e) and this Section 9.2(g) were not in this Agreement. 

        Section 9.3    Curative Allocations.    

        The
allocations set forth in Section 9.2 (other than Section 9.2(f)) (the "Regulatory Allocations") are intended to comply
with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 9.3. Therefore, notwithstanding any other provision of this Article 9
(other than the Regulatory Allocations), but subject to the Code and the Treasury Regulations, the Board shall make such offsetting special allocations of Company income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance
such Member would have had if the Regulatory Allocations were not part of this Agreement. In exercising its discretion under this Section 9.3, the Board shall take into account future
Regulatory Allocations that, although not yet made, are likely to offset other Regulatory Allocations previously made. 

43

 

        Section 9.4    Income Tax Allocations.    

        (a)   Except
as provided in this Section 9.4, each item of income, gain, loss and deduction of the Company for federal income tax purposes shall be allocated among the
Members in the same manner as such items are allocated for book purposes under Sections 9.1, 9.2, 9.3 and 13.4(b). 

        (b)   In
accordance with Code Section 704(c) and the applicable Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property
contributed to the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal
income tax purposes and its Gross Asset Value at the time of its contribution to the Company. If the Gross Asset Value of any Company property is adjusted in accordance with clause (c) or
(d) of the definition of Gross Asset Value, then subsequent allocations of income, gain, loss and deduction shall take into account any variation between the adjusted basis of such property for
federal income tax purposes and its Gross Asset Value as provided in Code Section 704(c) and the related Treasury Regulations. For purposes of such allocations, the Company shall elect the
remedial allocation method described in Treasury Regulation Section 1.704-3(d). 

        (c)   All
items of income, gain, loss, deduction and credit allocated to the Members in accordance with the provisions hereof and basis allocations recognized by the Company
for federal income tax purposes shall be determined without regard to any election under Section 754 of the Code which may be made by the Company. 

        (d)   If
any deductions for depreciation or cost recovery are recaptured as ordinary income upon the Transfer of Company properties, the ordinary income character of the gain
from such Transfer shall be allocated among the Members in the same ratio as the deductions giving rise to such ordinary character were allocated. 

        Section 9.5    Allocation and Other Rules.    

        (a)   In
the event Members are admitted to the Company pursuant to this Agreement on different dates, the Profits (or Losses) allocated to the Members for each Fiscal Year
during which Members are so admitted shall be allocated among the Members in proportion to their Percentage Interests during such Fiscal Year in accordance with Section 706 of the Code, using
any convention permitted by law and selected by the Board that takes into account the varying interests of the Members during such Fiscal Year. 

        (b)   For
purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily,
monthly or other basis, as determined
by the Board using any method that is permissible under Section 706 of the Code and the Treasury Regulations thereunder. 

        (c)   The
Members are aware of the income tax consequences of the allocations made by this Article 9 and hereby agree to be bound by the provisions of this
Article 9 in reporting their shares of Company income and loss for income tax purposes. 

        (d)   Allocations
made by the Board under Section 9.2 in reliance upon the advice of the Company's accountants shall be deemed to be made pursuant to any fiduciary
obligation to the Company and the Members. 

        (e)   If
any Member makes a loan to the Company, or the Company makes a loan to any Member, and interest in excess of the amount actually payable is imputed under Code
Sections 7872, 483, or 1271 through 1288 or corresponding provisions of subsequent federal income tax law, then any item of income or expense attributable to any such imputed interest shall be
allocated solely to the Member who made or received the loan and shall be credited or charged to its Capital Account, as appropriate. 

44

 
 
 

  ARTICLE 10
  BOOKS AND RECORDS    
    

        Section 10.1    Inspection Rights Pursuant to Law.    

        The
Company shall have obligations to the Members as set forth in this Article 10 respecting books, records and financial statements of the Company. 

        Section 10.2    Books and Records.    

        At
all times during the continuance of the Company, the Company shall maintain at its principal place of business all records and materials the Company is required to maintain at such
location under the Act. The Company shall keep proper and complete books of account adequate for its purposes. The books of account relating to the Company shall be open to inspection and copying by
any of the Members or by their authorized representatives upon reasonable notice and at any reasonable time during business hours, at the Member's expense; provided, however, that the Members
acknowledge and agree that, to the extent that the books of account include information relating to one or more Affiliates of the Operator (other than the Company) or any Out of Scope Projects or
Exempted Projects (the "Unrelated Information"), then the Company and Operator shall be entitled either to redact, or limit access to, the books of
account such that the Members shall not have access to Unrelated Information or to require such Member to designate an independent third party auditor to conduct such review, which auditor will be
required to execute a confidentiality agreement with the Operator under which such auditor may examine the Unrelated Information but may not disclose the Unrelated Information to such Member. 

        Section 10.3    Financial Statements and Reports.    

        The
Operator shall prepare, on behalf of the Company and at the Company's expense, and shall submit to the Members the following statements, reports and notices: 

        (a)   Annual
financial statements of the Company, consisting of a profit and loss statement, balance sheet and statement of cash flows, as of the end of and for the prior
Fiscal Year, which shall be prepared in accordance with generally accepted accounting principles consistently applied ("GAAP") and audited by the
Operator's independent certified public accountants, which shall be a nationally recognized accounting firm (the "Annual Financial Statements"). The
Annual Financial Statements shall be delivered to each Member within 75 days after the end of each Fiscal Year; 

        (b)   Unaudited
quarterly financial statements of the Company, consisting of a profit and loss statement, balance sheet and statement of cash flows, as of the end of and for
the prior calendar quarter, which shall be prepared in accordance with GAAP except for normal year end adjustments and the absence of footnotes (the "Quarterly Financial
Statements"). The Quarterly Financial Statements shall be delivered within 45 days after the end of each calendar quarter; 

        (c)   Monthly
financial and business reports, which shall consist of a profit and loss statement, balance sheet and statement of cash flows, as of the end of and for the prior
calendar month, which shall be prepared in accordance with GAAP except for normal year end adjustments and the absence of footnotes (the "Monthly
Reports"). The Monthly Reports shall be delivered within 30 days after the end of each calendar month; 

        (d)   Copies
of the Approved Budget in effect from time to time, within 30 days after the approval thereof in accordance with Section 6.15; 

        (e)   Such
other information as a Member may reasonably request to satisfy such Member's or its Affiliates' public disclosure obligations under the Exchange Act, the rules of
any stock 

45

 

exchange,
or any similar public disclosure obligations; provided that public disclosure of any such information shall be subject to the provisions of Section 5.4. 

        Section 10.4    Accounting Method.    

        For
both financial and tax reporting purposes and for purposes of determining Profits and Losses, the books and records of the Company shall be kept on such method of accounting as
determined by the Board and shall reflect all Company transactions and be appropriate and adequate for the Company's business. 

        Section 10.5    Bank Accounts; Investments.    

        The
Board shall establish one or more bank accounts in the name of the Company into which all Company funds shall be deposited. No other funds shall be deposited into these accounts. 

 
 

  ARTICLE 11
  TAX MATTERS    
    

        Section 11.1    Taxation of Company.    

        It
is the intent of the Members that the Company shall be treated as a partnership for U.S. federal income tax purposes. Neither the Company nor any Member shall make an election
for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law or
to be classified as other than a partnership pursuant to Treasury Regulation Section 301.7701-3. 

        Section 11.2    Tax Returns.    

        The
Company shall cause the Operator to prepare, at the expense of the Company, for each Fiscal Year (or part thereof), federal tax returns in compliance with the provisions of the Code
and any required state and local tax returns. Each Member shall furnish to the Company all pertinent information in its possession relating to the Company's operations that is necessary to enable the
Company's tax returns to be timely prepared and filed. Not less than 60 days prior to the due date (as extended) of the Company's federal income tax return or any state income tax return, the
return proposed by the Board to be filed by the Company shall be furnished to the Members for review. In addition, not more than 10 days after the date on which the Company files its federal
income tax return or any state income tax return, a copy of the return so filed shall be furnished to the Members. 

        Section 11.3    Member Tax Return Information.    

        The
Company, at its expense, shall cause to be delivered to each Member within 60 calendar days after the end of the Company's taxable year an IRS Form K-1 or a good
faith estimate of the amounts to be included on such IRS Form K-1 for such Member and such other information as shall be necessary (including a statement for that year of each
Member's share of net income, net losses and other items allocated to such Member) for the preparation and timely filing by the Members of their federal, state and local income and other tax returns. 

        Section 11.4    Tax Matters Representative.    

        (a)   The
"tax matters partner" of the Company for purposes of Section 6231(a)(7) of the Code shall be MWE Liberty, so long as MWE Liberty or one of its
Affiliates is a Member, and shall have the power to manage and control, on behalf of the Company, any administrative proceeding at the Company level with the Internal Revenue Service relating to the
determination of any item of Company income, gain, loss, deduction or credit for federal income tax purposes. Any Member who is designated as the tax matters partner shall be referred to herein as the
"Tax Matters Member." 

46

 

        (b)   The
Tax Matters Member shall keep the Members informed as to the status of any audit of the Company's tax affairs, and shall take such action as may be necessary to
cause any Member so requesting to become a "notice partner" within the meaning of Section 6231(a)(8) of the Code. Without first obtaining the approval of the Board and Requisite Member
Approval, the Tax Matters Member
shall not, with respect to Company tax matters: (i) enter into a settlement agreement with respect to any tax matter which purports to bind Members, (ii) intervene in any action pursuant
to Code Section 6226(b)(5), (iii) enter into an agreement extending the period of limitations for making assessments on behalf of Members, or (iv) file a petition pursuant
to Code Section 6226(a) or 6228. If an audit of any of the Company's tax returns shall occur, the Tax Matters Member shall not settle or otherwise compromise assertions of the auditing agent
which may be adverse to any Member as compared to the position taken on the Company's tax returns without the prior written consent of each such affected Member. 

        (c)   No
Member shall file a request pursuant to Code Section 6227 for an administrative adjustment of Company items for any taxable year, or a petition under
Code Sections 6226 or 6228 or other Code sections with respect to any item involving the Company, without first notifying other Members. 

        Section 11.5    Right to Make Section 754 Election.    

        The
Board, in its sole discretion, may make or revoke, on behalf of the Company, an election in accordance with Section 754 of the Code, so as to adjust the basis of Company
property in the case of a distribution of property within the meaning of Section 734 of the Code, and in the case of a transfer of Interests within the meaning of Section 743 of the
Code. 

        Section 11.6    Tax Elections.    

        The
Company shall have the right to make any U.S. federal income tax elections it deems appropriate and in the best interests of the Members. 

        Section 11.7    Tax Reimbursement.    

        If
Texas law requires the Company and any Member both to participate in the filing of a Texas margin tax combined group report, and if such Member pays the margin tax liability due in
connection with such combined report, the parties agree that the Company shall promptly reimburse such Member for the margin tax paid on behalf of the Company as a combined group member. The margin
tax paid on behalf of the Company shall be equal to the margin tax that the Company would have paid if it had computed its margin tax liability for the report period on a separate entity basis rather
than as a member of the combined group. In such event, the parties agree that such Member shall be considered as paying such amount on behalf of the Company and the Company shall deduct for federal
income tax purposes 100% of the Texas margin tax attributable to the Company; provided that in the event that such deduction may not be properly taken by the Company, the Company shall reimburse such
Member for the after-tax cost of such payment of Texas margin tax paid on the Company's behalf. 

47

 

 

 
 

  ARTICLE 12
  LIABILITY, EXCULPATION AND INDEMNIFICATION    
    

        Section 12.1    Liability.    

        (a)   Except
as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered
Person. 

        (b)   Except
as otherwise expressly required by law, a Member, in its capacity as Member, shall have no liability in excess of (i) the amount of its Capital
Contributions; (ii) its share of any assets and undistributed profits of the Company; (iii) its obligation to make other payments expressly provided for in this Agreement; and
(iv) the amount of any distributions wrongfully distributed to it. 

        Section 12.2    Exculpation.    

        (a)   No
Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that a Covered Person
shall be
liable for any such loss, damage or claim incurred by reason of such Covered Person's fraud, bad faith or willful misconduct as established by a non-appealable court order, judgment,
decree or decision. 

        (b)   A
Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented
to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or
on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, Profits, Losses or Available Cash or any other facts pertinent
to the existence and amount of assets from which distributions to Members might properly be paid. 

        Section 12.3    Indemnification.    

        To
the fullest extent permitted by applicable law, the Company shall indemnify and hold harmless each Covered Person from and against all Claims arising from or related to any act or
omission performed or omitted by such Covered Person on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this
Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any Claim by reason of such Covered Person's fraud, bad faith, or willful misconduct as established by a
non-appealable court order, judgment, decree or decision. Any indemnity under this Section 12.3 shall be provided out of and to the extent of Company assets only (including the
proceeds of any insurance policy obtained pursuant to Section 12.5), and no Covered Person shall have any personal liability on account thereof. Any amendment, modification or repeal of this
Section 12.3 or any provision in this Section 12.3 shall be prospective only and shall not in any way affect the rights of any Covered Person under this Section 12.3 as in effect
immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating
to such matters may arise or be asserted. 

        Section 12.4    Expenses.    

        To
the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or 

48

 

proceeding
upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified
as authorized in Section 12.3. 

        Section 12.5    Insurance.    

        The
Company may purchase and maintain insurance, to the extent and in such amounts as the Board shall, in its sole discretion, deem reasonable, on behalf of Covered Persons and such
other Persons as the Board shall determine, against any liability that may be asserted against or expenses that may be incurred by any such Person in connection with the activities of the Company or
such indemnities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement. The Board and the Company may enter
into indemnity contracts with Covered Persons and such other Persons as the Board shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses
and the funding of obligations under Section 12.4 and containing such other procedures regarding indemnification as are appropriate. 

        Section 12.6    Certain Liabilities.    

        Each
Member agrees to be liable for the Capital Contributions required to be made by such Member, and subject to the other provisions of this Agreement, in the event a Member becomes
liable for any liabilities of the Company, the Members shall bear such liability in proportion to their then existing Percentage Interests. 

        Section 12.7    Acts Performed Outside the Scope of the Company.    

        Each
Member (each Member in such capacity, an "Indemnitor") shall indemnify, defend, save and hold harmless each other Member (an
"Indemnitee") from any and all Claims that shall or may arise by virtue of any act or thing done or omitted to be done by the Indemnitor (directly or
through agents or employees) outside the scope of, or in breach of, the terms of this Agreement; provided, however, that the Indemnitor shall be properly notified of the existence of the Claim, and
shall be given reasonable opportunity to cure any act or omission causing liability, and participate in the defense thereof. The Indemnitee's failure to give such notice shall not affect the
Indemnitor's obligations hereunder, except to the extent of any actual prejudice arising therefrom. 

        Section 12.8    Liability of Members to Company or Other Members.    

        Unless
otherwise provided in this Agreement, no Member shall be liable to any other Member or to the Company by reason of such Member's actions in connection with the Company, except in
the event of a violation of any provision of this Agreement, fraud, bad faith or willful misconduct. 

        Section 12.9    Attorneys' Fees.    

        All
of the indemnities provided in this Agreement shall include reasonable attorneys' fees, including appellate attorneys' fees and court costs. 

        Section 12.10    Subordination of Other Rights to Indemnity.    

        The
interests of the Members in any proceeds of the Company by way of repayment of loans, return of any Capital Contributions, or any distributions from the Company, shall be
subordinated to the right of Members to the indemnities provided by this Article 12. 

        Section 12.11    Survival of Indemnity Provisions.    

        Except
as otherwise specifically provided herein, all of the indemnity provisions contained in this Agreement shall survive a Member's ceasing to be a Member hereunder. 

49

 
 
 

  ARTICLE 13
  DISSOLUTION, LIQUIDATION AND TERMINATION    
    

        Section 13.1    No Dissolution.    

        The
Company shall not be dissolved by the admission of Additional Members or Substitute Members in accordance with the terms of this Agreement, or the withdrawal of a Member. 

        Section 13.2    Events Causing Dissolution.    

        The
Company shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events: 

        (a)   the
determination of the Members pursuant to Section 6.12(p); 

        (b)   at
such time as there are no Members; 

        (c)   the
entry of a decree of judicial dissolution under the Act; or 

        (d)   the
sale, exchange or disposition of all, or substantially all, of the Company's assets in one transaction or a series of related transactions. 

        Section 13.3    Notice of Dissolution.    

        Upon
the dissolution of the Company, the Board shall promptly notify the Members of such dissolution. 

        Section 13.4    Liquidation.    

        (a)   Upon
dissolution of the Company, the Board (in such capacity, the "Liquidating Trustee") shall carry out the winding up
of the Company and shall immediately commence to wind up the Company's affairs; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the assets of the Company and
the satisfaction of liabilities to creditors so as to enable the Members to minimize the normal losses attendant upon a liquidation. The proceeds of liquidation shall be applied first to payment of
all expenses and debts of the Company and setting up of such reserves as the Board reasonably deems necessary to wind up the Company's affairs and to provide for any contingent liabilities or
obligations of the Company; provided that the unpaid principal of and interest on any loans made to the Company by Members (and their Affiliates) shall be distributed pro rata to the Members (and
their Affiliates) who made such loans, in proportion to the total amount of principal and interest payable on such loans, such distributions being treated first as a payment of accrued interest on
such loans and next as in payment of principal on such loans. Any remaining proceeds shall be distributed as follows: 

          (i)  If
the Equalization Date has not yet occurred, then: 

        (A)  First,
100% to the Class A Members in accordance with their Class A Percentage Interests until the ** is
reduced to zero; 

        (B)  Next,
100% to the Class A Members in accordance with their Class A Percentage Interests until the ** is
reduced to zero; and 

        (C)  Thereafter,
(1) if on or prior to **, ** to the holders of the
Class A Membership Interests and ** to the holders of the Class B Membership Interests and (2) if after  **, ** to the holders of the Class A Membership Interests and  ** to the holders of the Class B Membership Interests. 

         (ii)  If
the Equalization Date has occurred, then to the Members in accordance with their respective Percentage Interests. 

50

 

        (b)   Incentive
Interest Percentage Distributions. Notwithstanding the preceding provisions in Section 13.4(a), in the event a  ** Payout** has occurred, Available
Cash shall be distributed as follows: 

          **  Following
the ** Payout, if any, (x) first calculated in accordance with their respective Percentage Interests,
then (y) adjusted by reducing NGPMR's pro rata amount of Available Cash as determined in (x) by the ** and (z) increasing MWE
Liberty's pro rata amount of Available Cash as determined in (x) by the amount determined in (y) **

          **  

        (c)   The
Profits and Losses arising from liquidation of the Company shall be allocated to the Members so that, to the maximum extent possible, each Member's Capital Account
balance equals the amount of cash distributed to each such Member pursuant to Sections 13.4(a)(i) and (ii) and Section 13.4(b), to the extent applicable. 

        Section 13.5    Termination.    

        The
Company shall terminate when all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company, shall have been
distributed to the Members in the manner provided for in this Article 13 and the Certificate shall have been canceled, or such other documents required under the Act to be executed and filed
with the Secretary of State of the State of Delaware have been so executed and filed, in the manner required by the Act. 

        Section 13.6    Claims of the Members or Third Parties.    

        The
Members and former Members shall look solely to the Company's assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due
provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against the Company or
any other Member; provided, however, that nothing contained herein shall be deemed to limit the rights of a Member under applicable law. In the event any Member has a deficit balance in its Capital
Account at the time of the Company's dissolution, it shall not be required to restore such account to a positive balance or otherwise make any payments to the Company or its creditors or other third
parties in respect of such deficiency. 

        Section 13.7    Distributions In-Kind.    

        If
any assets of the Company shall be distributed in kind, such assets shall be distributed to the Member(s) entitled thereto as tenants-in-common in the same
proportions as such Member(s) would have been entitled to cash distributions if (i) such assets had been sold for cash by the Company at the fair market value of such property (taking the Gross
Asset Value definition herein and Code Section 7701(g) into account) on the date of distribution; (ii) any unrealized income, gain, loss and deduction inherent in such property (that has
not been reflected in the Capital Accounts previously) that would be realized by the Company from such sale were allocated among the Member(s) as Profits or Losses in accordance with this Agreement;
and (iii) the cash proceeds were distributed to the Member(s) in accordance with this Article 13. The Capital Accounts of the Member(s) shall be increased by the amount of any unrealized
income or gain inherent in such property or decreased by the amount of any loss or deduction inherent in such property that would be allocable to them, and shall be reduced by the fair market value of
the assets distributed to them under the preceding sentence. Notwithstanding the foregoing, the Members shall have the right to assign their interest to such in-kind distribution to any
Person. 

51

 
 
 

  ARTICLE 14
  REPRESENTATIONS, WARRANTIES AND COVENANTS    
    

        Section 14.1 Representations, Warranties and Covenants. 

        Each
Member hereby represents, warrants and covenants to the Company as follows: 

        (a)   The
Member understands that the purpose of the Company is to engage in the Primary Business. The Member has read and is familiar with, and has been given full and
complete access to, information, financial or otherwise, regarding the Company and has utilized such access to the Member's satisfaction and has obtained any other relevant information the Member has
sought. The Member has been given the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of, and other matters pertaining to, this investment. 

        (b)   The
Member has read this Agreement and understands that the Interests being acquired by the Member will be governed hereby. The Member agrees to be bound, in all
respects, by the terms of this Agreement. 

        (c)   The
Member has sufficient knowledge and experience in financial and business matters in general, and investments in particular, to be capable of evaluating the merits
and risks of the investment in the Interests. The Member is able to bear the economic risk of this investment, including a total loss of the investment. The Member has adequate means of providing for
its currents needs and personal contingencies, has no need for liquidity in the investment in the Company and has no reason to anticipate any circumstances, financial or otherwise, which might cause
or require any sale or distribution of the Interests. The Member's overall commitment to investments that are not readily marketable is not disproportionate to the Member's net worth and the
investment in the Company will not cause the Member's overall commitment in such investments to become excessive. The Member can lose its entire investment in the Interests without producing a
material adverse change in the Member's net worth. 

        (d)   It
is the Member's intention to acquire the Interest for its own account, for investment purposes, and not with a view to, or for, resale in connection with any
distribution thereof. The Member
understands that no federal or state agency has passed upon the Interests or made any findings or determination as to the fairness of this investment. The Member understands and acknowledges that the
Interests have not been registered under the Securities Act or under state securities laws and that the sale of the Interests is being made pursuant to exemptions from registration that may depend
upon the Member's investment intention. The Member also understands and acknowledges that the Interests may not be transferred unless they are registered under the Securities Act or an exemption from
such registration is available thereunder and under applicable state securities laws and established to the Company's satisfaction. In addition, the Member acknowledges that the Interests are subject
to additional restrictions on transferability in this Agreement that will make it difficult to Transfer or liquidate this investment. The Member acknowledges that the Company will rely on these
representations and that the Company is not required to recognize any Transfer of an Interest if, in the opinion of counsel, such Transfer would result in a violation of any federal or state law, rule
or regulation, regarding the offering or sale of securities. The Member further understands that any certificates representing the Interests may contain legends restricting the Transfer of the
Interests. 

        (e)   The
Member has authorized the execution of this Agreement, and the person executing this Agreement on the Member's behalf has been duly authorized to do so. 

        (f)    The
Member understands and acknowledges that (i) the Company may need to raise additional capital from time to time in order to engage in the Primary Business and
achieve any other objectives and goals that may be established for the Company by the Board, (ii) the Company may raise additional capital by selling Interests to one or more Members or other 

52

 

Persons,
(iii) the Member has no right to participate in any future offering, or to buy any additional Interests that may be issued, by the Company except to the extent set forth herein, and
(iv) the Member's Percentage Interest in the Company may be diluted as a result of any such sale of additional Interests in the Company. 

        (g)   The
Member will indemnify and hold harmless the Company and its Managers, officers, Members and Affiliates, and any other Person who controls or is controlled by any of
them, against any and all loss, liability, claim, damage and expense whatsoever, including reasonable attorney's fees, arising out of or based upon any false representation or warranty or any breach
by the Member of any term or condition contained in this Article 14. 

        (h)   All
of the information provided to the Company by the Member and all of the Member's representations and warranties are true and correct as of the date of this
Agreement. The Member's representations, warranties and covenants shall survive the delivery of the Member's Capital Contribution. 

 
 

  ARTICLE 15
  MISCELLANEOUS    
    

        Section 15.1    Notices.    

        All
notices provided for in this Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied, mailed by registered or certified mail,
sent by recognized overnight delivery or courier service (e.g., Federal Express) or, to the extent permitted by this Agreement, sent via electronic mail, and shall be deemed to have been given
upon delivery, if delivered personally or by facsimile or electronic mail, three days after mailing, if mailed, or one Business Day after delivery to the courier, if delivered by overnight courier
service, as follows: 

          (i)  if
given to the Company, in care of the Board at the principal place of business of the Company set forth in Section 2.5 or at such other address as the Company
may hereafter designate by 10 days' written notice to the Members. 

         (ii)  if
given to any Member, at such address designated on the signature page hereto or at such other address as such Member may hereafter designate by 10 days'
written notice to the Company. 

        Section 15.2    Failure to Pursue Remedies.    

        The
failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would
have originally constituted a violation, from having the effect of an original violation. 

        Section 15.3    Cumulative Remedies.    

        The
rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 

        Section 15.4    Binding Effect.    

        This
Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, legal representatives and assigns. 

53

 

        Section 15.5    Interpretation.    

        Throughout
this Agreement, nouns, pronouns and verbs shall be construed as masculine, feminine, neuter, singular or plural, whichever shall be applicable. All references herein to
"Articles," "Sections" and "Paragraphs" shall refer to corresponding provisions of this Agreement. 

        Section 15.6    Severability.    

        The
invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted. 

        Section 15.7    Counterparts.    

        This
Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All counterparts shall be construed together and
shall constitute one instrument. 

        Section 15.8    Integration.    

        This
Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining
thereto. 

        Section 15.9    Amendment or Restatement.    

        This
Agreement (including any Exhibit or Schedule hereto) and the Certificate may be amended, modified or supplemented, and any provisions of this Agreement or the Certificate be waived,
with a written instrument adopted, executed and agreed to by the Company and the Class B Members with an aggregate Class B Percentage Interest equal to or exceeding 50%; provided,
however, that (a) this Agreement shall be deemed automatically amended from time to time without further consent of any party to reflect issuances and transfers of Interests made in compliance
with this Agreement and (b) any amendment, modification, supplement or waiver to this Agreement or the Certificate that would adversely affect the rights, or increase the obligations, of any
Member in any material respect shall not be effective without the consent of such affected Member. Except as required by law, no amendment, modification, supplement, discharge or waiver of or under
this Agreement shall require the consent of any Person not a party to this Agreement. 

        Section 15.10    Governing Law.    

        This
Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such
laws without regard to principles of conflict of laws. The parties further agree that any legal action or proceeding with respect to this Agreement or any document relating hereto may be brought only
in a federal or state court of competent jurisdiction in Houston, Texas. Each party hereby irrevocably waives any objection, including, without limitation, any objection to the laying of venue or
based on the grounds of forum non-convenience, which it may now or hereafter have to the bringing of such action or proceeding in any such respective jurisdiction. 

        Section 15.11    Dealings in Good Faith.    

        Except
as otherwise expressly set forth herein, each party hereto agrees to act in good faith with respect to the other party in exercising its rights and discharging its obligations
under this Agreement. Each party further agrees to use its reasonable efforts to ensure that the purposes of this Agreement are realized and to take all steps as are reasonable in order to implement
the operational provisions of this Agreement. 

54

 

 
        Section 15.12    Partition of the Property.    

        Each
Member agrees that it shall have no right to partition the Property, or any portion thereof, and each Member agrees that it shall not make application to any court or authority
having jurisdiction in the matter to commence or prosecute any action or proceeding for partition of the Property, or any portion thereof. Upon the breach of this Section by any Member, the other
Members, in addition to all other rights and remedies in law and equity, shall be entitled to a decree or order dismissing application, action or proceeding. 

        Section 15.13    Third Party Beneficiaries.    

        Except
as expressly set forth in this Agreement, nothing in this Agreement is intended or shall be construed, to confer upon or give any Person other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this Agreement, or result in their being deemed a third party beneficiary of this Agreement. 

        Section 15.14    Tax Disclosure Authorization.    

        Notwithstanding
anything herein to the contrary, the Members (and each Affiliate and Person acting on behalf of any Member) agree that each Member (and each employee, representative, and
other agent of such Member) may disclose to any and all Persons, without limitation of any kind, the transaction's tax treatment and tax structure (as such terms are used in Sections 6011 and
6112 of the Code and the Treasury Regulations thereunder) contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) provided to such Member or such Person
relating to such tax treatment and tax structure, except to the extent necessary to comply with any applicable federal or state securities laws. 

        Section 15.15    Waivers and Consents.    

        A
waiver or consent, express or implied, to or of any breach or default by any Person in the performance of its obligations hereunder is not a consent or waiver to or of any other breach
or default in the performance by that Person of the same or any other obligation of such Person hereunder. Failure of a Person to assert the default or breach of any other Person hereunder shall not
constitute a waiver thereof until the applicable statute of limitations period has run. 

        Section 15.16    Deadlocks; Negotiations.    

        (a)   Deadlocks.
If any matter or proposal requiring less than a unanimous vote of the Managers for approval thereof is (i) brought before the Managers and such matter
or proposal is neither (A) approved of by the Managers sufficient to constitute approval of such matter or proposal or (B) disapproved of by the Managers sufficient to constitute
rejection of such matter or proposal or (ii) would have been brought before the Board, but for the fact that a quorum was not present at three consecutive Board meetings called for a purpose
which includes such matter or proposal, then any Manager, by written notice to the other Managers given within three Business Days after (1) the initial vote on such matter or proposal or
(2) the third consecutive Board meeting at which a quorum was not present, as applicable, may call a meeting of the Board to reconsider such matter or proposal, such meeting to be held when,
where and as reasonably specified in such notice, but not less than three Business Days nor more than seven Business Days after such vote. If such meeting is called and held as provided in the
immediately preceding sentence and either (i) the matter or proposal is offered at such meeting again and is neither (A) approved of by the Managers sufficient to constitute approval of
such matter or proposal or (B) disapproved of by the Managers sufficient to constitute rejection of such matter or proposal, (ii) the Managers are unable to otherwise agree on a course
of action to address the matter or proposal which is the reason for the meeting, or (iii) a quorum is not present at such Board meeting, then any Manager may within three Business Days
thereafter declare an impasse 

55

 

("Impasse") by giving written notice to the other Managers and to the Chief Executive Officer (or the individual performing similar functions) of the
parent company of each Member containing a brief description of the nature of the dispute subject to such Impasse (an "Impasse Notice"). Thereafter,
such Impasse shall be subject to the provisions of Section 15.16(b) and, if applicable, binding arbitration, in accordance with Section 15.16(c). If no Manager calls such a meeting
within the first three Business Days period provided in this Section or if an Impasse is not declared within the three Business Day period after the second meeting, then no Manager shall thereafter
have any right to declare an Impasse regarding such matter or proposal and binding arbitration shall not be available regarding such matter or proposal. 

        (b)   Impasse
Negotiations. Within 20 Business Days after the receipt of an Impasse Notice, the Chief Executive Officer of each parent company of a Member (or the individual
performing similar functions)
shall meet in good faith effort to reach accords that will end the Impasse. If a decision is not made by common accord that ends the Impasse within 15 days after the date of such meeting, any
Manager may declare a final Impasse ("Final Impasse") by written notice to the other Managers. Notwithstanding anything in this Agreement to the
contrary, if any CEO refuses to meet with the other CEOs, any Manager may immediately invoke the provisions of Section 15.16(c). 

        (c)   Submission
to Arbitration. If within 10 Business Days following receipt of written notice of a Final Impasse, the matter or proposal subject to such Final Impasse is
neither (A) approved of by the Managers sufficient to constitute approval of such matter or proposal or (B) disapproved of by the Managers sufficient to constitute rejection of such
matter or proposal, then any Manager may subject the matter or proposal to binding arbitration pursuant to Section 15.17. 

        Section 15.17    Dispute Resolution.    

        (a)    Agreement to Arbitrate.    Any claim, counterclaim, demand, cause of action, dispute, or any other controversy
arising out of or relating in any way to this Agreement or to the subject matter of this Agreement, including any dispute made subject to arbitration under Section 15.16(c) (each a
"Dispute") shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims
that the Agreement is unlawful, unenforceable, void, or voidable or involves claims under statutory, civil or common law. The validity, construction and interpretation of this Agreement to arbitrate,
and all other procedural aspects of the arbitration conducted pursuant hereto shall be decided by the arbitral tribunal. 

        (b)    Rules and Applicable Law.    Any arbitration under this Agreement shall be administered by the American
Arbitration Association and conducted in accordance with the Commercial Arbitration Rules of the AAA in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall
apply the governing law as specified in Section 15.10 of this Agreement. THE ARBITRAL TRIBUNAL SHALL NOT BE EMPOWERED TO AWARD PUNITIVE, EXEMPLARY, TREBLE, MULTIPLE,
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING DAMAGES FOR LOSS OF PROFITS, LOSS OF USE OR REVENUE OR LOSSES BY REASON OF COST OF CAPITAL, ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR THE BUSINESS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES AND THE PARTIES WAIVE ANY RIGHT THEY MAY HAVE TO RECOVER SUCH DAMAGES FROM ONE
ANOTHER. The arbitral tribunal shall not be empowered to declare any provision of this Agreement void or unenforceable. The arbitral tribunal shall not be empowered to decide
any dispute ex aequo et bono or amiable compositeur. 

56

 

        (c)    Location of the Proceeding.    The arbitration shall be held in Houston, Texas. 

        (d)    Selection of the Arbitral Tribunal.    The Dispute shall be decided by a panel of three neutral arbitrators
selected as follows. The claimant shall nominate an arbitrator at the time it serves its notice of arbitration. The respondent shall nominate an arbitrator within 15 days of the claimant's
nomination of an arbitrator. In the event that there is more than one claimant or more than one respondent, then the claimants or respondents, as the case may be, shall collectively appoint one
arbitrator. If a party or a group of parties does not appoint an arbitrator, then an arbitrator shall be appointed according to the Rules. The two arbitrators shall together agree upon a third
arbitrator to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within 30 days of the respondent's appointment of an arbitrator, then the
chairman shall be chosen according to the Rules. 

        (e)    Interim Measures and Provisional Remedies.    The arbitral tribunal is authorized to award interim measures,
provisional remedies or injunctive relief, which may be enforced by the arbitral tribunal or by a court of law. In the event of an emergency or if one of the arbitrators is unavailable, then the
chairman is authorized to award interim measures or injunctive relief, which may upon the request of a party be reviewed by the entire arbitral tribunal. The arbitral tribunal is authorized to direct
the parties to request that any court vacate, modify or dismiss any temporary or preliminary relief issued by a court relating to a Dispute. 

        (f)    Specific Performance.    The parties agree that money damages alone shall not be an adequate remedy for any
breach of this Agreement. Therefore, the parties agree that the arbitral tribunal is authorized to award specific performance and injunctive relief for any breach of this Agreement. The arbitral
tribunal is authorized to award interim measures of specific performance while the arbitration is pending. 

        (g)    Award.    The award shall be final and binding on the parties and may be confirmed in, and judgment upon the
award entered by, any court having jurisdiction over the parties. The award shall be required to be in writing, stating the award and the reasons therefor. 

        (h)    Enforcement of Award by a Court and Challenge to an Award.    Any arbitration award may be enforced by the
state or federal courts sitting in the state of Delaware or any other court of competent subject matter jurisdiction where the party against whom the award is sought to be enforced keeps or maintains
assets. Any party seeking to challenge an award must bring the action in the state or federal courts sitting in the state of Delaware. The parties agree to waive any objections they may have to
personal jurisdiction, venue, or forum non-conveniens for any action brought to enforce or to challenge an award in one of the courts set forth above. The parties agree that service of
process may be accomplished according to the procedures of Section 15.1 or by any other means authorized by law. The parties agree to waive any objection they may have to service of process if
accomplished according to the procedures of Section 15.1. 

        (i)    Costs and Attorneys Fees.    The arbitral tribunal is authorized to award costs of the arbitration in its award
and to allocate costs between the parties, including (A) the fees and expenses of the arbitrators; (B) the costs of assistance required by the tribunal, including its experts;
(C) the fees and expenses of the administrator; (D) the reasonable costs for legal representation of a successful party, including attorneys fees, expert witness fees, out of pocket
costs and other expenses; and (E) any such costs incurred in connection with an application for interim or emergency measures. 

        (j)    Interest.    The award shall include pre-judgment interest at a rate to be determined by the
arbitral tribunal from the date of the breach or default. Interest shall accrue until the date the award is paid in full. 

57

 

        (k)    Payment of the Award.    The award (including any interim award) shall be paid within 30 days of the
issuance of the award in immediately available funds, free and clear of any liens, taxes or other deductions. The award shall be paid in United States dollars. 

        (l)    Severability.    If any provision of this arbitration provision is found by a court to be unenforceable or
unlawful, then it shall be severed from the agreement and the remaining terms shall be enforced as written. 

        (m)    Confidentiality.    Any arbitration (including a settlement resulting from an award, documents exchanged or
produced during an arbitration proceeding, and memorials, briefs or other documents prepared for the arbitration) shall be Confidential Information subject to the provisions of Section 5.4. A
breach of this confidentiality provision shall not void any settlement or award. 

        Section 15.18    Transaction Expenses.    

        ** Class A Members and the Class B Members **
out-of-pocket fees, costs and expenses incurred in connection with the transactions related to this Agreement **. 

[Signature
Page Follows] 

58

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 

 

 

					
	 	 	 MWE LIBERTY:
	

 	
 	
MARKWEST LIBERTY GAS GATHERING, L.L.C.,

a Delaware limited liability company
	

 	
 	
By:	
 	

 
	 	 	 	 	 
	 	 	Name:	 	 
	 	 	Title:	 	 
	 	 	 	 	 
	

 	
 	
Address for notice:

1515 Arapahoe Street

Tower 2, Suite 700

Denver, CO 80202-2126

Attention: Senior Vice President and Chief Operations Officer
	

 	
 	
 NGPMR:
	

 	
 	
M&R MWE LIBERTY, LLC
	

 	
 	
By:	
 	

 
	 	 	 	 	 
	 	 	Name:	 	 
	 	 	 	 	 
	 	 	Title:	 	 
	 	 	 	 	 
	

 	
 	
Address for notice:

1401 McKinney, Suite 1025

Houston, TX 77010

Attention: Jeffrey C. Rawls
	

 	
 	
with a copy to:
	

 	
 	
Locke Lord Bissell & Liddell, LLP

600 Travis Street, Suite 3400

Houston, Texas 77002

Fax (713) 229-2518

Attention: H. William Swanstrom

 

 Signature
Page 

59

 

 
 

EXHIBIT A
  AREA OF MUTUAL INTEREST    

        The
areas described on the attached Area of Mutual Interest Map. 

A-1

 
**

A-2

 

 
 

EXHIBIT B
  MEMBERS AND CAPITAL CONTRIBUTIONS(1)    

 

 

												
	Member Name and Address

 
	 	Aggregate Capital

Contributions 	 	Cash Capital

Contributions 	 	Type of

Membership

Interest 	 	Percentage

Interest 	 	Investment

Balance 
	M&R MWE Liberty, LLC

1401 McKinney, Suite 1025

Houston, TX 77010

Attention: Jeffrey C. Rawls

Facsimile: (713) 579-5017

Email: jrawls@ngpmr.com

with a copy to:

Locke Lord Bissell & Liddell, LLP

600 Travis Street, Suite 3400

Houston, Texas 77002

Fax (713) 229-2518

Attention: H. William Swanstrom	 	$[            ]	 	$[            ]	 	Class A	 	 	40	%	$[            ]
	
MarkWest Liberty Gas Gathering, L.L.C.

1515 Arapahoe Street, Tower 2

Suite 700

Denver, CO 80202

Attention: Senior Vice President and Chief Operations Officer

Facsimile: (303) 925-9305

Email: jmollenkopf@markwest.com

with a copy to:

MarkWest Liberty Gas Gathering, L.L.C.

1515 Arapahoe Street, Tower 2

Suite 700

Denver, CO 80202

Attention: Senior Vice President, General Counsel and Secretary

Facsimile: (303) 925-9308

Email: cbromley@markwest.com	
 	
$[            ]	
 	
$[            ]	
 	
Class B	
 	
 	
60	
%	
$[            ]

 

 

	(1)
	To
be finalized upon the execution and adoption of this Agreement in accordance with the terms of that certain letter agreement, dated August 10,
2009, by and among M&R MWE Liberty, LLC and MarkWest Liberty Gas Gathering, L.L.C. 

 

 B-1

 

 
 

EXHIBIT C
  BASE PROJECT(1)    

	1.
	Natural
Gas Processing Plant Construction and Operation 

** 

	2.
	Natural
Gas Pipeline Construction and Operation 

**
 

	3.
	Miscellaneous
Natural Gas Processing Infrastructure Construction and Operation 

**

	(1)
	To
be finalized upon the execution and adoption of this Agreement in accordance with the terms of that certain letter agreement, dated August 10,
2009, by and among M&R MWE Liberty, LLC and MarkWest Liberty Gas Gathering, L.L.C. 

C-1

 

 
 

EXHIBIT D
  
    INITIAL BUDGET
  
    (See attached)(1)    

	(1)
	To
be finalized upon the execution and adoption of this Agreement in accordance with the terms of that certain letter agreement, dated August 10,
2009, by and among M&R MWE Liberty, LLC and MarkWest Liberty Gas Gathering, L.L.C. 

D-1

 

 
 

EXHIBIT E
  
    ILLUSTRATIVE EXAMPLE CALCULATION OF INCENTIVE INTERESTS    

** 

[6
pages have been omitted and filed separately with the Securities and Exchange Commission pursuant to the request for confidential treatment.] 

E-1

 

 
 

EXHIBIT G
  
    CAPITAL EXPENDITURES FOR AGREEMENTS    

** 

G-1

 

 
 

  EXHIBIT H
  
    PRE-APPROVED AFFILIATED TRANSACTIONS    
    

	1.
	Services
Agreement

	2.
	Fractionation
and NGL Purchase Agreement

	3.
	The
execution of the Company's acknowledgment of the pledge by MWE Liberty of its Class B Interest in the Company to the Royal Bank of Canada pursuant
to that certain Credit Agreement, dated as of February 20, 2008, among MWE, certain subsidiary guarantors, Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the other
lenders party thereto. 

H-1

QuickLinks

Exhibit 10.1

EXECUTION COPY

EXHIBIT A

EXHIBIT A

TABLE OF CONTENTS

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF MARKWEST LIBERTY MIDSTREAM & RESOURCES, L.L.C.

ARTICLE 1 DEFINED TERMS

ARTICLE 2 FORMATION AND TERM

ARTICLE 3 PURPOSE AND POWERS OF THE COMPANY

ARTICLE 4 CAPITAL CONTRIBUTIONS, MEMBER INTERESTS, CAPITAL ACCOUNTS AND FUTURE CAPITAL REQUIREMENTS

ARTICLE 5 MEMBERS, MEETINGS AND AMENDMENTS

ARTICLE 6 MANAGEMENT

ARTICLE 7 ASSIGNABILITY OF MEMBER INTERESTS

ARTICLE 8 DISTRIBUTIONS TO MEMBERS

ARTICLE 9 ALLOCATIONS

ARTICLE 10 BOOKS AND RECORDS

ARTICLE 11 TAX MATTERS

ARTICLE 12 LIABILITY, EXCULPATION AND INDEMNIFICATION

ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION

ARTICLE 14 REPRESENTATIONS, WARRANTIES AND COVENANTS

ARTICLE 15 MISCELLANEOUS

EXHIBIT A AREA OF MUTUAL INTEREST

EXHIBIT B MEMBERS AND CAPITAL CONTRIBUTIONS(1)

EXHIBIT C BASE PROJECT(1)

EXHIBIT D INITIAL BUDGET (See attached)(1)

EXHIBIT E ILLUSTRATIVE EXAMPLE CALCULATION OF INCENTIVE INTERESTS

EXHIBIT G CAPITAL EXPENDITURES FOR AGREEMENTS

EXHIBIT H PRE-APPROVED AFFILIATED TRANSACTIONSEXHIBIT
10.1

 

EXECUTION
COPY

 

CONFIDENTIAL TREATMENT REQUEST

 

***  Portions denoted with
asterisks have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

 

AMENDED &
RESTATED COMMERCIAL RESEARCH AND LICENSE AGREEMENT

 

This Amended & Restated Commercial Research and License
Agreement (“Agreement”) is entered into as of November 6, 2009 (“Execution
Date”), by and between GlaxoSmithKline LLC, a Delaware limited liability
company (formerly known as SmithKline Beecham Corporation d/b/a
GlaxoSmithKline), with its principal place of business located at One Franklin
Plaza, Philadelphia, Pennsylvania 19101 (“GSK”) and SuperGen, Inc.,
a company organized under the laws of the State of Delaware, with its principal
place of business located at 4140 Dublin Blvd., Suite 200, Dublin, CA
94568 (“SGI”). Each of GSK and SGI hereinafter referred to as a “Party”
and together, the “Parties”.

 

On October 27, 2009, SmithKline Beecham
Corporation d/b/a GlaxoSmithKline effected a corporate conversion pursuant to
Delaware law into a Delaware limited liability company known as GlaxoSmithKline
LLC.

 

The Parties entered into that certain Commercial
Research and License Agreement, effective October 22, 2009 (“Effective
Date”) (“Prior Agreement”), and have elected to amend and restate
the Prior Agreement as set forth herein, effective as of the Execution Date.

 

SGI owns or possesses certain intellectual property
with respect to the discovery and development of novel drug compounds, and
believes that certain of these drug compounds may have the potential to be used
therapeutically for the treatment of human cancer and other diseases;

 

SGI desires to collaborate with a pharmaceutical
company with late-stage development and commercialization expertise, so as to
realize the therapeutic and commercial potential of the drug compounds;

 

GSK possesses expertise in the research,
development, manufacturing and commercialization of human pharmaceuticals, and
GSK is interested in developing the drug compounds discovered by SGI;

 

GSK desires to engage in a collaborative effort with
SGI pursuant to which SGI will carry out research and development programs to
discover and develop compounds, and GSK will have the GSK Option (as defined
below), exercisable at GSK’s sole discretion, to further develop and
commercialize such compounds for any and all uses in the Field (as defined
below) in the Territory (as defined below), all on the terms and conditions set
forth herein; and

 

Upon exercise by GSK of the GSK Option, SGI desires
to grant to GSK, and GSK desires to obtain, an exclusive license under the SGI
Patents (as defined below) to make, have made, use, sell, offer for sale and
import Products (as defined below) in the Field throughout the Territory on the
terms and conditions set forth herein.

 

The Parties hereby agree as follows:

 

1.                                                    DEFINITIONS

 

As used herein, the following capitalized terms will have the following
meanings, and singular forms, plural forms and derivative forms thereof will be
interpreted accordingly:

 

a.                                       “Adverse
Event” means any unfavorable and unintended sign including an abnormal
laboratory finding, symptom or disease associated with the use of a Compound or
a Product, regardless of 

 

1

 

whether it is considered related to the Compound or Product,
that occurs during the course of the PoC Trial.

 

b.                                      “Affiliate”
means any corporation or other business entity that controls, is controlled by,
or is under common control with a Party. A corporation or other entity will be
regarded as in “control” of another corporation or entity if it (i) owns
or directly or indirectly controls at least fifty percent (50%) of the
outstanding shares or other voting rights of the other corporation or entity
having the right to elect directors or such lesser percentage that is the
maximum permitted to be owned by a foreign entity in those jurisdictions where
majority ownership by foreign entities is prohibited, or (ii) in the case
of a non-corporate business entity, if it possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
the corporation or non-corporate business entity, as applicable, whether
through the ownership or control of voting securities, by contract or
otherwise.

 

c.                                       “Back-Up
Compound” means, with respect to a Lead Compound or Follow-On Compound in
the Project, a Compound that: (i) supplants or is intended to supplant
such Lead Compound or Follow-On Compound, as applicable, if such Lead Compound
or Follow-On Compound is removed from development and (ii) is within the
same chemical class as the Lead Compound or Follow-On Compound that it is
intended to supplant. If a Back-Up Compound supplants a Lead Compound or a
Follow-On Compound, then that Back-Up Compound will become the Lead Compound or
the Follow-On Compound, respectively.

 

d.                                      “Candidate
Selection Compound” means a Compound that meets its Candidate Selection
Criteria, or is deemed by the JRC, or by GSK as set forth in Sections 2(c)v.A
and 2(c)v.B, as having met its Candidate Selection Criteria.

 

e.                                       “Candidate
Selection Criteria” means those criteria for candidate selection agreed to
by the Parties within five (5) days of the Execution Date pursuant to a
letter agreement between the Parties.

 

f.                                         “Change of
Control Transaction” means, with respect to a Party, any transaction or
series of related transactions that constitutes: (i) the sale or lease of
all or substantially all of such Party’s business or assets to an
acquiring entity; (ii) any merger, consolidation, share exchange,
recapitalization, business combination or other transaction to which such Party
is subject, resulting in the exchange or sale of all or substantially all of
the outstanding shares of such Party for securities or other consideration
paid, issued, or caused to be issued, by the acquiring entity; or (iii) an
acquiring entity having obtained beneficial ownership of fifty percent (50%) or
more of the outstanding voting securities of such Party; unless in any of cases
(ii) or (iii) the stockholders of such Party as of the date prior to
the closing date of such transaction or series of related transactions hold
more than fifty percent (50%) of the voting securities in the surviving entity
in such transaction or its parent outstanding immediately after the closing of
such transaction or series of transactions (provided that a “Change of Control
Transaction” will not be deemed to have occurred by virtue of GSK at any time
holding more than fifty percent (50%) of the voting securities in SGI).

 

g.                                      “CLIMBTM”
or “CLIMB” means that certain proprietary process, comprising hardware,
software, bench chemistry, synthesis, analysis and testing used by SGI for the
purpose of the discovery, evaluation and development of new chemical entities.

 

h.                                      “Commercially
Reasonable Efforts” means efforts
that are consistent with the efforts and resources normally used by a
Party in the exercise of its reasonable business discretion, relating to the
research and development progression of a potential pharmaceutical product
owned by it 

 

2

 

or to which it has exclusive rights, with similar product
characteristics, which is of similar market potential at a similar stage in its
development or product life, taking into account issues of patent coverage,
safety and efficacy, product profile, the competitiveness of the marketplace,
the proprietary position of the compound or product, the regulatory structure
involved, likelihood of obtaining regulatory approval, the profitability of the
applicable products (including, without limitation, pricing and reimbursement
status achieved), and other relevant factors, including without limitation
technical, legal, scientific and/or medical factors. For purposes of clarity, “Commercially
Reasonable Efforts” shall be determined on a market-by-market and
indication-by-indication basis for a particular Product and it is anticipated
that the level of effort may be different for different markets and may change
over time, reflecting changes in the status of the Product and the market(s) involved.

 

i.                                          “Compassionate Use Sales”
means the distribution or sale of Licensed Compounds as experimental
therapeutics prior to final FDA or foreign regulatory approval for use in humans.
For purposes of this Agreement, Compassionate Use Sales will also included “Named
Patient Sales” in jurisdictions where the latter term is used for the same or
similar purposes (e.g., EU).

 

j.                                          “Compound”
means any [***] owned or Controlled by SGI, as well as: (i) any pro-drugs
of such compounds, (ii) any metabolites of such compounds having [***]
target activity, (iii) all stereoisomers of such compounds including salts
of (i) (ii) and (iii), and any solvates or polymorphs of such
compounds. Compound will not include [***] and all stereoisomers, salts,
polymorphs, esters and acids of [***], or analogues of [***]. “Compound” will
also not include [***] or its derivatives or analogues, including [***].

 

k.                                       “Confidential Information”
means any proprietary or confidential information or material in tangible form
disclosed by one Party to the other hereunder that is marked as “Confidential”
at the time it is delivered to the receiving Party, or, if disclosed orally,
which is identified as confidential when disclosed and confirmed as such in
writing to the receiving Party within thirty (30) days thereafter, but in all
events excluding information that the receiving Party can demonstrate by
contemporaneously prepared competent evidence that:

 

i.                  is or becomes part of the public domain other
than by acts of the receiving Party in contravention hereof;

 

ii.               is disclosed to the receiving Party or its
Affiliates or Sublicensees by a Third Party who had the right to disclose such
Confidential Information to the receiving Party without obligation to the
disclosing Party;

 

iii.            prior to disclosure hereunder, was already in the
possession of the receiving Party or its Affiliates or Sublicensees without
obligation of non-use or nondisclosure; or

 

iv.           was independently discovered or developed by the
receiving Party without reference to or use of Confidential Information of the
disclosing Party.

 

l.                                          “Control” or “Controlled”
means the possession by a Party of the ability to grant a license or sublicense
as provided for herein without violating the terms of any agreement or other
arrangement with any Third Party that exists at the time of such license or
sublicense grant.

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

3

 

m.                                    “EMEA” means the
European Medicines Evaluation Agency, and any successor agency thereto.

 

n.                                      “EU Major Markets”
means Italy, Spain, France, Germany and the United Kingdom.

 

o.                                      “FDA” means the US
Food and Drug Administration and any successor entity thereto.

 

p.                                      “Field” means the
treatment, prevention, palliation or diagnosis of any disease or condition
adverse to human or animal health.

 

q.                                      “First Commercial Sale”
means, on a country-by-country, Product-by-Product basis, the first sale of a
Product to a Third Party for value, including Compassionate Use Sales. Registration samples, inter-company transfers
to Affiliates of a Party, transfers to a contract research organization or a
healthcare provider solely for clinical trial purposes in each case that do not
constitute a sale to a Third Party for value will not constitute a “First
Commercial Sale”.

 

r.                                         “Follow-On
Compound” means, with respect to the Lead Compound in the Project, a
Compound that (i) possesses a substantially different selectivity profile
towards [***] and/or [***], as the case may be, (ii) is from a [***] of
such Lead Compound or any Back-Up Compound to such Lead Compound, or (iii) is
reasonably expected to be [***] from such Lead Compound and from any Back-Up
Compound. For purposes of clarity, if a Back-Up Compound supplants a Follow-On
Compound, then that Back-Up Compound will become that Follow-On Compound.

 

s.                                       “GSK Group” means,
collectively, GSK and its Affiliates and its Sublicensee(s), if any.

 

t.                                         “GSK
Housemark” means the “GlaxoSmithKline” company name, any corporate logos of
the Seller, and, in each case, any variations thereof.

 

u.                                      “IND”
means an Investigational New Drug application, as defined in the US Food, Drug
and Cosmetic Act and the regulations promulgated thereunder, or any
corresponding foreign application, registration or certification.

 

v.                                      “Intellectual Property
Rights” means, collectively, all worldwide Patents, copyrights, copyright
registrations, trade names, trademarks, service marks, domain names and
registrations and/or applications for all of the foregoing, trade secrets,
know-how, rights in trade dress and packaging, goodwill and all other
intellectual property rights and proprietary rights, whether arising under the
laws of the US or the laws of any other state, country or jurisdiction.

 

w.                                    “Invention” means any
and all ideas, design, development, concepts, methods, procedures, processes,
improvements, inventions, know-how, technologies, data, discoveries, and
reductions to practice, whether or not patentable, which are first made,
conceived or first reduced to practice in the course of the joint or separate
activities of the Parties and/or their respective Affiliates and subcontractors
conducted in connection with this Agreement.

 

x.                                        “Joint Patent” means
any Patent claiming a Joint Invention.

 

y.                                      “Joint Patent Committee”
or “JPC” means the committee, established by the Parties to oversee
intellectual property matters related to the Project as further described in Section 3.

 

z.                                        “Joint Research Committee”
or “JRC” means the committee established by the Parties to oversee the
scientific and clinical progress of the Project, as further described in Section 3.

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

4

 

aa.                                 “Lead Compound”
means, at any particular point in time, the furthest advanced Compound within
the Project as identified by SGI.

 

bb.                               “Licensed Compound”
means those Compounds licensed to GSK upon GSK’s exercise of the GSK Option
pursuant to Section 4(a) which shall consist of: (i) the Lead
Compound, (ii) the Follow-On Compound, (iii) all Back-Up Compounds to
the Lead Compound and Follow-On Compound and (iv) all other Compounds [***] demonstrated by the Lead Compound or
Follow-On Compound as shown in [***] which are discovered or
made by SGI during the Research Term of this Agreement and for two years
thereafter in accordance with Section 4(i)ii.C.

 

cc.                                 “Major Indication”
means each of colorectal cancer, non-small cell lung cancer, prostate cancer or
breast cancer. In addition, Major Indications will also include such other
indications, separate and apart from the foregoing indications, that have an
incidence of at least Fifty Thousand (50,000) patients per year in the US, in
each case as approved by the JRC.

 

dd.                               “Manufacturing Cost”
means the following costs and expenses actually incurred by a Party (or its
Affiliates or Sublicensees, as applicable) in each case only to the extent
allocable to the manufacture or storage of the Compound or Product and included
in determining inventory value in its financial statements for the Compound or
Product when the accounting principles and policies as practiced and disclosed
in public regulatory filings are applied: costs of labor, costs of material,
third-party contract manufacturing costs, quality assurance and quality control
related expenses, directly incurred energy, utilities and other charges and
normal production overhead.

 

ee.                                 “MM” means million.

 

ff.                                     “NDA” means a New
Drug Application, as defined in 21 C.F.R. 314.5 et seq. or
its successor regulation and all amendments and supplements thereto, filed with
the FDA, or any corresponding foreign application, registration or
certification, filed with a Regulatory Agency.

 

gg.                               “Net Sales”
means, on a Product-by-Product basis, the gross amount invoiced on the last
sale of the Product(s) by any member of the GSK Group or SGI Group, as
applicable, to a Third Party, less reasonable and customary deductions for (i) actual
credits or allowances granted for damaged Products, including withdrawals and
recalls, returns or rejection of Products, price adjustments, and billing
errors; (ii) actual governmental and other rebates and chargebacks (or
equivalents thereof); (iii) actual sales, value-added and other taxes (but
in the case of value added taxes only to the extent such taxes are not
reimbursable or refundable); (iv) actual customs duties on sales made by
such member of the GSK Group or the SGI Group to the such Third Party; (v) normal and customary trade, cash
and quantity discounts, allowances, and credits actually allowed or paid such
Party; (vi) commissions allowed or paid to Third Party distributors,
brokers, or agents other than sales personnel, sales representatives, and sales
agents employed by such Party; (vii) transportation costs, including
insurance, for outbound freight related to delivery of Product to the extent
included in the gross amount invoiced; (viii) the actual amount of any
write offs for bad debt directly relating to sales of Product in the relevant
royalty reporting period; and (ix) any other items actually deducted from
gross invoiced sales amounts, in each case as reported by such Party in its
financial statements in accordance 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

5

 

with, in
the case of GSK’s Net Sales, which is a component of turnover as reported by
GSK in its published financial statements, the International Financial
Reporting Standards, applied on a consistent basis, and in the case of Third
Party’s Net Sales, the U.S. generally accepted accounting principles applied on
a consistent basis.

 

If a Product is sold for consideration other than solely cash, the fair
market value of such other consideration, as determined by the Parties in good
faith, will be included in the calculation of Net Sales. Sales between or among either Party and
its Affiliates or Sublicensees will be excluded from the computation of such
Party’s Net Sales, but the subsequent final sales to a Third Party by such
Affiliates or Sublicensees will be included in the computation of such Party’s
Net Sales.

 

In the event a combination product (or bundling with any other product,
component, or service, for a single price) is formulated, royalties on
combination (or bundled) products will be calculated separately by multiplying
the total Net Sales of the combination (or bundled) product by the fraction
A/(A+B), where A is the actual average total invoice price throughout the
Territory, as the case may be, in each calendar quarter of the Product if sold
separately (e.g., without other therapeutically or prophylactically active
ingredients) and B is the sum of the actual average total invoice price
throughout the Territory of all other therapeutically or prophylactically
active ingredients or other components of the combination (or bundled) product
if sold separately.

 

In calculating the royalty on a country-by-country basis, the Party
shall use the countries representing eighty percent (80%) of the combination
product revenues to calculate a weighted average ratio that will then be
applied to all other markets globally it being understood that should said
countries represent less than eighty percent (80%) of the combination product
revenues as a basis for calculating a weighted average ratio to be applied to
other markets, the parties shall then confer in good faith to agree on the
selection of the countries to be included in the calculation of the royalty.
The markets representing eighty percent (80%) of the total world-wide business
shall be assessed on an annual basis of combination product if there are shifts
in relative sales of combination product and the selection of the countries to
be included in the calculation of the royalty shall be modified based on such
assessment. The Net Sales definition shall be permitted to be amended as
appropriate to reflect changes to each Party’s accounting rules (e.g.,
change from UK GAAP to IFRS) brought by merger, take-over or law, provided that
any and all such changes are net neutral to the royalties payable on Net Sales,
i.e., royalty rates must be adjusted to account for any such change such that
neither Party realizes a gain or a loss from its pre-change position. An
example of how the combination net sales mechanism would work is set forth on ExhibitB. The example is for illustrative purposes only and
not based on any actual data or country.

 

hh.                               “Paragraph
IV Litigation” means any litigation or pre-litigation response
commenced by a Party in response to a Third Party certification in accordance
with and within the time specified by Section 505(j)(5)(B)(iii) of
the Federal Food, Drug, and Cosmetic Act following submission to the FDA of a
certification in accordance with Section 505(j)(2)(A)(vii)(iv) of the
Federal Food, Drug, and Cosmetic Act solely with regard to claims of
infringement, invalidity and unenforceability of a Product-related patent.

 

ii.                                       “Patent” means (i) all
patents and patent applications in any country or supranational jurisdiction in
the Territory, (ii) any substitutions, divisions, continuations,
continuations-in-part, provisional applications, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like of any such patents or patent 

 

6

 

applications, and (iii) foreign counterparts of any of the
foregoing.

 

jj.                                       “Phase 1” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(a), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.

 

kk.                                 “Phase 2” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(b), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.

 

ll.                                       “Phase 3” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(c), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.

 

mm.                           “PoC” means proof of
concept.

 

nn.                               “PoC Criteria” means
the clinical and non-clinical criteria for determining if a Candidate Selection
Compound under study in a PoC Trial demonstrates a [***]. The PoC Criteria may
include one or more biomarkers. The initial PoC Criteria are to be agreed
between the Parties within five (5) days of the Execution Date pursuant to
a letter agreement between the Parties; provided, that more specific and/or detailed
PoC Criteria may be finalized in writing by the JRC (with input from the JPC)
during the Research Term with respect to Candidate Selection Compounds. It is
understood and agreed by the Parties that if more specific and/or detailed PoC
Criteria are not finalized in writing by the JRC that the PoC Criteria set
forth in the letter agreement will apply.

 

oo.                               “PoC Trial” means a clinical trial for a
particular Candidate Selection Compound to demonstrate the PoC Criteria.

 

pp.                               “Product”
means any pharmaceutical product that contains a Licensed Compound, whether or
not as the sole active ingredient, in any dosage form or formulation.

 

qq.                               “Project” means all
of SGI’s research and development activities on Compounds through completion of
a PoC Trial or earlier as agreed by the Parties.

 

rr.                                     “Regulatory Agency”
means, with respect to any particular country or, where applicable, a
multinational jurisdiction, the governmental authority, body, commission,
agency or other instrumentality of such country or multinational jurisdiction
(e.g., the EMEA with respect to the European Union), with the primary
responsibility for the evaluation or approval of pharmaceutical products before
a Product can be tested, marketed, promoted, distributed or sold in such
country or multinational jurisdiction, including such governmental bodies, if
any, that have jurisdiction over the pricing of such pharmaceutical product.
The term “Regulatory Agency” includes, without limitation, the FDA and the
EMEA.

 

ss.                                 “Regulatory Approval”
means, with respect to a nation or, where applicable, a multinational
jurisdiction, such approvals, licenses, registrations or authorizations that
are required to be obtained from a Regulatory Agency prior to the manufacture,
marketing and sale of a Product for use in the Field in such country or
multinational jurisdiction (including, where applicable, 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

7

 

pricing approvals necessary to obtain reimbursement).

 

tt.                                     “Regulatory-Based
Exclusivity Period” means, with respect to a Product in a country in
the Territory, that period of time during which a Regulatory Agency is
prohibited from granting of final approval of (i) an application to market
a Generic Product (as defined in Section 6(a)ii.B below), or (ii) an
application to market any product that relies upon Regulatory Approval of the
applicable Product or the safety and efficacy data used to support Regulatory
Approval of the Product.

 

uu.                               “Regulatory
Filing” means any filing with a Regulatory Agency relating to the clinical
evaluation or Regulatory Approval of a Product, including all Supporting Data.
Regulatory Filings include, without limitation, INDs and NDAs and their ex-US
counterparts. Regulatory Filings will include all documents, data and
information used or required to support a marketing application, manufacture,
sale or distribution of a Product.

 

vv.                               “Rejected Compound”
means a Compound that has failed to meet either the Candidate Selection
Criteria or the PoC Criteria.

 

ww.                           “Research Plan” means
the written plan that will describe the research and development activities
that are to be carried out by the Parties and agreed to by the Parties within
five (5) days of the Execution Date pursuant to a letter agreement between
the Parties.

 

xx.                                   “Research Term” means
that period from the Effective Date until the fifth anniversary of the
Effective Date, unless this Agreement is earlier terminated or extended in
accordance with its terms.

 

yy.                               “SGI Group” means,
collectively, collectively, SGI and its Affiliates and its Sublicensee(s), if
any.

 

zz.                                   “SGI IP” means SGI Know-How,
SGI Patents and SGI Technical Information.

 

aaa.                           “SGI Know-How” means
all tangible and intangible (a) [***]; whether stored or transmitted in
oral, documentary, electronic or other form, including regulatory
documentation, in each case with respect to (a) and (b) above,
created by SGI or its Affiliates after the Effective Date in the course of
performing the Research Plan that is directly related to Licensed Compounds or
Product(s) incorporating Licensed Compounds; but in all events excluding (i) any
or all of the foregoing that is owned or Controlled by a Successor prior to the
date that a Successor consummates a Change of Control Transaction with respect
to SGI or prior to any other transaction pursuant to which the Successor
succeeds to all or substantially all of SGI’s business or assets pertaining to
the subject matter of this Agreement, whether by merger, reorganization,
acquisition or otherwise and (ii) CLIMB and any other practices, methods,
techniques, trade secrets, inventions or any other information that SGI owns,
controls, uses or may use in the conduct of drug discovery research hereunder
or otherwise.

 

bbb.                        “SGI Patents” means
all Patents Controlled by SGI or its Affiliates during the term of this
Agreement (other than Joint Patents) that claim, generically or specifically,
the (i) composition of matter of a Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds or (ii) method of use of
Licensed Compound(s) and/or Product(s) comprising Licensed Compounds,
or (iii) method of manufacture of Licensed Compound(s) and/or Product(s) comprising
Licensed 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for confidential
treatment.

 

8

 

Compounds, but shall exclude any and all Patents owned or Controlled by
a Successor prior to the date that a Successor consummates a Change of Control
Transaction with respect to SGI or prior to any other transaction pursuant to
which the Successor succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, whether by merger,
reorganization, acquisition or otherwise.

 

ccc.                           “SGI Technical
Information” means all tangible and intangible information, data and
results created by SGI or its Affiliates prior to the Effective Date and
Controlled by SGI or its Affiliates as of the Effective Date that is directly
related to Licensed Compounds or Product(s) incorporating Licensed
Compounds or is otherwise disclosed by SGI to GSK, including all data, or
results generated through application of CLIMB to the Project; but in all
events excluding any or all of the foregoing that is owned or Controlled by a
Successor prior to the date that a Successor consummates a Change of Control
Transaction with respect to SGI or prior to any other transaction pursuant to
which the Successor succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, whether by merger,
reorganization, acquisition or otherwise, and shall exclude CLIMB and any other
practices, methods, techniques, trade secrets, inventions or any other
information that SGI owns, controls, uses or may use in the conduct of drug
discovery research hereunder or otherwise.

 

ddd.                        “Sublicensee” means
any entity to which GSK or SGI, as applicable, directly or indirectly sells or
distributes, a Product (including Third Parties authorized to make and sell a
Product and Third Parties that purchase from another that is authorized to make
and sell a Product), provided that such Third Party is responsible for some or
all of the marketing and promotion of such Product within its portion of the
Territory, but excluding wholesalers and physical distributors. For clarity,
any contract manufacturer that has rights to sell or otherwise distribute
Product(s) will be considered a Sublicensee for purposes of this Agreement.

 

eee.                           “Successor”
means any entity that succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, including by means
of a Change of Control Transaction.

 

fff.                                 “Supporting
Data” means all data and information relating to (i) the pharmacological
or toxicological properties of any Product, (ii) any pre-clinical or
clinical testing and experience in relation to any Product and (iii) the
chemical composition, synthesis, formulation, compounding, and manufacturing
and quality control testing of any Product, to the extent reasonably required
for purposes of any application for Regulatory Approval for a Product.
Supporting Data will also include, but is not limited to, copies of annual
reports, integrated study reports, protocols for clinical research and
pre-clinical studies, protocol changes and amendments, Chemistry, Manufacturing
and Control (CMC) sections and amendments, safety data, clinical databases,
case report forms and access to patient records, toxicity, safety and
metabolism reports and data, and pharmacokinetic data and reports and relating
to any Product, as well as, in general, data or information which would
typically be part of any submission to FDA or other Regulatory Agency for the
purpose of obtaining approval of any Product for any indication.

 

ggg.                        “Territory” means the
entire world.

 

hhh.                        “Third Party” means
any entity other than the GSK Group and the SGI Group and each of the members
thereof.

 

iii.                                    “Third Party Claim”
means a liability, loss, fine, penalty, damage, expense, action, or claim
brought against an Indemnitee (defined herein) by a Third Party, for which such
Indemnitee seeks indemnification under Section 14 hereof.

 

9

 

jjj.                                    “US” means United
States of America.

 

kkk.                           “US$” means US
Dollars.

 

lll.                                    “Valid Claim”  means either (i) a
claim of an application for a Patent that claims, generically or
specifically, the (A) composition of matter of a Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds or (B) method of use of
Licensed Compound(s) and/or Product(s) comprising Licensed Compounds that has been pending for no more than eight (8) years
from the earliest date on which such patent application claims priority, which
claim was filed in good faith and has not been cancelled, withdrawn or
abandoned, or (ii) a claim within an issued Patent that claims,
generically or specifically, the (A) composition of matter of a Licensed
Compound(s) and/or Product(s) comprising Licensed Compounds or (B) method
of use of Licensed Compound(s) and/or Product(s) comprising Licensed
Compounds that has not expired, lapsed, or been cancelled, withdrawn,
disclaimed or abandoned, and, in each case of (i) or (ii) has not
been dedicated to the public, disclaimed, or held unenforceable, invalid, or
been cancelled by a court or administrative agency of competent jurisdiction in
an order or decision from which no appeal has been or can be taken, including
through opposition, re-examination, reissue or disclaimer.

 

Other
Defined Terms

 

	
  Term

  	
   

  	
  Section

  
	
  “Agreement”

  	
   

  	
  Introductory Clause

  
	
  “Alliance Managers”

  	
   

  	
  Section 3(c)

  
	
  “Arbitratable Dispute”

  	
   

  	
  Section 16(b)iii

  
	
  “Chairperson”

  	
   

  	
  Section 3(a)i

  
	
  “Chief Patent Counsels”

  	
   

  	
  Section 3(b)ii

  
	
  “Competing Compound”

  	
   

  	
  Section 2(g)

  
	
  “District Court”

  	
   

  	
  Section 16(a)ii

  
	
  “Effective Date”

  	
   

  	
  Introductory Clause

  
	
  “Executive Officers” -

  	
   

  	
  Section 3(a)iv

  
	
  “Expiration in Entirety”

  	
   

  	
  Section 9(a)

  
	
  “Force Majeure Event”

  	
   

  	
  Section 17(b)

  
	
  “Generic Entry”

  	
   

  	
  Section 6(a)ii.B

  
	
  “Generic Product”

  	
   

  	
  Section 6(a)ii.B

  
	
  “GSK”

  	
   

  	
  Introductory Clause

  
	
  “GSK Indemnitee”

  	
   

  	
  Section 14(a)

  
	
  “GSK Inventions”

  	
   

  	
  Section 10(g)ii

  
	
  “GSK Loss”

  	
   

  	
  Section 14(a)

  
	
  “GSK Option”

  	
   

  	
  Section 4(a)

  
	
  “GSK Product IP”

  	
   

  	
  Section 9(e)v.B

  
	
  “GSK Royalty”

  	
   

  	
  Section 6(b)i

  
	
  “Indemnitee”

  	
   

  	
  Section 14(c)i

  
	
  “Indemnitor”

  	
   

  	
  Section 14(c)i

  
	
  “IP Conflict”

  	
   

  	
  Section 3(b)i.A

  
	
  “Joint Invention”

  	
   

  	
  Section 10(g)iii

  
	
  “License”

  	
   

  	
  Section 4(b)

  
	
  “Party” or “Parties”

  	
   

  	
  Introductory Clause

  
	
  “Payee”

  	
   

  	
  Section 6(g)

  

 

10

 

Other Defined Terms

 

	
  “Payor”

  	
   

  	
  Section 6(g)

  
	
  “PoC Trial Data Package”

  	
   

  	
  Section 2(c)vi.A

  
	
  “Product Expiration”

  	
   

  	
  Section 9(a)

  
	
  “Product Trademark”

  	
   

  	
  Section 9(e)v.N

  
	
  “Publication”

  	
   

  	
  Section 11(f)

  
	
  “Reverted Products”

  	
   

  	
  Section 9(e)v.A

  
	
  “Reverted Territory”

  	
   

  	
  Section 9(e)v.A

  
	
  “Rules”

  	
   

  	
  Section 16(b)iii.A

  
	
  “SAR”

  	
   

  	
  Section 2(c)iv.B

  
	
  “SGI”

  	
   

  	
  Introductory Clause

  
	
  “SGI Indemnitee”

  	
   

  	
  Section 14(b)

  
	
  “SGI Inventions”

  	
   

  	
  Section 10(g)i

  
	
  “SGI Loss”

  	
   

  	
  Section 14(b)

  
	
  “SGI Royalty”

  	
   

  	
  Section 6(a)i

  
	
  “State Court”

  	
   

  	
  Section 16(a)ii

  
	
  “TPP”

  	
   

  	
  Section 2(c)ii

  

 

11

 

2.                                                    RESEARCH
TERM

 

(a)                        Initial Term. The initial
Research Term will be five (5) years from the Effective Date, unless this
Agreement is earlier terminated; provided that the initial Research Term may be
extended by GSK in its sole discretion, through completion of a PoC Trial if (i) such
PoC Trial has commenced prior to expiration of such 5-year period, and (ii) GSK
has paid SGI the milestone for first dosing in a Phase 1 clinical trial.
Otherwise the initial Research Term may be extended by mutual written agreement
of the Parties.

 

(b)                       Objectives;
Efforts.

 

i.                            During the Research Term, SGI shall use Commercially
Reasonable Efforts to perform the Research Plan to progress a Lead, Follow-On
and/or Back-up Compound through to completion of a PoC Trial in order to
demonstrate the PoC Criteria, including conducting the following:

 

A.           Stage 1, Stage 2 and Stage 3 activities (as
applicable and discussed in the Research Plan) for the Lead Compound, and as
appropriate a Back-up Compound to the Lead Compound, through to achievement of
the Candidate Selection Criteria;

 

B.             In the event that a Follow-On Compound is
established, Stage 1, Stage 2 and Stage 3 activities for the Follow-On
Compound, and as appropriate a Back-Up Compound to the Follow-On Compound,
through to achievement of the Candidate Selection Criteria; and

 

C.             For any Lead Compound, Follow-on Compound or Back-Up
Compound that is progressed beyond Candidate Selection, undertake IND-enabling
studies with an objective to progress such Compound(s) into Phase 1 clinical
trials, and subsequently to carry out a PoC Trial designed to demonstrate the
PoC Criteria.

 

ii.                         Following the Effective
Date, SGI shall devote a [***] to carrying out the Research Plan for the Lead
Compound. If GSK elects to establish the Follow-On Compound, SGI shall devote
an additional [***] to carrying out the Research Plan for the Follow-On
Compound. For clarity, such minimum resource commitment shall only apply to
activities undertaken prior to candidate selection of the Lead Compound or Follow-On
Compound.

 

iii.                      SGI shall use its best
endeavours to recruit an experienced, PhD level [***] within three (3) months
of the Effective Date, or if this is unsuccessful despite such best endeavours,
as soon as practicable thereafter. The [***] will support the collaboration
with GSK [***] within his/her role.

 

iv.                     No
material changes may be made to the Research Plan without the approval of the
JRC.

 

(c)                        Development of
Compounds.

 

i.                            SGI
Responsibility. Prior to GSK’s exercise of
the GSK Option, SGI will have primary responsibility for conducting the
pre-clinical and clinical development activities for all 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

12

 

Compounds (including clinical trials and submissions to Regulatory Authorities)
in accordance with this Agreement and the Research Plan. SGI shall
declare a Lead Compound within [***] days of the Effective Date. GSK will have the
opportunity to provide advice to SGI (which will be considered by SGI)
regarding the development of the Compounds through GSK’s participation in the
JRC, and will have such other development responsibilities as are set forth in
this Agreement or are mutually agreed by the Parties in writing.

 

ii.                         PoC Trial
Design and Conduct. The JRC shall be responsible for the design of all PoC
Trials for each Compound which design will demonstrate (A) the [***],
through JRC-approved biomarker(s), which correlates to a clinical benefit
effect on disease consistent with a stated Target Product Profile (“TPP”),
thereby providing evidence of efficacy, safety and tolerability in the target
population; and (B) the establishment of a dose, consistent with the
demonstration of PoC Criteria and such efficacy, safety and tolerability
considerations, to move forward into larger focused clinical trials. The PoC Trial design will also include a
mutually agreed-to budget for the completion of such PoC Trial, which financial
responsibility shall be borne entirely by SGI, except as set forth in Section 3(a)iv.A The Parties agree that such budget shall
be agreed to using reasonable and customary per-patient costs as a basis
therefor.

 

iii.                      Design and
Budget Disputes.

 

A.           Any disputes regarding the
design of any PoC Trial, including with respect to content and endpoints of
such PoC Trial, that are not resolved by the JRC shall be presented to GSK to
make the final decision as provided in Section 3(a)iv.A

 

B.             Any disputes regarding the
budget for any PoC Trial that cannot be amicably resolved in accordance with Section 16(b)i
hereunder will be submitted for dispute resolution by outside experts in
accordance with Section 16(b)ii hereunder.

 

iv.                     Reports

 

A.           Progress Reports. During the Research Term, SGI
shall provide to the JRC written progress reports on a quarterly basis within
ten (10) days of the end of each calendar quarter regarding the status of
its activities for the Project to date, including summaries of data associated
with SGI’s research and development efforts and an assessment of the likelihood
of and timetable for completion of the Project and advancement of Compounds to
the next phase of research or development, as applicable. For clarity,
structures for Compounds that have been [***] (i.e., Compounds that are within
Stage 2), shall be disclosed within progress reports, and the Parties shall
discuss and agree a lead optimization strategy through discussion at the JRC,
drawing from such progress reports. All such exchanges will be coordinated by
the Alliance Managers.

 

B.             Candidate Selection Reports. At the time of
nomination of a Compound for Candidate Selection, SGI will provide a report
that will contain all information necessary for evaluation of the nominated
Compound against the Candidate 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

13

 

Selection Criteria, including without limitation the following information:
(i) all chemical information including chemical structures of the
nominated Compound plus all other Compounds falling within the same Chemical Series (as
defined below), (ii) all biological results and data associated with the
nominated Compound, (iii) all patent filings that describe or claim the
nominated Compound, together with the results of novelty and patentability
searches undertaken by SGI.

 

For purposes of this Section 2(c)iv.B, “Chemical Series” means
a set of molecules of the same chemical class in which the structure activity
relationship (“SAR”) suggests a common mode of binding to an activity at
a biological target such as an enzyme, receptor, or cancer cell. The members of
the series may share key structural features, functional groups or shapes that
in three dimensional space are important in interacting with the target of
interest. Typically, a chemical series would comprise analogs of a lead
compound in which one or more individual atoms have been replaced, either with
a different atom or a different functional group(s).

 

v.                        Evaluation of
Candidate Selection Activities.

 

A.           In the event that SGI
determines that a Compound meets the Candidate Selection Criteria, SGI shall
promptly notify GSK in writing of such event and shall provide to the JRC a
candidate selection report (as described in 2(c)iv.B above). The
JRC will, at its next regularly scheduled meeting or at an ad hoc
meeting scheduled by the JRC (and in any event within thirty (30) days after
the JRC’s receipt of such report), review the report to confirm whether that
Compound meets the Candidate Selection Criteria, with GSK having the final
decision-making authority as to whether the first Lead Compound nominated by
SGI meets the Candidate Selection Criteria.

 

B.             In the event that GSK
determines that the first Lead Compound does not meet the Candidate Selection
Criteria that Lead Compound shall be deemed a Rejected Compound, and SGI shall
continue its research and development in accordance with the Research Plan and
the guidelines set forth in Section 2(b) during the Research Term to
progress another Compound with the goal of achieving Candidate Selection
Criteria. In the event that SGI determines that such other Compound meets the
Candidate Selection Criteria, SGI shall follow the reporting and evaluation
procedures set forth in Section 2(c)v.A above, provided, however, the JRC
shall have final decision-making authority as to whether the such Compound
meets the Candidate Selection Criteria.

 

C.             In the event that the JRC
fails to confirm that a Compound has met the Candidate Selection Criteria, then
either (1) GSK and SGI may agree in writing that SGI may conduct further
studies with that Compound in an effort to meet the Candidate Selection
Criteria, or (2) such Compound will thereby be deemed a Rejected Compound.

 

vi.                     PoC Trial Results

 

A.           Following completion of any
PoC Trial, in the event that SGI determines that a Compound meets the PoC
Criteria, SGI shall promptly notify GSK in writing of such event and shall
provide to the JRC a data package containing all analysis, results and raw data
from the PoC Trial for such Compound, and any related correspondence or
information received from or sent to any Regulatory Authority relating to such 

 

14

 

Compound (“PoC Trial Data
Package”). Unless otherwise agreed to by the Parties, the JRC will schedule
an ad hoc meeting not more than thirty (30)
days after receipt of any such PoC Trial Data Package to review such PoC Trial
Data Package and determine whether such Compound meets the PoC Criteria. SGI
shall provide GSK with any additional information reasonably available to it
from the conduct of the Project (excluding any information related to CLIMB)
that GSK may reasonably request to assist GSK in evaluating the PoC Trial Data
Package.

 

B.             If a Candidate Selection
Compound does not meet the PoC Criteria or fails prior to completion of PoC,
the Parties may decide, subject to mutual written agreement, that (1) SGI
will conduct additional trials on that Candidate Selection Compound to achieve
PoC or, alternatively, (2) SGI shall progress another Compound through to
completion of a PoC Trial for that second Compound.

 

C.             Subject to GSK’s right to
exercise the GSK Option pursuant to Section 4(a), if, upon expiration of
the Research Term, there are no Back-Up Compounds or Follow-On Compounds being
progressed by SGI, or if the Back-Up Compounds or Follow-On Compound(s) being
progressed fail to achieve the PoC Criteria, either Party may terminate this
Agreement pursuant to Section 9(d)iv.

 

D.            If a Candidate Selection
Compound fails to meet the PoC Criteria, GSK nonetheless will have the right to
deem that Compound as having met the PoC Criteria and to exercise the GSK
Option to such Compound in accordance with Section 4(a). If GSK does not
elect to exercise the GSK Option to such failed Compound as set forth in Section 4(a) then
either (1) GSK and SGI may agree in writing that either party may conduct
further studies with that Compound in an effort to meet the PoC Criteria
subject to mutual written agreement as regards the budget and funding therefor
in accordance with Section 3(a)iv.A, or (2) that Compound will
thereby be deemed a Rejected Compound.

 

E.              If the JRC determines that
the Candidate Selection Compound achieves the PoC Criteria, and GSK elects not
to exercise the GSK Option within the [***] option exercise period pursuant to Section 4(a),
then either Party may terminate this Agreement in accordance with Section 9(d)iii,
and all rights in Compounds shall remain vested in SGI.

 

(d)                       Rejected
Compounds. In the event that a Compound (or in the case of a
PoC Trial, a Candidate Selection Compound) becomes a Rejected Compound in
accordance with the procedure set forth in Sections 2(c)v.B, 2(c)v.C and/or
2(c)vi.D, SGI will continue to conduct research and development activities on
another Compound in accordance with the Research Plan and the guidelines set
forth in Section 2(b) during the Research Term. If a Rejected
Compound is [***] with a Licensed Compound, then upon GSK’s exercise of the GSK
Option, such Rejected Compound shall be licensed to GSK as part of the License.
If a Rejected Compound is not [***] with a Licensed Compound, then it shall
remain with SGI for its own purposes, subject to Section 2(f).

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

15

 

(e)                        Additional
Program. Notwithstanding GSK’s exercise of the GSK Option, during the Research
Term, SGI shall continue to develop at least one (1) Back-Up Compound
through the achievement of the Candidate Selection Criteria and, if agreed by
the JRC, to develop a Follow-On Compound through the achievement of the PoC
Criteria, and GSK shall pay milestone payments to SGI for development of such
Back-Up Compound(s) and Follow-On Compound as set forth below. GSK will
have the right, at any time after exercising the GSK Option, to terminate
development of the Lead Compound in order to develop and commercialize either a
Back-Up Compound or Follow-On Compound from the Project.

 

(f)                          Limited
Non-Compete. During the Research Term, subject to Section 2(f),
SGI will not, outside of the Agreement, conduct research, development or
commercialization activities specifically targeted at identifying Compounds.
For the avoidance of doubt, activities required to confirm whether or not a
Compound is a Competing Compound (as defined below) shall not be construed as
representing the conduct of either research, development or commercialization
activities in violation of the foregoing.

 

(g)                       Competing
Compounds. If during the Research Term, in the course of
research conducted by SGI outside of this Agreement, either for its own or a
Third Party’s benefit, SGI discovers any compound that demonstrates [***]
(each, a “Competing Compound”), then SGI shall notify GSK promptly after
such discovery. GSK will have a [***] exclusive option to include such compound
as a Compound under the terms of this Agreement.

 

i.                            Acceptance of a
Competing Compound by GSK. If GSK opts to include such Competing
Compound as a Licensed Compound under the terms of this Agreement, then GSK, in
its sole discretion, shall designate such Compound as a Lead Compound, Back-Up
Compound to the Lead Compound, Follow-On Compound or Back-Up Compound to the
Follow-On Compound. GSK shall be obligated to pay any milestones that such
Compound shall achieve.

 

ii.                         Rejection of a
Competing Compound by GSK. If GSK opts not to include such Competing
Compound as a Licensed Compound under the terms of this Agreement, then all
rights in such Competing Compound(s) will remain with SGI and SGI will not
be restricted in any manner from researching and developing such Competing
Compound(s), except that SGI may not license or commercialize such Competing
Compound(s) for any purpose in the Territory until the expiration of the
Research Term.

 

iii.                      Test Procedure
for Competing Compound. SGI shall test whether a compound is a
Competing Compound by testing such compound for [***].

 

(h)                       Other SGI
Programs. GSK acknowledges and understands that SGI has
discovered and developed, and may continue to discover and develop, [***] or
[***] comprising at least [***] or its derivatives and analogues, including
[***], and further, that such compounds will not be considered Competing
Compounds and that SGI and its licensees and sublicensees may directly and
indirectly continue to develop such compounds, including [***], [***] and [***]
thereof, unabated and unaffected by this Agreement.

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

16

 

(i)                           Regulatory
Matters; Compliance.

 

i.                            Compliance. SGI shall
conduct all development activities in compliance with applicable laws, rules and
regulations. SGI shall ensure that development activities conducted by Third
Parties on its behalf are conducted in compliance with applicable laws, rules and
regulations, and, as applicable, cGMP, GLP and GCP.

 

ii.                         Data Integrity.

 

A.           SGI acknowledges the
importance of ensuring that the Project is undertaken in accordance with the
following data management practices:

 

(1)          data is being generated
using industry-accepted scientific techniques and processes;

 

(2)          data is being accurately and
reasonably contemporaneously recorded by persons conducting research hereunder;

 

(3)          data is being analyzed
without bias; and

 

(4)          data and results are being
stored securely and can be easily retrieved.

 

B.             SGI agrees that it shall use
Commercially Reasonable Efforts to carry out the Project so as to collect and
record any data generated therefrom in a manner consistent with the practices
set forth in Sections 2(i) and 2(ii).A(1)-(4) above.

 

iii.                      Ownership. SGI will own
and maintain all Regulatory Filings for Compounds developed during the Research
Term pursuant to this Agreement. In the event that any Regulatory Authorities
request a teleconference, videoconference, or meeting with SGI with respect to
a material matter relating to a Compound during the Research Term SGI agrees to
confer with GSK as to its response to such Regulatory Authorities prior to any
such teleconference, videoconference, or meeting. Upon exercise by GSK of the
GSK Option, as provided in Section 4, SGI (or its Successor in the event
of a Change in Control Transaction is consummated) shall transfer ownership of
such Regulatory Filings for such Compound to GSK, and provide GSK with copies
of Regulatory Filings. Thereafter, GSK (or its Affiliates) will own and
maintain all Regulatory Filings and Regulatory Approvals for Licensed
Compounds; provided that in the event of termination in accordance with Section 9(e)v
such ownership and maintenance responsibilities will revert to SGI. After
exercise of the GSK Option by GSK, SGI agrees to continue to reasonably
cooperate with GSK in responding to any inquiries from Regulatory Authorities
relating to the Regulatory Filings for Compounds developed during the Research
Term pursuant to this Agreement.

 

iv.                     Adverse Event
Reporting. Beginning on the Effective Date and continuing
until such time, if any, that GSK exercises the GSK Option as provided in Section 4,
SGI shall be responsible for reporting all Adverse Events in connection with
the activities of SGI under this Agreement to the appropriate Regulatory
Authorities in the countries in the Territory in which the Compound is being
developed, in accordance with the appropriate laws and regulations of the
relevant countries and Regulatory Authorities. GSK understands and agrees that
the Adverse Events database software currently in use by SGI are ARISg
5.0.2.2.7, WHO drug 2008 4th quarter and MedDRA 12.1, and SGI
agrees to deliver Adverse Events data to GSK in an agreed-upon data format.

 

(j)                           Subcontracting. Subject to the
terms of this Agreement, SGI may perform any activities in 

 

17

 

support of its development of Compounds
through subcontracting to one or more Third Party contractors or contract
service organizations, provided, that: (A) none of the rights of GSK under
this Agreement are materially adversely affected as a result of such
subcontracting; (B) the contracts for any such Third Party subcontractor
to whom SGI discloses the Confidential Information of GSK will contain
appropriate obligations of confidentiality that are no less restrictive than
the obligations of SGI under Section 11; (C) SGI shall obligate such
Third Party to agree in writing to assign or license (with the right to grant
sublicenses) to SGI any Inventions (and SGI Patents or Joint Patents claiming
such Inventions) made by such Third Party in performing such services for SGI
that are necessary for the development or commercialization of Compounds; and (D) SGI
shall at all times be responsible for the performance of such subcontractor.

 

3.                                                    GOVERNANCE

 

(a)                        JRC. Promptly and
in any event within sixty (60) days after the Effective Date, the Parties shall
establish the JRC. The JRC will oversee the scientific and clinical progress of
the Project, as more specifically provided herein. SGI shall keep the JRC
reasonably informed of its progress and activities under the Project.

 

i.                            Membership. The JRC will
be comprised of two (2) representative employees from each of GSK and SGI.
Each Party shall provide the other with a list of its initial members of the
JRC no later than thirty (30) days prior to the first scheduled meeting of the
JRC. Each Party may replace any or all of its representatives on the JRC at any
time upon written notice to the other Party in accordance with 17(d) of
this Agreement, provided that such notice is received by the other party no
less than ten (10) days prior to the next scheduled JRC meeting. Each
representative of each Party shall have expertise in pharmaceutical drug
discovery and/or development. Any member of the JRC may designate a substitute
with substantially similar expertise to attend and perform the functions of
that member at any meeting of the JRC, provided that such designation is
noticed to the other party no less than ten (10)days prior to the next
scheduled JRC meeting. Each Party may, in its reasonable discretion, invite up
to three (3) non-member representatives of such Party to attend meetings
of the JRC as a non-voting participants, subject to the confidentiality
obligations of Section 11. The Parties shall designate a chairperson (“Chairperson”)
to oversee the operation of the JRC and prepare minutes as set forth in Section 3(a)iii,
each such Chairperson to serve a twelve (12) month term. The right to name the
Chairperson will alternate between the Parties, with SGI designating the first
such Chairperson.

 

ii.                         Meetings. During the
Research Term, the JRC shall meet in person or otherwise at least once each
calendar quarter, and more frequently as the Parties mutually deem appropriate,
on such dates, and at such places and times, as the Parties may agree.
Following GSK’s exercise of the GSK Option, the JRC will continue solely as a
forum to maintain information flow between the Parties regarding the
progression of Licensed Compounds, and to discuss and agree on SGI’s role, if
any, with respect to continuing development of Licensed Compounds after
exercise by GSK of the GSK Option pursuant to Section 4. Meetings of the
JRC that are held in person will alternate between the facilities of the
Parties, or such other place as the Parties may agree. The members of the JRC
also may convene or be polled or consulted from time to time by means of telecommunications,
video conferences, electronic mail or correspondence, as deemed necessary or
appropriate. Each Party shall bear all expenses it incurs in regard to 

 

18

 

participating in meetings of the JRC, including
all travel and living expenses.

 

iii.                      Minutes. The
Chairperson shall be responsible for preparing and circulating minutes of each
meeting of the JRC, setting forth, inter alia, a
description, in reasonable detail, of the discussions at the meeting and a list
of any actions, decisions or determinations approved by the JRC and a list of
any issues to be resolved by the Executive Officers (as defined below) pursuant
to Section 3(a)iv. Such minutes will be effective only after approved by
both Parties at the next JRC meeting or via polling as described in Section 3(a)ii
above. With the sole exception of specific items of the meeting minutes to
which the members cannot agree and which are escalated to the Executive
Officers as provided in Section 3(a)iv below, definitive minutes of all
JRC meetings shall be finalized no later than thirty (30) days after the
meeting to which the minutes pertain. If at any time during the preparation and
finalization of the JRC minutes, the Parties do not agree on any issue with
respect to the minutes, such issue will be resolved by the escalation process
as provided in Section 3(a)iv.A-iv.C. The decision resulting from the
escalation process will be final and shall be recorded by the Chairperson in
amended finalized minutes for that meeting.

 

iv.                     Decisions. The JRC will
have the authority to make decisions only with respect to the issues set forth
in Sections 3(a)v.C to 3(a)v.E below. All other decisions with respect to the
Project will be made by SGI in its sole discretion, other than as set forth in Section 3(a)iv.A.
Except as otherwise expressly provided in Section 3(a)iv.A, all decisions
of the JRC will be made by unanimous vote, with each Party having collectively
one (1) vote in all decisions. Prior to GSK’s exercise of the GSK Option,
in the event that the JRC is unable to reach a unanimous decision within
fifteen (15) days after it has met and attempted to reach such decision, then
either Party may, by written notice to the other, have such issue referred to
the Chief Executive Officer of SGI and the Senior Vice President of Cancer
Research at GSK, or their designees or successors (collectively, the “Executive
Officers”), for resolution. The Executive Officers shall meet promptly to
discuss the matter submitted and to determine a resolution. If the Executive
Officers are unable to determine a resolution in a timely manner, which will in
no case be more than ten (10) days after the matter was referred to them,
the issue will be resolved as follows:

 

A.           Subject to the limitations
set forth in this Section 3(a)iv.A below, GSK will have final
decision-making authority with respect to any disputes concerning: (i) whether
to research and develop a Follow-On Compound after the Effective Date, (ii) whether
a Compound has met the PoC Criteria, and (iii) the PoC Trial design. For
purposes of clarity, decisions made in accordance with this Section 3(a)iv.A
shall be without imposition of additional costs on SGI and would not be
submitted to outside experts or arbitration for dispute resolution. If a final
decision made by GSK as set forth in Section 3(a)iv.A(iii) above
results in an increase in the projected cost of the PoC Trial, the Parties
shall discuss and agree to the allocation of costs with respect to such excess.
SGI will not be obligated to continue the Project until agreement is reached in
writing with respect to the allocation of costs and expenses, and such action
will not be considered a breach of this Agreement by SGI.

 

B.             If the Parties cannot agree
to a cost allocation mechanism as described in Section 3(a)iv.A above, and
such disagreement occurs during the conduct of a PoC Trial by SGI and such
disagreement threatens the continuation of such PoC Trial, then GSK 

 

19

 

will have the right, but not
the obligation, to pay the costs of continuing such PoC Trial, including any
proposed increases, until such cost-sharing mechanism can be agreed to by the
Parties, whether such agreement is arrived at amicably in accordance with Section 16(b)i
or through outside experts in accordance with Section 16(b)ii.

 

C.             Except as set forth in Section 3(a)iv.A,
all disputed issues arising from the JRC will be submitted to dispute
resolution in accordance with Section 16(a)ii.

 

v.                        Responsibilities. The JRC will
perform the following functions, some or all of which may be addressed directly
at each meeting of the JRC:

 

A.           review SGI’s activities
during the Research Term;

 

B.             review the progress of the
Project against the Research Plan and approve material changes to the Research
Plan as set forth in Section 2(b)i;

 

C.             review, modify, update and
approve the PoC Trial designs in accordance with the terms of Sections 2(c)ii
and 2(c)iii;

 

D.            review and comment on the
Research Plan;

 

E.              subject to GSK’s decision-making
authority pursuant to Section 2(c)v.A to, confirm that a nominated
Compound(s) has met the Candidate Selection Criteria, or Section 3(a)iv.B
with regard to confirmation that Compound(s) have met PoC Criteria; and

 

F.              such other responsibilities
as may be assigned to the JRC pursuant to this Agreement or as may be mutually
agreed upon by the Parties in writing from time to time.

 

For clarity, the JRC will
have no authority beyond the specific matters set forth above in this Section 3(a)v,
and in particular will have no power to amend or modify the terms or provisions
of this Agreement. In addition, GSK (and neither SGI nor the JRC) shall have
the sole right to make decisions in its sole discretion with respect to (i) the
exercise of the GSK Option; or (ii) the development and commercialization
by GSK of Compounds (and resultant Products) after exercise by GSK of the GSK
Option with respect to such Compound; in each case so long as these decisions
impose no obligation, cost or expense on SGI, other than SGI’s continuing
obligation to carry on research and development of Compounds during the
Research Term in accordance with the Research Plan and the guidelines set forth
in Section 2(b). Additionally, prior to GSK’s exercise of the GSK Option,
SGI shall have the sole right to make decisions in its sole discretion with
respect to the disclosure of any chemical structure information to GSK and/or
the JRC with respect to any Compounds prior to nomination of a Compound for
Candidate Selection Criteria. If the Parties cannot agree as to whether an
issue is within the purview of the JRC, GSK or SGI, that issue will be referred
to the dispute resolution process outlined in Sections 16(b)i and 16(b)ii
below.

 

(b)                       JPC.

 

i.                            Role.

 

A.           After the JRC or GSK, as applicable
confirms that a Compound has met the Candidate Selection Criteria, the JPC will
be formed and will be responsible for (1) developing a strategy to protect
SGI Patents, including the filing, prosecution, 

 

20

 

maintenance, enforcement and
defense of Patents included in the SGI Patents; (2) providing a forum for
the Parties to discuss material issues and provide input to each other
regarding such SGI Patents; (3) in the event of any conflict involving Third
Parties in relation to SGI Patents and Joint Inventions, e.g., a patent
interference proceeding or patent litigation (“IP Conflict”), the
selection of counsel, whether to settle and the terms of settlement, selection
of expert witnesses, the decision whether to drop a patent from infringement
litigation, communications with the US Federal Trade Commission or equivalent
foreign competition agencies and other material litigation issues, including
the text of briefs and motions, in each case in the context of patent matters
only. For purposes of clarity, any decision relating to Paragraph IV Litigation
shall rest exclusively with GSK in its sole discretion (except in the case of
Reverted Products, in which case such decision would rest exclusively with SGI).

 

B.             The members of the JPC and
their designees will have the right to participate in meetings with legal
counsel and to attend litigation hearings, depositions and meetings, as
allowable by applicable laws and the adjudicator. For the purposes of this section,
arbitration and mediation are considered litigation and within the remit of the
JPC.

 

C.             Periodically, or upon
request, the JPC shall report its activities and the status of SGI Patents
filings to the JRC.

 

ii.                         Decisions. Except as
otherwise provided herein and until GSK has exercised the GSK Option as
provided in Section 4(a), all decisions of the JPC will be made by
unanimous vote, with each Party having collectively one (1) vote in all
decisions. In the event that the JPC is unable to reach a majority decision
within fifteen (15) days after it has met and attempted to reach such decision,
then either Party may, by written notice to the other, have such issue
submitted to the chief patent counsel of GSK and SGI (“Chief Patent Counsels”),
or such other person holding a similar position designated by GSK or SGI from
time to time, for resolution. The Chief Patent Counsels shall meet promptly to
discuss the matter submitted and to determine a resolution. If the Chief Patent
Counsels are unable to determine a resolution in a timely manner, which will in
no case be more than fifteen (15) days after the matter was referred to them, (A) prior
to exercise of the GSK Option by GSK, the dispute shall be promptly decided by
SGI; and (B) after exercise of the Option by GSK, the dispute shall be
promptly decided by GSK.

 

iii.                      Meeting. The JPC will
meet on such dates and at such places and times agreed to by the Parties, but
the JPC shall meet at least three (3) times a year and more frequently as
needed leading up to and during any IP Conflict.

 

iv.                     Members. The
membership of the JPC will be comprised of two (2) representatives from
each Party, which representatives may or may not be JRC members. Each Party
agrees that at least one (1) of its representatives will be a patent
attorney admitted before the USPTO. Upon notice of at least ten (10) days
prior to a scheduled JPC meeting, a Party may substitute one (1) representative
for another as long as the total number of members does not exceed the maximum
agreed by the Parties, and such substituted representative has experience
substantially similar to the absent representative. Either Party may invite
additional individual(s) to attend a JPC meeting on an as-needed basis to
advise, or present information to, the JPC, provided that such invitation is
noticed to the other party no less than ten (10) days prior to the next
scheduled JPC meeting. Such

 

21

 

invited individual will be an observer only
and will not be a voting member of the JPC. Each Party shall bear all expenses
it incurs in regard to participating in all meetings of the JPC, including all
travel and living expenses.

 

v.                        JPC Survival. Once GSK has
elected to exercise the GSK Option, the JPC will continue solely as a forum to
maintain information flow between GSK and SGI regarding the SGI Patents, and to
discuss and agree on strategy in the event of an intellectual property dispute,
e.g., an infringement action. All decisions made after exercise of the GSK
Option with respect to the SGI Patents will be made at the sole discretion of
GSK so long as such decisions otherwise comply and are consistent with the
terms and conditions of this Agreement and do not impose any additional
obligations, costs or expenses on SGI. For purposes of clarity, GSK’s reduction
of royalty to SGI pursuant to Section 6(e) shall not be deemed additional
obligations, costs or expenses on SGI.

 

(c)                        Alliance
Managers. Promptly after the Effective Date, each Party
shall appoint an individual (who may or may not be an existing member of the
JRC) to act as alliance manager for such Party (each, an “Alliance Manager”).
Each Alliance Manager may thereafter be permitted (upon the agreement of each
of the Parties) to attend meetings of the JRC as a non-voting observer (unless
such Alliance Manager is a member of the JRC), subject to the confidentiality
provisions of Section 11. The Alliance Managers will be the primary point of
contact for the Parties regarding the activities contemplated by this Agreement
and shall assist in the facilitation of such activities hereunder as needed,
including the exchange of information described in Section 2(c)iv. The Alliance
Managers shall also be responsible for assisting the JRC in performing its
oversight responsibilities. The name and contact information for such Alliance
Managers, as well as any replacement(s) chosen by SGI or GSK, in their sole
discretion, from time to time, shall be promptly provided to the other Party in
accordance with Section 17(d) of this Agreement.

 

(d)                       JRC Survival. Once GSK has
elected to exercise the GSK Option, the JRC will meet only once a year and will
continue solely as a forum to maintain information flow between GSK and SGI
regarding the progression of Licensed Compounds, and to discuss and agree on
SGI’s role, if any, with respect to continuing development of Licensed
Compounds after exercise of the GSK Option (as described below under Section 4(a)).
Subject to GSK’s obligation to use Commercially Reasonable Efforts with respect
to its activities undertaken after exercise of the GSK Option, all decisions
made after exercise of the GSK Option with respect to the development,
manufacturing, progression or commercialization of any Licensed Compound will
be made at the sole discretion of GSK so long as such decisions otherwise
comply and are consistent with the terms and conditions of this Agreement and
do not impose any additional obligations, costs or expenses on SGI, other than
SGI’s obligation to continue to conduct research and development activities
during the Research Term in accordance with the Research Plan and the
guidelines set forth in Section 2(b).

 

4.                                                    OPTION
AND LICENSE

 

(a)                        Option Grant. SGI hereby
grants to GSK the exclusive option to obtain the License set forth in Section 4(b)
(“GSK Option”). The GSK Option is exercisable at GSK’s sole discretion
upon the occurrence of any of the following events: (i) upon written
confirmation by the JRC that a Lead Compound has met the PoC Criteria in
accordance with Section 2(c)vi.A, in which case, 

 

22

 

GSK will have [***] from the date of such
confirmation to exercise the GSK Option, or (ii) if GSK deems that the Lead
Compound that has failed to meet the PoC Criteria as set forth in Section 2(c)vi.D,
is nonetheless acceptable to GSK in its sole discretion, GSK will have [***] from written confirmation from the JRC
that the Lead Compound has failed to meet the PoC Criteria to exercise the GSK
Option; or (iii) upon expiration of the Research Term, in which case GSK will
have [***] from the date of such expiration to exercise the GSK Option; or (iv)
upon a Change of Control as described in Section 8(a), in which case GSK will
have [***] from the date of notice from SGI of the Change of Control to
exercise the GSK Option. For purposes of clarity, GSK shall have one GSK Option
for the Project, exercisable at one of the points described in 4(a)i-iv above,
and on exercise of the GSK Option, GSK shall have rights to the Licensed
Compounds in the Project. The grant of the GSK Option is irrevocable except in
the event of a termination of this Agreement by SGI for material breach by GSK
and shall remain in place through the expiration of the Research Term so long
as this Agreement is not terminated by a Party pursuant to Section 9(d)iii.

 

(b)                       License Grant. Subject to
the terms and conditions of this Agreement and upon GSK’s exercise of the GSK
Option, SGI hereby grants to GSK (a) a worldwide, irrevocable, exclusive
license, with the right to sublicense, under the SGI Patents, SGI Know-How and
SGI’s interest in the Joint Inventions and Joint Patents, to make, have made,
use, sell, offer for sale and/or import Licensed Compounds and Products
comprising Licensed Compounds in the Field in the Territory, and (b) a
worldwide, irrevocable, non-exclusive license, with the right to sublicense,
under the SGI Technical Information to make, have made, use, sell, offer for
sale and/or import Licensed Compounds and Products comprising Licensed
Compounds in the Field in the Territory (collectively, “License”). The
License grant to GSK hereunder is irrevocable except in the event of a
termination of this Agreement by SGI for material breach by GSK.

 

(c)                        Retention of
Rights by SGI. Notwithstanding the foregoing, during the Research
Term, SGI will retain the right under the SGI IP to conduct development of
Back-Up Compounds and Follow-On Compounds through achievement of the Candidate
Selection Criteria or PoC Criteria, as the case may be.

 

(d)                       No Grant of
Rights to Third Parties. Until such time as the GSK Option pursuant
to Section 4(a) has expired, SGI shall not grant to any Third Party rights to
any SGI Patents or SGI Know-How which would conflict with the grant of the
resulting License to GSK. For the avoidance of doubt, the Parties understand
and agree that for so long as the GSK Option is in effect, such option will be
exclusive, and SGI shall have no right to offer or negotiate with any Third Party
the grant of any right, license, or any other encumbrance of any kind, in or to
any Compounds subject to that GSK Option, or any SGI Patents or SGI Know-How
exclusively pertaining to such Compounds, which would conflict with the grant
of a License to GSK.

 

(e)                        License Grant
Upon Expiration of the Royalty Term. SGI hereby grants to GSK a
worldwide, non-exclusive fully paid-up license, with the right to sublicense,
under the SGI Know-How and SGI Technical Information to continue to make, have
made, use, sell, offer for sale and/or import Licensed Compounds and Products
comprising Licensed Compounds in the Field in the Territory upon Expiration in
Entirety (defined in Section 9(a) below).

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

23

 

(f)                          Regulatory
Filings. As soon as practicable after the exercise of the GSK Option, SGI
shall assign and transfer to GSK at SGI’s sole cost and expense, any Regulatory
Filings that SGI has filed with respect to any Licensed Compound, and take such
actions and execute such other instruments, assignments and documents as may be
reasonably necessary to effect the transfer of rights thereunder to GSK.
Concurrent with the exercise of the GSK Option by GSK, the Parties agree to
draft a transition plan to accommodate the transfer of any such Regulatory
Filings and related documents and materials.

 

(g)                       Supply. After GSK’s
exercise of the GSK Option, SGI agrees to expend Commercially Reasonable
Efforts to promptly transfer to GSK, at SGI’s Manufacturing Cost plus [***]
such supplies of clinical development material and supplies, and all bulk drug
substance or other materials used to manufacture the applicable Licensed
Compound then on hand, to enable GSK to continue development of the Licensed
Compounds.

 

(h)                       Third Party Manufacturing
Contracts. SGI agrees to expend Commercially Reasonable
Efforts to make any Third Party manufacturing contracts for supplies of
clinical development material wholly or partially assignable to GSK. In the
event that such an assignment cannot be made, SGI shall cooperate with GSK, for
a maximum period of twelve (12) months, to have such Third Party manufacturer(s)
continue to manufacture the clinical development material for which GSK shall
promptly reimburse SGI at SGI’s actual Third Party cost, plus [***], and GSK
shall expend Commercially Reasonable Efforts to (i) accelerate the search for
an alternative commercial manufacturing source for GSK, (ii) bring such
manufacturing in-house to GSK, or (iii) to enter into contract for such
manufacture with such Third Party manufacturer(s).

 

(i)                           Technology
Transfer after GSK’s Option Exercise.

 

i.                            Generally. After GSK
exercises the GSK Option for a Compound, SGI shall promptly deliver to GSK, at
no cost to GSK, all tangible embodiments of SGI Know-How, together with bulk
and final product manufacturing data and processes, batch records and
validation documentation; Third Party subcontractor information to the extent
permissible; Regulatory Filings and Supporting Data; and Adverse Event data.
The Parties, working through the JRC will use Commercially Reasonable Efforts to
plan and execute a mutually agreeable transition process designed to effect the
orderly transition and uninterrupted development of Licensed Compounds.

 

ii.                         Continuing
Cooperation.

 

A.           After the transfer described in Section 4(i)i above,
and for a 6-month period thereafter, SGI shall use Commercially Reasonable
Efforts to cooperate with GSK to provide GSK with the SGI Know-How to which GSK
has a right or license under this Agreement. During such 6-month period, SGI
would be responsible for its reasonable costs and expenses of such continuing
cooperation; provided, however, that after such 6-month period all of SGI’s
costs and expenses for such continuing cooperation would be borne by GSK.

 

B.             After exercise of the GSK Option by GSK, SGI agrees
to continue to reasonably cooperate with GSK in responding to any inquiries
from Regulatory Authorities 

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

24

 

relating to the Regulatory Filings for Compounds developed during the
Research Term pursuant to this Agreement.

 

C.             For a period of [***] following expiration of the
Research Term, SGI shall not have the obligation of testing Compounds for
[***]; however if SGI becomes aware of a Compound that qualifies as a  Licensed  Compound hereunder, SGI agrees to
promptly notify GSK of the existence of such Compound and such Compound shall
be deemed a Licensed Compound in accordance with Section 4.

 

iii.                      Additional
Services. In the event that GSK requests SGI to provide GSK
with any materials or services beyond those set forth in Sections 4(i)i and
4(i)ii, such materials and/or services shall be scheduled and provided by SGI
to GSK on such terms and conditions as may be mutually agreed between the
Parties at the time of any such request, if, and only if, each of the Parties
mutually desire to engage in the transfer or provision of such additional
materials or services.

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

25

 

5.                                                    FEES,
EQUITY, AND RESEARCH AND DEVELOPMENT MILESTONES

 

(a)                        Upfront Fee. GSK shall pay
to SGI US Two Million Dollars (US$2,000,000) within ten (10) business days
after receipt of an invoice therefor from SGI after the Effective Date.

 

(b)                       Stock Purchase. In accordance
with the terms and conditions of the Common Stock Purchase Agreement entered
into by the Parties effective October 22, 2009, attached hereto as Exhibit A, GSK agrees to purchase, and SGI agrees to sell and
issue to GSK, SGI common stock at a cash purchase price per share equal to one
hundred and ten percent (110%) of the average closing sale price of one (1) share
of the SGI common stock
as reported on for the thirty (30) consecutive trading days
immediately preceding the date of execution of this Agreement for an aggregate
purchase price equal to US Three Million Dollars (US$3,000,000).

 

(c)                        Follow-On Fee. In addition,
if a Follow-On Compound program is initiated following the Effective Date, GSK
shall pay to SGI a one-time fee of US [***] within ten (10) business days
following receipt of an invoice therefor from SGI.

 

(d)                       Lead Compound
Milestones. GSK shall make the following one-time payments to
SGI for the first Lead Compound to achieve the following milestones:

 

	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial

  	
   

  	
  [***]

  	
   

  
	
  Exercise by GSK of the GSK Option

  	
   

  	
  [***]

  	
   

  

 

(e)                        Follow-On
Compound Milestones. In addition, GSK shall make the following one-time
payments to SGI for the first Follow-On Compound to achieve the following
milestones:

 

	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial

  	
   

  	
  [***]

  	
   

  
	
  Achievement of PoC Criteria

  	
   

  	
  [***]

  	
   

  

 

(f)                          Back-Up
Compound Milestones. For each Back-Up Compound, up to a maximum of two (2)
Back-Up Compounds (i.e., a Back-Up Compound to each of the Lead Compound and a
Follow-On Compound), GSK shall make the following payments to SGI for each of
the first two (2) Back-Up Compounds to achieve the following milestones:

 

	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  Initiation of IND-enabling GLP studies

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial, so long as the Lead Compound
  or Follow-On Compound to which the Back-Up Compound relates, is not
  terminated within six (6) 

  	
   

  	
  [***]

  	
   

  

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.

 

26

 

	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  months of payment of the first dosing in a Phase 1 clinical trial
  milestone for such Lead Compound or Follow-On Compound

  	
   

  	
   

  	
   

  

 

(g)                       Licensed
Compound Milestones. GSK shall make the following one-time payments to
SGI for the first Compound to achieve such milestone:

 

	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  First dosing in a Phase 3 clinical trial (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  First NDA approval by FDA (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  Marketing Authorization Approval including Price and Reimbursement
  Approval in 3 of 5 EU Major Markets (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  First NDA Approval by the Japanese MHLW (first Major Indication)

  	
   

  	
  [***]

  	
   

  

 

(h)                       If following
exercise of the GSK Option, a Licensed Compound is developed for a second Major
Indication, and if such Licensed Compound achieves any of the milestones set
forth above noted as “first Major Indication” in such second Major Indication, then
GSK shall pay a one-time payment to SGI [***] of the amounts as set forth above
noted as “first Major Indication” for the applicable milestone achieved.

 

(i)                           If following
exercise of the GSK Option, a Licensed Compound is developed for a first
non-Major Indication, and if such Licensed Compound achieves any of the
milestones set forth above noted as “first Major Indication” in such first
non-Major Indication, then GSK shall pay a one-time payment to SGI [***] of the
amounts as set forth above noted as “first Major Indication” for the applicable
milestone achieved.

 

(j)                           Except as set
forth above, all milestone payments and fees in this Section 5 shall be made
within forty-five (45) days from the date of receipt of an invoice from SGI.
GSK agrees to promptly notify SGI of the achievement of any of the foregoing
milestones, but in any event, such notification shall not be delayed by more
than ten (10) days from the date of each such milestone achievement. For
purposes of clarity, the transaction contemplated by Section 5(b) above is
subject to the payment terms specified in the Common Stock Purchase Agreement
and is specifically exempted from the timing requirements of this Section 5(j).

 

(k)                        All upfront and
milestone payments will be non-refundable.

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

27

 

6.                                                    ROYALTIES

 

(a)                        Royalty to SGI

 

i.                            Royalty Rate. Subject to Section 6(a)ii-iii, GSK shall pay SGI royalties on annual Net Sales of each Product containing a
Licensed Compound during a calendar year, on a country-by-country and
Product-by-Product basis, in those countries of
the Territory in which there is a Valid Claim of an SGI Patent or a Joint
Patent (“SGI Royalty”),
in the amounts as follows:

 

	
  Annual Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
  < $500M

  	
   

  	
  [***]

  	
  %

  
	
  > $500M < $1,000M

  	
   

  	
  [***]

  	
  %

  
	
  > $1,000M < $2,000M

  	
   

  	
  [***]

  	
  %

  
	
  >$2,000M

  	
   

  	
  [***]

  	
  %

  

 

The royalty rates in the table above are incremental rates which apply
only for the respective increment of annual Net Sales described in the Annual
Net Sales column and, thus, once a total annual Net Sales figure is achieved
during the calendar year, the royalties owed on any lower tier portion of
annual Net Sales are not adjusted up to the higher tier rate.

 

ii.                         Royalty
Reductions.

 

A.           For countries where there is
no Valid Claim within the SGI Patents or Joint Patents and the Regulatory-Based
Exclusivity Period has expired, royalty rates will be reduced by [***] so long
as Generic Entry has not occurred; provided however,
in the event that GSK elects to abandon any Joint Patent in a country that is
the only Patent covering the Product in such country, then (1) if SGI does not
elect to continue prosecution and maintenance of such Joint Patent, GSK will
receive the royalty rate reduction described above for Net Sales revenue from
that country, or (2) if SGI elects to continue prosecution and maintenance of
such Joint Patent, then GSK will not receive the royalty rate reduction
described above for Net Sales revenue from that country until such date as
there is no Valid Claim within such Joint Patent in such country. For the
avoidance of doubt, in either case of the foregoing (1) or (2), Generic Entry
in such country would reduce the SGI Royalties payable regardless of the
disposition of such patent prosecution and maintenance activities of the
Parties.

 

B.             If at any time, but only for
so long as, (1) a Third Party’s product(s) having the same active ingredient as
a Product (each, a “Generic Product”) enters the market in a given
country, and (2) such Generic Product(s) account for more than [***] of
aggregate unit sales of the Product and such Third Party product(s) in the
given country, as determined by, e.g., an IMS Health Inc. market measurement
study (“Generic Entry”), the applicable SGI Royalty will be reduced by
[***] in such country.

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

28

 

C.             By way of example only, (1) in a
country where there is no Valid Claim of any SGI Patents or Joint Patents, as
described in Section 6(a)ii.A above, the royalty rate reduction will be [***]; (2)
in a country where there has been Generic Entry, as described in Section 6(a)ii.B
above, the royalty rate will be reduced by [***] in such country whether or not
a Valid Claim of any SGI Patents or Joint Patents
exists in such country.

 

iii.                      SGI Royalty
Term. The royalty term will commence upon First Commercial Sale and will
expire on a country-by country basis upon the later of either (A) expiration in
such country of the last Valid Claim within SGI
Patents or Joint Patents covering the
composition of matter or method of use of the Licensed Compound included in the
Product, or (B) ten (10) years after such First Commercial Sale in such
country, except as otherwise provided in Section 6(a)iv.

 

iv.                     Regulatory-Based
Exclusivity Period. Notwithstanding the foregoing in Section 6(a)iii,
if, after expiration of the last Valid Claim within SGI Patents or Joint
Patents  in a country, SGI can prove
by reasonably satisfactory documentary evidence, which is not contradicted by
reasonably satisfactory documentary evidence provided by GSK, that there exists
Regulatory-Based Exclusivity with respect to such Product in such country, GSK
shall continue to pay the SGI Royalty to SGI as set forth in Section 6(a)i for
so long as such Regulatory-Based Exclusivity Period continues in such country.

 

(b)                       Royalty to GSK.

 

i.                            Royalty Rate. If SGI, on
its own or with or through an Affiliate or Third Party, develops or
commercializes a terminated Licensed Compound (terminated in accordance with Section
9(d)ii or a Reverted Product (defined below)), subject to Section 6(b)ii, SGI
shall pay to GSK a royalty on Net Sales of Products containing such Compound or
such Reverted Products, as the case may be, as follows depending on the stage
at which GSK terminated development (“GSK Royalty”):

 

A.           If termination occurred
prior to the completion of Phase 3 trials, SGI shall pay a royalty equal to [***]
of Net Sales to GSK; and

 

B.             If termination occurred
following the completion of Phase 3 trials, SGI shall pay a royalty equal to
[***] of Net Sales to GSK.

 

ii.                         Royalty
Reductions.

 

A.           For countries where there is
no Valid Claim in the SGI Patents or Joint Patents and the Regulatory-Based
Exclusivity Period has expired, royalty rates will be reduced by [***] so long
as Generic Entry has not occurred; provided however,
in the event that GSK elects to abandon any Joint Patent in a country that is
the only Patent covering the Product in such country, then (1) if SGI does not
elect to continue prosecution and maintenance of such Joint Patent, SGI will
receive the royalty rate reduction described above for Net Sales revenue from
that country until the end of the term of such Joint Patent  in such country as if GSK had not elected to abandon
the 

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

29

 

maintenance and prosecution
of such Patents, or (2) if SGI elects to continue prosecution and maintenance
of such Joint Patent, then SGI will not receive the royalty rate reduction described
above for Net Sales revenue from that country until such date as there is no
Valid Claim within such Joint Patent in such country. For the avoidance of
doubt, in either case of the foregoing (1) or (2), Generic Entry in such
country would reduce the GSK Royalties payable regardless of the disposition of
such patent prosecution and maintenance activities of the Parties.

 

B.             If at any time, Generic
Entry has occurred for a Product within a country, the applicable GSK Royalty
will be reduced by [***] in such country.

 

C.             By way of example only, (1) in a
country where there is no Valid Claim in a SGI Patent or Joint Patent, as
described in Section 6(a)ii.A above, the royalty rate reduction will be [***]; (2)
in a country where there has been Generic Entry, as described in Section 6(b)ii.A
above, the royalty rate reduction will be [***], whether or not a Valid Claim
of any SGI Patents or Joint Patents exists in such country.

 

iii.                        GSK Royalty
Term. The royalty term will commence upon First Commercial Sale of such
Product in the Territory and will expire on a country-by country basis upon the
later of either (A) expiration in such country of the last Valid Claim within SGI Patents or Joint Patents covering the composition of matter or method of use of the Licensed
Compound included in the Product, or (B) ten (10) years after First Commercial
Sale in such country, subject to Section 6(b)iv.

 

iv.                     Regulatory-Based
Exclusivity Period. Notwithstanding the foregoing in Section 6(b)iii,
if, after expiration of the last Valid Claim of any SGI Patents or Joint
Patents  in a country, GSK can prove
by reasonably satisfactory documentary evidence, which is not contradicted by
reasonably satisfactory documentary evidence provided by SGI, that there exists
Regulatory-Based Exclusivity with respect to such Product in such country, SGI
shall continue to pay the GSK Royalty to GSK as set forth in Section 6(a)i for
so long as such Regulatory-Based Exclusivity Period continues in such country.

 

(c)                        Royalty
Reduction Following Breach. If SGI materially breaches
this Agreement without cure as set forth in Section 9(c) of this Agreement, GSK
will have the right to terminate this Agreement pursuant to Section 9(c), and
continue to exercise its rights under this Agreement, including without
limitation obtaining the License, subject to the following royalty obligations
and royalty reductions as set forth in Section 6(b)ii for the period set forth
in Section 6(b)iii:

 

i.                            If termination
occurred prior to the Lead Compound achieving the Candidate Selection Criteria,
GSK shall pay to SGI a [***] royalty on annual Net Sales of all Products in the
Territory;

 

ii.                         If termination
occurred after the Lead Compound achieved the Candidate Selection Criteria but
prior to exercise by GSK of the GSK Option, GSK shall pay to SGI a [***]
royalty on annual Net Sales of all Products in the Territory.

 

(d)                       Third Party
Licenses for SGI R&D Activities. SGI shall be solely
responsible for satisfying all 

 

***              CONFIDENTIAL TREATMENT REQUEST

Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.

 

30

 

costs and payments of any kind (including,
without limitation, all upfront fees, annual payments, milestone payments and
royalty payments) for any licenses required from a Third Party for the conduct
of its research and development activities hereunder prior to the date that GSK
exercises the GSK Option. GSK shall be solely responsible for satisfying all
such costs and payments after the date that GSK exercises the GSK Option. It is
understood and agreed by GSK that SGI is not required to maintain any of the
licenses described in this Section 6(d), or satisfy any costs and payments
therefor, following exercise of the GSK Option by GSK; provided however, if
such licenses are required by GSK, in GSK’s discretion, SGI shall use
commercially reasonable efforts to assign such license to GSK or assist GSK in
obtaining a direct license from licensor at GSK’s cost.

 

(e)                        Third Party
Licenses for GSK Development, Manufacture or Commercialization Activities. With respect
to any license necessary for the development, manufacture or commercialization
of a Licensed Compound as determined by GSK following exercise of the GSK
Option (including the licenses as described in Section 6(d), if such licenses
are required for manufacture or commercialization by GSK), GSK shall be
responsible for satisfying all costs and payments of any kind (including
without limitation all upfront fees, annual payments, milestone payments and
royalty payments) for any such licenses and GSK may offset up to [***] of its
direct costs associated with acquiring such license(s) against any royalty
payments due to SGI; provided, that such offset will not reduce the relevant
royalty rates lower than the minimum threshold rates as follows:

 

	
  Annual Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
  < $500M

  	
   

  	
  [***]

  	
  %

  
	
  > $500M < $1,000M

  	
   

  	
  [***]

  	
  %

  
	
  > $1,000M < $2,000M

  	
   

  	
  [***]

  	
  %

  
	
  >$2,000M

  	
   

  	
  [***]

  	
  %

  

 

GSK will be entitled to
carry forward uncredited amounts to future royalties due to SGI. For purposes
of clarity, any such license must be obtained by GSK from a Third Party which
party is neither an Affiliate of GSK nor a Sublicensee of GSK.

 

(f)                          Royalty Offset
Reduction. If the GSK Group uses the technology covered by a
license as described in Sections 6(d) and/or 6(e) above for products other than
Licensed Compounds and Products incorporating such Licensed Compounds, then the
costs associated with such license that are offset against royalties payable to
SGI will be reduced from a maximum of [***], by the ratio of the costs
associated with the number of such other products in relation to the costs
associated with the Products incorporating Licensed Compounds. By way of example only, if the GSK Group uses such a
technology to manufacture three (3) other products with a total combined cost
of $[***] and one (1) Product with a total cost of $[***] then the royalty
offset reduction will be [***], or $[***]/($[***] + $[***]).

 

(g)                       Payment,
Reporting and Timing. All royalties shall be paid quarterly within sixty
(60) days after the end of each calendar quarter on a Product-by-Product,
country-by-country basis. The

 

***              CONFIDENTIAL TREATMENT REQUEST  

Portions denoted with
asterisks have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

 

31

 

Party obligated to make royalty payment (“Payor”) shall submit
to the other Party (“Payee”), within sixty (60) days after the end of
each calendar quarter, on a Product-by-Product, country-by-country basis, a
written report showing Net Sales, Net Sales unit volume sold, the royalties
payable in US Dollars and the method used to calculate the royalty and the
exchange rates.

 

(h)                       Currency Conversion. All amounts
set forth in this Agreement, or in any Exhibit, are in US Dollars. If any
currency conversion will be required in connection with the calculation of
royalties or other payments hereunder, such conversion shall be made by the
parties, using the standard method to be employed by GSK in its Group
Consolidation process and in its annual accounts.

 

The current
standard method is sourced from Reuters/ Bloomberg, with US spot rates supplied
on a daily basis. The cumulative year-to-date average rates are calculated as
the average of the preceding 31st December spot rate plus the closing spot
rates of the relevant months to date, using the following as input:

 

·                  US Dollar and Euro input
to 4 decimal places

 

·                  All other currencies to
3 significant places (or to the nearest round number if over 999).

 

As an
example, the cumulative average rate for the 5 months to May will be
computed by taking the sum of the spot rates of the preceding 31st December, plus the month-end
spot rates for the 5 months to May, divided by 6.

 

The
resulting average rates are published to 3 significant figures (e.g.,
$1.44 for the Dollar, or Naira 168 for Nigeria), or to the nearest round number
if the currency is more than 999 (e.g., Bolivar 1,302 for Venezuela).

 

The
rounding process for a currency is that 0.5 is rounded up (e.g., $1.4350
is rounded up to $1.44).

 

If the
standard method for currency conversion employed by GSK in its Group
Consolidation process and in its annual accounts
changes, GSK will timely notify SGI of the new standard method in advance of it
being applied.

 

(i)                           Taxes.

 

i.                            Deductions and Withholdings. All amounts due under this Agreement shall be paid in
full without deduction for any applicable taxes, levies, imposts, duties and
fees of whatever nature imposed by or under the authority of any government or
public authority, except for tax legally required to be withheld. If a law or
regulation of any country of the Territory requires withholding of taxes of any
type, levies or other charges with respect to any amounts payable hereunder to
Payee, Payor shall promptly pay such tax, levy, or charge to the proper governmental
authority and shall furnish Payee with proof of such withholding or similar tax
in a form in accordance with the relevant taxation authority as evidence of
such payment. Payor shall have the right to deduct any such tax, levy or charge
actually paid from payment due to Payee or be promptly reimbursed by Payee if
no further payments are due to Payee. Payor agrees to provide reasonable
assistance to Payee in claiming exemption from such deductions or withholdings
under double taxation or similar agreement or treaty from time to time in force
and in minimizing the amount required to be so withheld or deducted and in 

 

32

 

obtaining a repayment of tax withheld or
deducted. As GSK and SGI are both U.S. tax residents, each party hereto
acknowledges and agrees that it is not required by any applicable law to make
(and shall not make) any deduction or withholding for or on account of any tax,
levy or other governmental charge from any payment to be made by the other
party under this Agreement, unless either party transfers or assigns this
Agreement or its rights or obligations under this Agreement to a foreign party
or foreign Affiliate or otherwise becomes a resident for taxation purposes in
any country of the Territory other than the United States.

 

ii.                         Assignment
or Change in Tax Residency of GSK. In the event that GSK assigns or transfers its rights or obligations
under this Agreement, under Section 17(e) or otherwise, or that GSK
becomes resident for taxation purposes in any country of the Territory other
than the United States, any amounts payable hereunder to SGI shall be made
without any deduction for or on account of any tax, levy or charge imposed by
any law or regulation of any country of the Territory. If GSK or its assignee
or transferee is compelled to make any such deduction, it shall pay to SGI such
additional amounts as are necessary to ensure receipt by SGI of the full amount
which SGI would have received but for the deduction. GSK agrees to provide
reasonable assistance to SGI in claiming exemption from such deductions or
withholdings under double taxation or similar agreement or treaty from time to
time in force and in minimizing the amount required to be so withheld or
deducted and in obtaining a repayment of tax withheld or deducted. If SGI
receives a tax credit or other tax benefit for such taxes required to be
withheld and paid by GSK then SGI shall reimburse GSK the amount of the tax
credit or other tax benefit actually received and utilized by SGI (net of taxes
incurred by SGI with respect to such tax credit or tax benefit);provided,
however, that in the event a taxing authority denies the tax credit or other
tax benefit claimed by SGI, then SGI shall notify GSK of such denial and GSK
shall within forty-five (45) days of receipt of such notice return to SGI the
amount of the tax credit or other tax benefit disallowed.

 

iii.                      Assignment or Change in Tax Residency of SGI. In the event that SGI assigns or transfers its
rights or obligations under this Agreement, under Section 17(e), or that
SGI becomes resident for taxation purposes in any country of the Territory
other than the United States, any amounts payable hereunder to GSK shall be
made without any deduction for or on account of any tax, levy or charge imposed
by any law or regulation of any country of the Territory. If SGI or its
assignee or transferee is compelled to make any such deduction, it shall pay to
GSK such additional amounts as are necessary to ensure GSK’s receipt of the
full amount which GSK would have received but for the deduction. SGI agrees to
provide reasonable assistance to GSK in claiming exemption from such deductions
or withholdings under double taxation or similar agreement or treaty from time
to time in force and in minimizing the amount required to be so withheld or
deducted and in obtaining a repayment of tax withheld or deducted. If GSK
receives a tax credit or other tax benefit for such taxes required to be
withheld and paid by SGI then GSK shall reimburse SGI the amount of the tax
credit or other tax benefit actually received and utilized by GSK (net of taxes
incurred by GSK with respect to such tax credit or tax benefit);provided,
however, that in the event a taxing authority denies the tax credit or other
tax benefit claimed by GSK, then GSK shall notify SGI of such denial and SGI
shall within forty-five (45) days of receipt of such notice return to GSK the
amount of the tax credit or other tax benefit disallowed.

 

33

 

(j)                           Method of Payment; Late Fees. Payments to
be made by Payor to Payee hereunder shall be paid by bank wire transfer in
immediately available funds to such bank account as is designated by Payee from
time to time. Any undisputed payments due under this Agreement which are not
paid by the date such payments are due will bear interest to the extent
permitted by applicable law at the prime rate announced by Citibank, N.A. for
the applicable time period plus five percent (5%). The foregoing shall exclude (i) changes
to bank details (e.g., IBAN or SWIFT code) less than ten (10) days by
Payor prior to payment by either Party or (ii) bank errors made by or on
behalf of Payor’s bank.

 

(k)                        Records and Inspection. Payor and its
Affiliates and Sublicensees shall keep complete and accurate books and records
in sufficient detail to permit Payee to confirm the accuracy of all payments
due hereunder. Such books and records shall be kept for at least five (5) years
following the end of the calendar quarter to which they pertain. Payee will
have the right to have such books and records audited by a Third Party
representative reasonably acceptable to Payor under confidentiality obligations
no less strict than a set forth in Section 11 (a nationally recognized
accounting firm) relating the accuracy of all payments due hereunder for the
preceding two (2) years. Payee may conduct such audits during normal
business hours no more than once in any twelve (12)-month period upon at least
thirty (30) days’ prior written notice to Payor. Payee shall bear the cost of
such audit, except that if the audit determines that Payor has made an
underpayment with respect to the audited period that is greater than five
percent (5%) of all amounts due in such audited period, then Payor shall reimburse
Payee for all costs incurred by Payee in connection with the audit, including
reasonable, documented, travel expenses actually incurred by Payee or its Third
Party auditor. If the audit validly determines that there has been any
underpayment, Payor shall promptly reimburse Payee the amount of such
underpayment together with interest on such unpaid amounts at the rate set
forth in Section 6(g). If the audit validly determines that Payor has made
an overpayment with respect to the audited period, Payor will be allowed to
credit the overpayment against future royalty payments due to Payee, without
interest.

 

(l)                           Royalties for Combination or
Bundled Products. Notwithstanding anything else contained in this Section 6,
in the event a combination or bundled Product is formulated, the Net Sales for
such combination or bundled Product will be calculated in accordance with the
formula set forth in Section 1(gg) and the applicable royalty rate will be
applied to such Net Sales amount.

 

7.                                                    SALES
MILESTONE PAYMENTS

 

(a)                        Sales Milestone Payments. GSK shall pay
to SGI the following one-time sales milestone payments based on the first
achievement of worldwide aggregate Net Sales, on a Product-by-Product basis,
for each Product:

 

US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year;

 

US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year;

 

US$[***] for first achievement of US$[***] for all
indications for such Product in one 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

34

 

calendar year; and

 

US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year.

 

All milestone payments in this Section 7 shall
be made within sixty (60) days from the date of receipt of invoice from SGI,
following achievement of each such milestone, provided that GSK promptly
notifies SGI of the achievement of each such sales milestone, in each case no
later than thirty (30) days after the achievement of each such milestone. All
milestone payments in this Section 7 will be non-refundable.

 

8.                                                    CHANGE
OF CONTROL

 

(a)                        Change of Control. Upon SGI
consummating a Change of Control Transaction with an entity engaged in the
pharmaceutical or biotechnology business with a market capitalization of at
least US$1 Billion, GSK will have the immediate right, but not the obligation,
to exercise the GSK Option. If, as a result of such a Change of Control
Transaction, GSK exercises the GSK Option, (i) SGI shall license to GSK in
accordance with Section 4(b), the Licensed Compounds that have been [***]  by SGI to date including those that are furthest in
development with respect to the Lead Compound, the Follow-On Compound and any
Back-Up to the Lead and Follow-On Compound; and (ii) GSK shall pay
milestones and royalties to SGI or its Successor as follows:

 

	
  Stage
  at Which Option

  Exercised on Change of

  Control of SGI

  	
   

  	
  Percentage of Milestones

  and Royalties Payable

  
	
  Before
  Lead Compound meets Candidate Selection Criteria

  	
   

  	
  [***]%
  of applicable milestones and royalties

  
	
  After
  Lead Compound meets Candidate Selection Criteria but prior to initiation of
  clinical trials with the Lead Compound

  	
   

  	
  [***]%
  of applicable milestones and royalties

  
	
  After
  clinical trials have been commenced with respect to the Lead Compound but
  before completion of the PoC Trial for the Lead Compound

  	
   

  	
  [***]%
  of applicable milestones and royalties

  

 

Further, in the event of a Change of Control Transaction, SGI shall
provide reasonable cooperation, including technical assistance, to effect a
technology and Regulatory Filings transfer as described in Section 4(f) for
a Licensed Compound. In all cases, the Parties agree to draft a transition plan
to accommodate the transfer of any such technology, Regulatory Filings and
related documents and materials.

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

35

 

(b)                       No Exercise Upon Change of Control. If GSK elects
not to exercise the GSK Option upon SGI consummating a Change of Control
Transaction as described in Section 8(a) above prior to the Lead
Compound meeting the PoC Criteria, SGI shall continue development of Compounds
in accordance with this Agreement, and, upon GSK’s exercise of the GSK Option
on achievement of the PoC Criteria, GSK shall pay milestones and royalties to
SGI or its Successor in accordance with the provisions set forth in Sections 5, 6 and 7.

 

9.                                                    TERM
AND TERMINATION

 

(a)                        Term of this Agreement. This
Agreement will become effective upon the Effective Date and will continue
thereafter in full force and effect on a Product-by-Product and
country-by-country basis, unless terminated sooner in accordance with the terms
hereof, or until it expires on a Product-by-Product and country-by-country
basis upon the expiration of GSK’s obligation to pay any royalties or other
consideration to SGI hereunder in the applicable country with regard to the
applicable Product (such expiration of this Agreement with respect to a
particular Product in a particular country in the absence of termination is
referred to herein as “Product Expiration” and such expiration of this
Agreement with respect to all Products under this Agreement in all countries is
referred to herein as “Expiration in Entirety”).

 

i.                            Research Term. The Research
Term shall terminate as of the effective date of any termination of this
Agreement, unless the Project had terminated previously.

 

(b)                       Bankruptcy-Related Events.

 

i.                            Either Party may terminate
this Agreement upon (A) the bankruptcy, liquidation or dissolution of the
other Party; or (B) the filing of any petition (voluntary or involuntary)
for bankruptcy, dissolution, liquidation or winding-up of the affairs of the
other Party which is not dismissed within ninety (90) days after the date on
which it is filed or commenced; or (C) the proposal by a Party to be a
party to any dissolution or liquidation; or (D) assignment by a Party of
substantially all of its assets for the benefits of creditors.

 

ii.                         If an event as described in Section 9(b)i
above occurs, all rights and licenses granted under or pursuant to this
Agreement by one Party to the other Party are, and shall be deemed to be, for
purposes of Section 365(n) of the
Bankruptcy Code and any similar law or regulation in any other country,
licenses of rights to “intellectual property” as such term is defined in Section 101(35A) of the Bankruptcy Code. The Parties
agree that all intellectual property rights licensed hereunder are part of the “intellectual
property” as defined under Section 101(35A)
of the Bankruptcy Code subject to the protections afforded the non-terminating
Party under Section 365(n) of the
Bankruptcy Code, and any similar law or regulation in any other country.

 

(c)                        Termination for Material
Breach. Either Party may terminate this Agreement, as a whole, at any time
with sixty (60) days prior notice if the other Party materially breaches this
Agreement and such material breach is not cured by the breaching Party within
thirty (30) days after the non-breaching Party provides the breaching Party
with written notice of such breach, provided, however, if such material breach
cannot be cured through Commercially Reasonable Efforts within such 30-day
period and the breaching Party has within such time period promptly submitted a
written plan to cure such material breach through the application of
Commercially Reasonable Efforts, with a cure date reasonably acceptable to the
non-breaching Party, after the earlier of the cure date agreed to by the
non-breaching Party, 

 

36

 

or the date the breaching Party ceases Commercially Reasonable Efforts
to cure such breach. Notwithstanding the above, in the case of a failure to pay
any amount due hereunder the period for cure of any such default following
written notice thereof will be ten (10) days and, unless payment is made
within such period, termination will become immediately effective at the end of
such period.

 

i.                            In the event that the Party
found to have committed a material breach is SGI, GSK may obtain the License to
the Licensed Compounds that have been [***] by SGI to date, including those
that are furthest in development with respect to the Lead Compound, the
Follow-On Compound and any Back-Up Compounds to each of the Lead Compound and
Follow-On Compound, subject only to the royalty obligations set forth in Section 6(c) above.
For purposes of clarity, if GSK is granted the License pursuant to this Section 9(c)i,
SGI shall not be entitled to any further milestone payments after the effective
date of termination for such material breach.

 

ii.                         In the event that the
Parties cannot in good faith agree as to whether an act or omission is a
material breach, the Parties agree to submit the matter to arbitration for
dispute resolution, who shall finally decide the matter in accordance with Section 16(b)iii
of this Agreement.

 

(d)                       Permissive Termination.

 

i.                            Termination of Entire
Agreement. GSK may terminate this Agreement in its entirety
for convenience, upon thirty (30) days prior written notice to SGI.

 

ii.                         Product-Specific Termination. GSK may
terminate this Agreement, for convenience, as to any Product, on a
country-by-country and Product-by-Product basis (i.e., for a particular Product
for all indications), upon thirty (30) days prior written notice to SGI. In any
such event, GSK’s license and rights with regard to the applicable Product in
the applicable geographic territory will terminate and such Product will be
treated as a Reverted Product (defined below) and the terms of Sections 6(b) and 9(e)v will apply.

 

iii.                      Election Not to Exercise. If the JRC
determines that the Lead Compound achieves the PoC Criteria, and GSK elects not
to exercise the GSK Option within the 90-day option exercise period, then
either Party may terminate this Agreement which termination will become
effective upon written notice to the other Party.

 

iv.                     Failure to Achieve PoC
Criteria. Following expiration of the Research Term, if the
Lead Compound fails to meet PoC Criteria and either (A) there are no
Back-Up Compounds or Follow-On Compounds or (B) the Back-Up Compounds and
Follow-On Compound(s) to that Lead Compound fail to achieve the PoC
Criteria, then in either case either Party may terminate this Agreement which
termination will become effective upon written notice to the other Party.

 

v.                        No Further Development of
Products. If, as a result of the decision, endorsement, vote
(or like mechanism for such election) by GSK’s then-Chairman of Research and Development
(or his or her successor) and/or its Product Management Board (as then 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

37

 

constituted or any successor entity or individual thereto), GSK elects
to cease development and/or commercialization of all Products, GSK will
promptly send a notice to SGI of such election. In such case, SGI may elect to
terminate, upon prior written notice to GSK, this Agreement in its entirety or
as to any or all Compounds, Products, on a country-by-country,
Compound-by-Compound and Product-by-Product basis (i.e., for a particular
Compound or Product for all indications or for all Compounds or Products for
all indications).

 

(e)                        Effect of Expiration or
Termination. Upon Expiration in Entirety or termination of this
Agreement in its entirety for any reason, all rights and obligations of the
Parties hereunder will cease, except as explicitly provided for below:

 

i.                            Accrued Rights and
Obligations. Termination or any expiration of this Agreement
for any reason will not release any Party hereto from any liability that, at
the time of such termination, has already accrued to the other Party or that is
attributable to a period prior to such termination, nor preclude either Party
from pursuing any rights and remedies it may have hereunder or at law or in
equity that accrued or are based upon any event occurring prior to such
termination.

 

ii.                         Confidential Information. Upon
termination of this Agreement by either Party for any reason, the rights of
each Party to retain and use the Confidential Information of the other to
exercise its rights will be as set forth in this Section 9(e); provided,
however, that each Party may retain a single archival copy of the other Party’s
Confidential Information solely for the purpose of determining the extent of
disclosure of such Confidential Information hereunder and assuring compliance
with the surviving provisions of this Agreement.

 

iii.                      GSK Rights Upon Product
Expiration. Upon Product Expiration in any country with regard
to a particular Product, subject to GSK’s compliance with the surviving provisions
of this Agreement pursuant to Section 9(f), GSK’s License with respect to
such Product in such country will survive.

 

iv.                     Rights Upon Termination
Pursuant to Section 9(b). Upon termination of this
Agreement pursuant to Section 9(b), all licenses granted to the Party to
which the Section 9(b) event applies will terminate concurrently.

 

v.                        Rights Upon Other
Terminations. If SGI or GSK terminates this Agreement pursuant
to Section 9(c) or 9(d), then:

 

A.           Reverted Territory; Reverted
Products. The Territory, in the case of a termination in
whole, and the terminated country or countries (together with their territories
and possessions) in the case of a partial termination, will be deemed to be the
“Reverted Territory” effective as of the effective date of such
termination. In the case of a partial termination, the Reverted Territory will
thereafter be excluded from the Territory for all purposes under this
Agreement, but this Agreement will remain in effect in the remaining Territory.
All Products in the Reverted Territory will, effective upon the effective date
of such termination, be deemed “Reverted Products.”

 

B.             License to SGI. After
exercise of the GSK Option, GSK may, at its sole discretion, cease its
development or commercialization of Licensed Compounds at any time. In such
event, all licenses to GSK from SGI, including the Licenses, will terminate
upon such termination by GSK. At SGI’s option, GSK hereby grants and shall
grant to SGI, 

 

38

 

effective upon such termination, a worldwide, perpetual, exclusive
license, with the right to grant and authorize sublicenses, under all
Inventions and Intellectual Property Rights owned or Controlled by GSK as of
the effective date of termination pursuant to Section 9(d)v above that
were created by GSK in the performance of this Agreement (1) that are
directly related to Reverted Products or the Licensed Compounds upon which the
Reverted Products are based and (2) to the extent that such Inventions and
Intellectual Property Rights are Patents, then those Patents that claim,
generically or specifically, the (I) composition of matter of Licensed
Compounds and/or Reverted Products comprising Licensed Compounds, (II) method
of use of Licensed Compounds and/or Reverted Products comprising Licensed
Compounds or (III) method of manufacture of Licensed Compounds and/or
Reverted Products comprising Licensed Compounds (collectively, “GSK Product
IP”), in each case of (1) and (2) to make, have made, use, sell,
offer to sell and/or import the Reverted Products or the Licensed Compounds
upon which the Reverted Products are based throughout the Reverted Territory.
The foregoing license shall include the right to use the bulk and final product
manufacturing data and processes, batch records and validation documentation;
subcontractor information, Supporting Data, know-how and Adverse Event data to
make, have made, use, sell, offer for sale and import the Reverted Products and
the Licensed Compounds on which the Reverted Products are based throughout the
Reverted Territory.

 

C.             Royalty to GSK. In the event
that SGI obtains the foregoing license from GSK, such license will be subject
to the royalty obligations set forth in Section 6(b) above.

 

D.            Third Party IP-related
Contracts. After SGI’s review, at SGI’s sole election and on
an agreement-by-agreement basis, GSK shall assign (or cause to be assigned) to
the extent permitted by their terms, to SGI all Third Party agreements with GSK
or its Affiliates containing a license under Intellectual Property Rights
claiming, or Inventions specific to or incorporated into, the development or
commercialization of Reverted Products to SGI in the Reverted Territory, or
grant (or cause to be granted) to SGI a sublicense thereunder of a scope
equivalent to that granted to SGI above in Section 9(e)v.B, and thereafter
SGI shall be fully responsible for all obligations due under such agreements.
GSK shall notify SGI in writing no later than ninety (90) days prior to any
such assignment or sublicense becoming effective (unless SGI agrees in writing
for it to earlier become effective), as well as of any associated financial
obligations. If SGI does not wish to assume any obligations associated with
such an assignment or sublicense, then SGI shall so notify GSK and GSK shall
not make such assignment or grant such sublicense (or cause it to be made or
granted). GSK agrees to expend Commercially Reasonable Efforts to make any such
Third Party contracts wholly or partially assignable to SGI without imposition
of any cost or expense upon SGI with respect to such assignment and without any
change in pricing or other commercial terms. In the event that such an
assignment cannot be made, GSK shall cooperate with SGI, including, e.g., by
granting a sublicense for which SGI shall reimburse GSK at GSK’s cost, and SGI
shall expend Commercially Reasonable Efforts to enter into a license or other
agreement with such Third Party licensor.

 

39

 

E.              Further Sales. In the event
of any such termination, GSK may continue to sell its remaining inventory of
the applicable Reverted Product for a period of six (6) months from the
effective date of such termination, subject to the payment of royalties
pursuant to Section 6. GSK covenants that promptly after such 6-month
period that it and its Affiliates and former Sublicensees hereunder shall cease
to sell, and thereafter shall not sell, any Reverted Product in the Reverted
Territory.

 

F.              Regulatory Filings and
License Registrations. GSK shall assign and transfer (or cause to
be assigned and transferred) to SGI at GSK’s sole cost and expense, any
Regulatory Filings and government License registrations in the Reverted
Territory of GSK and its Affiliates with respect to any Reverted Product (or Licensed
Compound contained in a Reverted Product), and take such actions and execute
such other instruments, assignments and documents as may be reasonably
necessary to effect the transfer of rights thereunder to SGI. GSK shall, in
each sublicense that it grants hereunder, require the Sublicensee to transfer
any Regulatory Filings and License registrations in the Reverted Territory with
respect to any Reverted Product (or Licensed Compound contained in a Reverted
Product) in the event of a termination of this Agreement or such sublicense, to
SGI if this Agreement remains in effect, and to GSK if only such sublicense
terminates, in each case at no cost to SGI. In all cases and concurrent with
the termination event, the Parties agree to draft a transition plan to
accommodate the transfer of any such Regulatory Filings, government License
registrations and related documents and materials.

 

G.             Data Disclosure. To the extent
not already provided, GSK shall provide SGI with all Supporting Data in the GSK
Group’s possession with respect to any Reverted Product (or Licensed Compound
on which a Reverted Product is based), which SGI will be free to use in
accordance with the licenses granted under Section 9.

 

H.            Remaining Quantities. At the end of
the period described in Section 9(e)v.E above, at SGI’s sole election, on
a Reverted Product-by-Reverted Product basis and upon SGI’s written request,
GSK shall transfer to SGI, at GSK’s Manufacturing Cost plus [***] and the cost
of shipping for the Reverted Product, all quantities of reverted Licensed
Compounds and Reverted Products in GSK’s possession (including, without
limitation, clinical trial supplies and Products intended for commercial sale)
that have at least a remaining shelf life of twenty-four (24) months from the
date of transfer, in the case of a Territory-wide termination, or in their
possession and labeled specifically for sale in any country of the Reverted
Territory, in the case of a partial termination. GSK will have no obligation to
alter the labeling of such purchased Licensed Compounds and/or Reverted
Products for commercialization by SGI.

 

I.                 Ongoing Trials. If there are
ongoing trials of Reverted Products and the First Commercial Sale has not
occurred, then, at SGI’s sole election, GSK shall use Commercially Reasonable
Efforts to either (1) transfer responsibility of such trials to SGI, at
SGI’s sole expense, for completion of such trials, or (2) affect an
orderly 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

40

 

wind-down of such clinical trials.

 

J.                Product Manufacture by GSK. If any
Reverted Product was manufactured by GSK at the time of such termination, then
GSK, at SGI’s sole election and written request, shall continue to provide for
manufacturing of such Reverted Product for SGI, at GSK’s Manufacturing Cost,
plus [***], for the Reverted Product from the time of the effective date of
termination, until such time (not to exceed twelve (12) months) as SGI is able
to secure an equivalent alternative commercial manufacturing source for which
Regulatory Approval has been obtained and from which quantities of Reverted
Product are approved by the applicable Regulatory Agency for commercial sale in
each country of the Reverted Territory. During the pendency of the 12-month
manufacturing period, GSK agrees to expend Commercially Reasonable Efforts to
accommodate such manufacture without additional capital expenditure; however,
if GSK notifies SGI in writing that it must increase its manufacturing capacity
to produce the Reverted Product(s), such increase in manufacturing capacity for
the Reverted Products will be at SGI’s sole discretion, and any costs
associated with this increase in manufacturing capacity will be borne solely by
SGI, provided that SGI has notified GSK of its approval of such costs in
writing. If SGI elects not to increase manufacturing capacity after
notification by GSK, then GSK has no obligation to supply Reverted Products to
SGI above and beyond GSK’s available capacity and SGI agrees to accelerate the
search for an alternative commercial manufacturing source. For purposes of
clarity, in the event of the continuation of such manufacturing by GSK,
royalties payable to any Third Parties based on the manufacture of a Reverted
Product will not be included as part of GSK’s Manufacturing Cost if the royalty
deduction provisions of Sections 6(e) and 6(f) are being applied by
GSK to royalty payments to SGI. If GSK is not making royalty payments to SGI
and such Third Party licenses are required for GSK to manufacture the Product
as it was being manufactured before termination, GSK may include such costs in
its Manufacturing Costs.

 

K.            Third Party Manufacturing
Contracts. If any Reverted Product was manufactured by Third
Parties for GSK, or GSK had contracts with vendors which contracts are
necessary for SGI to take over responsibility for the Reverted Products in the
Reverted Territory, GSK shall, at SGI’s sole option and election, without
charge to SGI, assign all of the relevant Third Party contracts to SGI to the
extent permitted by their terms. GSK agrees to expend Commercially Reasonable
Efforts to make any such Third Party manufacturing contracts wholly or
partially assignable to SGI. In the event that such an assignment cannot be
made, GSK shall cooperate with SGI, for a maximum period of twelve (12) months,
to have such Third Party manufacturer(s) continue to manufacture the
Reverted Products for which SGI shall reimburse GSK at GSK’s cost plus [***],
and SGI shall (1) accelerate the search for an alternative commercial
manufacturing source for SGI, or (2) expend Commercially Reasonable
Efforts to enter into contract for such manufacture with such Third Party
manufacturer(s).

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

41

 

L.              Technical Assistance. Promptly
after the effective date of any Product Expiration, Expiration in Entirety or
termination of this Agreement, GSK shall provide reasonable cooperation,
including technical assistance, to SGI in addition to all documentation
reasonably necessary for a smooth transition of all GSK Product IP, GSK
Inventions, Regulatory Filings and other information related to the Reverted
Products and necessary for SGI to commence or continue to commercially
manufacture Reverted Products. Without limiting the foregoing, GSK shall
reasonably assist SGI, at SGI’s sole cost and expense, with the orderly
transition and uninterrupted manufacture, import and sale of Reverted Products.

 

M.         No Further Representations. GSK and its
Affiliates shall and GSK shall cause its Sublicensees to discontinue making any
representation regarding its status as a licensee of or distributor for SGI in
the Reverted Territory, for all Reverted Products. GSK and its Affiliates shall
and GSK shall cause its Sublicensees to cease conducting any activities with
respect to the marketing, promotion, sale or distribution of the Reverted
Products in the Reverted Territory.

 

N.            Trademarks. If GSK used,
with regard to any Reverted Product in a country in the Reverted Territory, any
trademark, tradename or logo solely with a Product (“Product Trademark”),
GSK shall assign its rights in such Product Trademark to SGI. Effective upon
the date of such assignment, maintenance of the Product Trademark will be at
SGI’s sole discretion and expense. For clarity, SGI will under no circumstance
receive any rights under other GSK trademarks, tradenames or logos or GSK
Housemark, except with respect to selling off of existing inventory in Reverted
Territory solely at GSK’s reasonable discretion.

 

(f)                          Survival. Upon
expiration or termination of this Agreement for any reason, the following will
survive such expiration or termination, subject to any later termination dates
provided for therein: Sections 1, 2(d), 4(e), 6(k), 9(e), 10(b), 10(c), 10(d),
10(f), 10(g), 11, 14, 15, 16, 17 and this Section 9(f).

 

10.                                             INTELLECTUAL
PROPERTY.

 

(a)                        Filing and Prosecution Prior
to Option Exercise. Prior to exercise by GSK of the GSK Option, SGI
shall be responsible, at its sole cost and expense, for filing, prosecuting,
maintaining, defending and enforcing all SGI Patents, provided however, after
confirmation by the JRC or GSK, as applicable, that a Compound has met
Candidate Selection Criteria, SGI shall coordinate the filing, prosecuting,
maintaining, defending and enforcing all SGI Patents with the JPC, further
provided that SGI retains final decision-making authority over the foregoing
matters until such time as GSK exercises the GSK Option. Upon exercise of the
GSK Option, Section 10(b) applies.

 

(b)                       Filing and Prosecution After
Option Exercise. Upon exercise of the GSK Option, GSK would
thereafter be responsible, at its sole cost and expense, for filing,
prosecuting, maintaining, defending and enforcing all SGI Patents that claim, generically or specifically, the (i) composition of
matter of a Licensed Compound(s) and/or Product(s) comprising
Licensed Compounds or (ii) method of use of Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds. GSK shall keep SGI reasonably
and currently informed as to the status of the prosecution of such SGI Patents
and of all steps to be taken in the prosecution of such SGI Patents and shall
furnish SGI with copies of amendments thereto and other related correspondence
to and from patent offices and permit SGI to offer its comments thereon 

 

42

 

before a submission to a patent office is made where there is material
effect on the scope of the patent coverage that may result is in issue. GSK
shall not allow any of such SGI Patents to be abandoned without notifying SGI
in writing at least sixty (60) days prior to the date on which the next action
or filing is due to be taken with respect thereto, and shall give SGI a
reasonable opportunity to assume responsibility for prosecuting and maintaining
such SGI Patents at its expense.

 

(c)                        Filing and Prosecution of
Joint Patents. GSK will be responsible, at its sole cost and
expense, for filing, prosecuting, maintaining, defending and enforcing all
Joint Patents. GSK shall keep SGI reasonably informed as to the status of the
prosecution of such Joint Patents. GSK shall not allow any of the Joint Patents
to be abandoned without notifying SGI in writing at least sixty (60) days prior
to the date on which the next action or filing is due to be taken with respect
thereto, and shall give SGI a reasonable opportunity to assume responsibility
for prosecuting and maintaining such Joint Patents at its expense.

 

(d)                       Infringement Claims. If
infringement of a Patent or other right by Licensed Compounds and Products
comprising Licensed Compounds included under the License is asserted by a Third
Party after exercise of the GSK Option, GSK will have the exclusive right to
defend and control the defense thereof, using counsel of its choosing, at its
expense. GSK shall keep SGI reasonably informed of developments in such
defense, including contemplation of settlement. If infringement by
a Third Party of an SGI Patent or a Joint Patent that claims the Licensed
Compounds or Products comprising Licensed Compounds included under the License
is discovered by SGI or GSK after exercise of the GSK Option, GSK will have the
exclusive right to defend and control the defense thereof, using counsel of its
choosing, at its expense. GSK shall keep SGI reasonably informed of
developments in such defense, including contemplation of settlement. GSK and
SGI will cooperate on a mutually written agreement to determine apportionment
of labor, costs and settlement/judgment monies. The Parties shall reasonably
assist one another and cooperate in any litigation at the other Party’s request
without expense to the requesting Party. The foregoing notwithstanding, in the
event GSK determines not to assert a Paragraph IV Litigation, such decision
will be final and SGI shall not seek to assert such Paragraph IV Litigation on
its own.

 

(e)                        Regulatory Data Protection. To the extent
required by law or permitted by law, each Party will use Commercially
Reasonable Efforts to promptly, accurately and completely list, with the
applicable Regulatory Authorities during the term of this Agreement, all
applicable Patents for any Product that such Party intends to, or has begun to
commercialize, and that have become the subject of a marketing application
submitted to FDA, such listings to include all so called “Orange Book” listings
required under the Hatch-Waxman Act and all so called “Patent Register”
listings as required in Canada. Prior to such listings, the Parties will meet
to evaluate and identify all applicable Patents. Notwithstanding the preceding
sentence, the Party holding the NDA for the applicable Product will retain
final decision making authority as to the listing of all applicable Patents for
such Product, regardless of which Party owns such Patent.

 

(f)                          Law. Inventorship
and rights of ownership of patentable subject matter first conceived or first
reduced to practice pursuant to this Agreement will be determined in accordance
with U.S. patent law. Rights of ownership of non-patentable subject matter will
be determined in accordance with the laws of the jurisdiction in which such
subject matter is developed.

 

(g)                       Ownership. Ownership of
all Inventions and other Intellectual Property Rights made in connection the
activities carried out pursuant to this Agreement will be as follows:

 

43

 

i.                            Inventions and Intellectual
Property Rights made solely by SGI or its Affiliates’ employees or its agents,
without inventive contribution by GSK or its Affiliates’ employees or its
agents as determined in accordance with Section 10(f)will be solely owned
by SGI (“SGI Inventions”); and

 

ii.                         Inventions and Intellectual
Property Rights made solely by GSK or its Affiliates’ employees or its agents,
without inventive contribution by SGI or its Affiliates’ employees or its
agents as determined in accordance with Section 10(f) will be solely
owned by GSK (“GSK Inventions”); and

 

iii.                      Inventions and Intellectual
Property Rights made jointly by employees or the agents of GSK or its
Affiliates’ and SGI or its Affiliates’, as determined in accordance with Section 10(f),
will be jointly owned by SGI and GSK, with each Party having an undivided
ownership interest therein (“Joint Inventions”).

 

11.                                             CONFIDENTIALITY

 

(a)                        Treatment of Confidential
Information. Except as otherwise provided in this Section 11,
GSK and its Affiliates shall retain in confidence and use only for purposes
hereof any information, data, and materials supplied by SGI or on behalf of SGI
to GSK and its Affiliates hereunder, and SGI shall retain in confidence and use
only for purposes hereof any information, data, and materials supplied by GSK
or on behalf of GSK to SGI hereunder.

 

(b)                       Permitted Disclosures. To the extent
it is reasonably necessary or appropriate to fulfill its obligations or exercise
its rights hereunder or any rights which survive termination or expiration
hereof, GSK and SGI may disclose Confidential Information of the other Party to
their respective Affiliates, Sublicensees, consultants, outside contractors,
clinical investigators or other Third Parties provided that such entities or
persons agree in writing (i) to keep such Confidential Information
confidential to the same extent as GSK and SGI are required to keep such
Confidential Information confidential, and (ii) to use such Confidential
Information only for such purposes as GSK and SGI are entitled to use such
Confidential Information. Each Party or its Affiliates or Sublicensees may
disclose such Confidential Information to government or other regulatory
authorities to the extent that such disclosure (A) is reasonably necessary
to obtain patents or authorizations to conduct clinical trials with or to
market commercially the Products, provided such Party is otherwise entitled to
engage in such activities hereunder; or (B) is otherwise required by
applicable law or regulation; provided that if a Party is required to make such
a disclosure under Section 11(b)ii.B, it shall first have given prompt
notice to the other Party hereto to enable it to seek any available exemptions
from or limitations on such a disclosure or to apply for confidential treatment
or a protective order and take reasonable efforts to limit such disclosures to
the minimum extent possible.

 

(c)                        CLIMB. At no time,
during the term of this Agreement or otherwise, will SGI be required to
disclose information related to CLIMB other than information that is generated
as a direct result of the application CLIMB; such information in this context
is strictly limited to Compounds, Candidate Selection Compounds, Lead Compounds,
Back-Up Compounds and Follow-On Compounds.

 

(d)                       Terms of the Agreement. Each of the
Parties agrees not to disclose the terms of this Agreement to any Third Party
other than Affiliates or Sublicensees without the prior express written consent
of the other Party, which consent shall not be unreasonably withheld or
delayed, except (i) to advisors, legal counsel, existing and potential
investors and others on a need-to-know basis under conditions which reasonably
ensure the confidentiality thereof, (ii) 

 

44

 

as required by any court or other governmental body or as otherwise
required by law in accordance with Section 11(b) above; (iii) in
confidence, in connection with the enforcement of this Agreement or rights
under this Agreement; (iv) in confidence, in connection with a merger,
acquisition of stock or assets, proposed merger or acquisition, or the like; (v) as
advisable or required in connection with any government or regulatory filings,
including without limitation filings with the SEC, provided that the filing
Party consults in good faith with the Party whose Confidential Information is
to be disclosed with respect to the specific disclosure and seeks confidential
treatment to the extent reasonably practical; and (vi) as required to be
disclosed in such Party’s financial statements as reasonably required or
recommended by such Party’s independent auditor.

 

(e)                        Publicity. The Parties
may release a joint press release promptly after the Effective Date. Except as
may be required by law, stock exchange or regulatory authority, neither Party
nor any of their respective Affiliates, shall originate any publicity, news
release or other public announcement, written or oral, relating to the
confidential terms or conditions contained herein without the prior express
written approval of the other Party, and agreement upon the nature and text of
such announcement or disclosure, which approval shall not be unreasonably
withheld. Each of the Parties understands that the other Party may be required
under applicable law to timely announce of the progression of a Product through
clinical development for regulatory or other purposes, e.g., a US Securities
and Exchange Commission 8K filing for a material event. A Party desiring to
make any such public announcement or other disclosure shall seek confidential
treatment to the extent reasonably practical and shall inform the other Party
of the proposed announcement or disclosure in reasonably sufficient time prior
to public release or disclosure, and shall provide the other Party with a
written copy thereof, in order to allow such other Party to comment upon such
announcement or disclosure or request confidential treatment thereof. Unless
disclosure is required by law in a shorter period of time, the Party receiving
the proposed release will have at least five (5) days to review any such
release.

 

(f)                          Publication. Reasonably in
advance of any oral or written presentation, or written submission for
publication (each a “Publication”) that will disclose any Invention
relating to a Licensed Compound or a Product for which a patent application has
not been filed in the US, Japan, with the European Patent Office or pursuant to
the Patent Cooperation Treaty, the Party wishing to make such a Publication
shall notify the other Party. In such event, the JPC will convene and discuss
filing patent applications claiming such Invention. During the term hereof,
neither Party shall make any Publication of any data or information produced as
a result of the activities carried out pursuant to this Agreement or otherwise
relating to Products without the other Party’s prior express written consent.
Any such Publication shall include an acknowledgment of the contributions of
each Party, consistent with customary scientific process.

 

(g)                       Clinical Trial
Register. GSK will have the right to publish clinical trial
protocols and summaries of results of all clinical trials conducted by either
Party with respect to a Product after the Effective Date of this Agreement on
GSK’s clinical trial register.

 

12.                                             ETHICAL
CONDUCT

 

(a)                        Policies. SGI agrees to
observe the principles of key GSK policies relating to research and 

 

45

 

development to its conduct of the Project, to the extent of its
understanding of such principles and policies as summarized in the document
entitled “[***],” provided to SGI by GSK.

 

(b)                       Observation. SGI agrees
that GSK may observe SGI’s research and development activities related solely
to its conduct of the Project for the purposes of determining that SGI is
making a reasonable effort to observe the principles and polices described in Section 12(a),
upon thirty (30) days advance written notice, during normal business hours, at
GSK’s sole cost and expense, at such SGI facilities where such activities are
being conducted.

 

13.                                             INTENTIONALLY
LEFT BLANK

 

14.                                             INDEMNIFICATION

 

(a)                        By SGI. SGI hereby
agrees to defend, indemnify and hold harmless GSK and its Affiliates and their
respective directors, officers, employees and agents (each a “GSK Indemnitee”)
from and against any liabilities, losses, fines, penalties, damages, expenses
(including reasonable attorney’s fees and expenses incurred in connection with
the enforcement of this provision), to the extent based upon a Third Party
Claim brought after the Effective Date of this Agreement against GSK
Indemnitees, including but not limited to, any actions in contract (including
breach of warranty) or tort (including negligence, strict liability or
commercial torts) alleging:

 

i.                            any breach of any of the
representations and warranties of SGI contained in Section 15(a) hereof;

 

ii.                         the gross negligence,
recklessness or willful misconduct of SGI, its Affiliates or agents; or

 

iii.                      any development or
commercialization by SGI or its Affiliates or agents of any Reverted Products,
including without limitation, any manufacture, storage, use, importation, sale,
marketing, promotion or distribution of any Reverted Products.

 

Items (i) through (iii) are hereinafter
collectively referred to as a “GSK Loss.” SGI will have no obligation to
indemnify GSK Indemnitees, to the extent that any GSK Loss is due to the
negligence, recklessness, willful misconduct or otherwise caused by any GSK
Indemnitee.

 

(b)                       By GSK. GSK hereby
agrees to defend, indemnify and hold harmless SGI, and their respective
directors, officers, employees and agents (each an “SGI Indemnitee”)
from and against any liabilities, losses, fines, penalties, damages, expenses
(including reasonable attorney’s fees and expenses incurred in connection with
the enforcement of this provision), to the extent based upon a Third Party
Claim brought after the Effective Date of this Agreement against SGI
Indemnitees, including but not limited to, any actions in contract (including breach
of warranty) or tort (including negligence, product liability, strict liability
or commercial torts) alleging:

 

i.                            any breach of any of the
representations and warranties of GSK contained in Section 15(b) hereof;

 

ii.                         the gross negligence,
recklessness or willful misconduct of GSK or its Affiliates or agents; 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

46

 

or

 

iii.                      any development or
commercialization of any Product by GSK or its Affiliates, or agents, including
without limitation, any manufacture, storage, use, importation, sale,
marketing, promotion or distribution of any Product.

 

Items (i) through (iii) are hereinafter
collectively referred to as a “SGI Loss.” GSK will have no obligation to
indemnify SGI Indemnitees, to the extent that any SGI Loss is due to the
negligence, recklessness, willful misconduct or otherwise caused by any SGI
Indemnitee.

 

(c)                        Indemnification With Respect
to Third Party Claims; Procedures.

 

i.                            To be eligible to seek
indemnification under this Section 14 in respect to a Third Party Claim, a
GSK Indemnitee or an SGI Indemnitee (each, an “Indemnitee”) shall
promptly give written notice thereof to the Party from whom indemnification is
sought (“Indemnitor”) within a reasonable period of time after the
assertion of such Third Party Claim by such Third Party; provided, however,
that the failure to provide written notice of such Third Party Claim within a
reasonable period of time will not relieve the Indemnitor of any of its
obligations hereunder, except to the extent that the Indemnitor is prejudiced
by such failure.

 

ii.                         The Indemnitor will have the
right to assume the complete control of the defense, compromise or settlement
of any Third Party Claim (provided that no settlement of any Third Party Claim
will include any admission of wrongdoing on the part of an Indemnitee or the
invalidity, unenforceability or absence of infringement of any patent owned in
whole or part by the Indemnitee, and shall not grant any right inconsistent
with the terms of this Agreement, without the prior express written consent of
such Indemnitee, which consent shall not be unreasonably withheld), including,
at its own expense, employment of legal counsel reasonably acceptable to the
Indemnitee. At any time thereafter the Indemnitor will be entitled to exercise,
on behalf of the Indemnitee, any rights which may mitigate the extent or amount
of such Third Party Claim; provided, however, that if the Indemnitor will have
exercised its right to assume control of such Third Party Claim, the Indemnitee
(A) may, in its sole discretion and at its own expense (which expense will
not be subject to indemnification hereunder), employ legal counsel to represent
it (in addition to the legal counsel employed by the Indemnitor) in any such
matter, and in such event legal counsel selected by the Indemnitee shall be required
to confer and cooperate with such counsel of the Indemnitor in such defense,
compromise or settlement for the purpose of informing and sharing information
with the Indemnitor; (B) shall, at its own expense, make available to
Indemnitor those employees, officers and directors or Indemnitee whose
assistance, testimony or presence is necessary or appropriate to assist the
Indemnitor in evaluating and in defending any such Third Party Claim (provided,
however, that any such access shall be conducted in such a manner as not to
interfere unreasonably with the operations of the businesses of Indemnitee);
and (C) shall otherwise fully cooperate with the Indemnitor and its legal
counsel in the investigation and defense of such Third Party Claim.

 

iii.                      The Parties shall cooperate
with each other in connection with any such claim, suit or proceeding and shall
keep each other reasonably informed of all material developments in connection
with any such claim, suit or proceeding.

 

(d)                       Reservation. If the
Parties acting in good faith cannot agree as to the applicability of Section 14
(a) and/or 14 (b) to a particular Third Party Claim, then each Party
(and its respective 

 

47

 

Indemnitees) reserves the right to conduct its own defense of such
Third Party Claim and seek indemnification from the applicable Party upon its
resolution.

 

(e)                        Insurance.

 

i.                            SGI Insurance
Obligations. SGI shall
maintain, at its cost, with effect from prior to the date of first
administration of any Compound (including all Products and any product
based thereon) for testing in humans
hereunder and during the term of this Agreement, adequate insurance against
liability and other risks associated with its activities contemplated by this
Agreement, including its clinical trials and its indemnification obligations
herein, in such amounts and on such terms as are customary for prudent
practices in the biotechnology industry for the activities to be conducted by
it under this Agreement. SGI shall
furnish to GSK evidence of such insurance, upon request. SGI shall maintain in force from prior to the
date of first testing in humans and thereafter during the term of this
Agreement, at its cost, a general liability insurance policy providing coverage
in such amounts and on such terms as are customary for prudent practices for
drug development companies for activities similar to those that will be
conducted by it under this Agreement. SGI shall furnish to GSK evidence of such
insurance, upon request.

 

ii.                         GSK Insurance Obligations. GSK
hereby represents and warrants to SGI that it is self-insured against liability
and other risks associated with its activities and obligations under this
Agreement in such amounts and on such terms as are customary for prudent practices
for large pharmaceutical companies in the pharmaceutical industry for the
activities to be conducted by it under this Agreement. GSK shall furnish to SGI evidence of such self-insurance, upon request.

 

15.                                             REPRESENTATIONS

 

(a)                        Of SGI. SGI hereby
represents and warrants to GSK as of the Effective Date that:

 

i.                            SGI is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of SGI.
This Agreement has been duly executed and delivered by SGI and constitutes the
valid, binding and enforceable obligation of SGI, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors’ rights generally from time to time in effect.

 

ii.                         SGI is not subject to, or
bound by, any provision of:

 

A.           any articles or certificates
of incorporation or by-laws;

 

B.             any mortgage, deed of trust,
lease, note, shareholders’ agreement, bond, indenture, license, permit, trust,
custodianship, or other instrument, agreement or restriction; or

 

C.             any judgment, order, writ,
injunction or decree or any court, governmental body, administrative agency or
arbitrator;

 

in each case, that will prevent, or be violated by,
or under which there will be a default as a result of, nor is the consent of
any Third Party required for, the execution, delivery 

 

48

 

and performance by SGI of this Agreement and the
obligations contained herein, including without limitation, the grant to GSK of
the License described in Section 4 hereof.

 

iii.                      SGI will obtain all of the
applicable government authorizations, consents, approvals, licenses, filings or
registrations required for it to perform its obligations hereunder;

 

iv.                     SGI has the right to grant
all rights and licenses it purports to grant to GSK with respect to SGI IP
under this Agreement;

 

v.                        SGI has received no notice (A) that
any of the Patents in the SGI Patents are invalid or unenforceable; or (B) of
any settled, pending or threatened claim or lawsuit or legal proceeding of a
Third Party against SGI alleging that SGI Patents infringes or misappropriates
in part or in whole the intellectual property or intellectual property rights
of such Third Party;

 

vi.                     SGI has not granted as of the
Effective Date any right or license to any Third Party relating to any of the
SGI Patents or SGI Know-How that would materially conflict with any of the
rights or licenses granted to GSK hereunder; and

 

vii.                  SGI has not willfully withheld from GSK any material
data or information (exclusive of chemical structures) with respect to any or
all of the Compounds that SGI is actively developing for the Project as of the
Effective Date.

 

(b)                       Of GSK. GSK hereby
represents and warrants to SGI as of the Effective Date that:

 

i.                            GSK is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with the corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of GSK. This Agreement has been duly executed and delivered by GSK
and constitutes the valid, binding and enforceable obligation of each of them,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors’ rights generally from time to time in effect.

 

ii.                         GSK is not subject to, or
bound by, any provision of:

 

A.           any articles or
certificates of incorporation or by-laws;

 

B.             any mortgage,
deed of trust, lease, note, shareholders’ agreement, bond, indenture, license,
permit, trust, custodianship, or other instrument, agreement or restriction, or

 

C.             any judgment,
order, writ, injunction or decree or any court, governmental body,
administrative agency or arbitrator,

 

in
each case, that will prevent, or be violated by, or under which there will be a
default as a result of, nor is the consent of any Third Party required for, the
execution, delivery and performance by GSK of this Agreement and the
obligations contained herein.

 

(c)                        Mutual Covenants. Each Party
hereby covenants to the other Party that:

 

i.                            All employees
of such Party and its Affiliates and Sublicensees will be under the obligation
to assign all right, title and interest in and to their Inventions and
discoveries, whether or not patentable, if any, to such Party as the sole owner
thereof;

 

49

 

ii.                         In each case to
the best of each Party’s knowledge as of the Effective Date, it has not
knowingly employed and in the future shall not knowingly employ any individual
or entity debarred by the FDA (or subject to a similar sanction of EMEA), or
any individual who or entity which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of EMEA), in the conduct of
the activities or clinical contemplated hereunder. Further, to the best of each
Party’s knowledge as of the Effective Date, it has not knowingly retained or
used a contractor or consultant that has been debarred by the FDA (or subject
to a similar sanction of EMEA), or which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of EMEA), in the conduct of
the activities contemplated hereunder;

 

iii.                      Each Party
shall (A) to the extent required by applicable law, perform its activities
pursuant to this Agreement in compliance with GLP, GCP and cGMP, in each case
as applicable under the laws and/or regulations of the country and/or state
and/or local government wherein the applicable activities are conducted; and (B) with
respect to the care, handling and use in research and development activities
hereunder of any non-human animals by or on behalf of such Party, at all times
comply (and shall make reasonable efforts to ensure compliance by any of its
subcontractors) with all applicable federal, state and local laws, regulations
and ordinances, and also with the most current best practices for
comparable-sized pharmaceutical companies for the proper care, handling and use
of animals in pharmaceutical research and development activities, and with the “3R
Principles” (reducing the number of animals used, replacing animals with
non-animal methods whenever possible and refining the research techniques
used);

 

iv.                     Neither Party shall, during
the term of this Agreement, grant any right or license to any Third Party
relating to any of the Intellectual Property Rights it Controls which would conflict
with any of the rights or licenses granted to the other Party hereunder; and

 

v.                        Each Party shall notify the
other Party in writing promptly in the event that it has actual knowledge of
the material breach of any covenant under this Section 15(c) or the
material breach of any representation or warranty provided by SGI under Section 15(a) or
by GSK under Section 15(b).

 

(d)                       Disclaimer of Warranties. SGI AND GSK
EACH SPECIFICALLY DISCLAIMS THAT THE PROJECT WILL BE SUCCESSFUL IN WHOLE OR
PART. EXCEPT AS SET FORTH EXPRESSLY IN THIS SECTION 15(d), EACH PARTY
HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES AND CONDITIONS OF ANY KIND,
EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND/OR
NON-INFRINGEMENT OF THE INTELLECTUAL RIGHTS OF THIRD PARTIES. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, BOTH PARTIES ACKNOWLEDGE AND DISCLAIM ANY
WARRANTY AS TO: (I) THE SUCCESS OF ANY DEVELOPMENT ACTIVITY OR CLINICAL
TRIAL, STUDY OR TEST COMMENCED UNDER THIS AGREEMENT; OR (II) REGULATORY
APPROVAL, PRODUCT INTRODUCTION, SAFETY, USEFULNESS OR COMMERCIAL SUCCESS OF ANY
PRODUCT.

 

16.                                             GOVERNING
LAW; DISPUTE RESOLUTION

 

(a)                        Governing Law; Jurisdiction;
Venue.

 

i.                            This Agreement and any
dispute arising from the performance or breach hereof, and any dispute
resolution conducted thereby, will be governed by and construed in accordance
with the laws of the State of Delaware, excluding its rules governing 

 

50

 

conflicts of laws.

 

ii.                         Except as set forth in Section 16(b) below,
each Party hereby irrevocably submits to the exclusive jurisdiction of (i) the
courts of the State of Delaware (each a “State Court”) and (ii) the
United States Court for Delaware (the “District Court”), for the
purposes of any action, suit or proceeding arising out of this Agreement or out
of any transaction contemplated hereby. Each Party agrees to commence any
action, suit or proceeding either in the District Court of if such action, suit
or proceeding may not be brought in such court for jurisdictional reasons, in a
State Court. Each Party further agrees that service of any process, summons,
notice or document by personal delivery, by registered mail, or by a recognized
international express delivery service to such Party’s respective address set
forth below will be effective service of process for any such action, suit or
proceeding in the District Court or State Court with respect to any matters to
which it has submitted to jurisdiction in this Section. Each Party irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the District Court or State Court, hereby and thereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum, hereby and thereby further
irrevocably and unconditionally waives its right to a jury trial.

 

(b)                       Dispute Resolution.

 

i.                            Initial Efforts. The Parties
recognize that disputes as to certain matters may from time to time arise
during the term hereof which relate to either Party’s rights and/or obligations
hereunder. Unless otherwise set forth
in this Agreement, including without limitation, disputes arising within the
JRC under Section 3, in the event of a dispute arising under this
Agreement between the Parties, either Party shall have a right to refer such
dispute to the respective Executive Officers, and such Executive Officers shall
attempt in good faith to resolve such dispute (subject always to the Parties’
final decision-making authorities pursuant to Section 3(a)iv). If the
Parties are unable to resolve a given dispute pursuant to this Section 16(b)i within thirty (30) days of referring such dispute to
the Executive Officers, then the dispute shall be settled by an outside expert
pursuant to Section 16(b)ii if such disputes arises within the JRC. All other disputes shall be
submitted to arbitration pursuant to Section 16(b)iii.

 

ii.                         Outside Experts’
Dispute Resolution. For purposes of dispute resolution under this Section 16(b)ii, “outside experts”
means at least one (1) but no more than three (3) independent,
neutral Third Parties, acceptable to each of GSK and SGI, that are, as required
by the matter in dispute, either a clinician or scientist with relevant
pharmaceutical industry experience. The use of outside experts will be solely
to resolve disputes arising under Sections 2 and 3, and not under any other Section of
this Agreement. The Parties shall enter into contract with the outside experts
on a case-by-case basis, and each Party shall bear one-half of such outside
experts’ costs and expenses. Outside Experts dispute resolution shall be
conducted in accordance with Section 16(b)iii.B(1-3) and the Rules (as defined below). Each Party shall prepare a
written report setting forth its position or proposal with respect to the
matter in dispute, and shall submit such report to the outside experts within
ten (10) days of the failure of the Executive Officers to resolve such
disputed matter. The outside expert(s)

 

51

 

will select one (1) of the requested positions as its decision,
and will not have the authority to render any substantive decision other than
to so select the position of either Party. The final decision of the outside
expert(s) with respect to the matter in dispute will be limited to a
finding fully in favor of one Party’s position, and no compromise or split
decisions will be allowed. For purposes of clarity, there will be no witnesses,
evidence, presentations, or other activities other than the written submission
of the Parties’ positions and proposals to the outside expert(s). The outside
expert(s) shall be required to submit a written report of their analysis
and recommendation regarding the disputed matter no more than thirty (30) days
after the Parties’ submissions. The decision of such outside expert shall be
binding on each of the Parties.

 

iii.                      Arbitration. Any
controversy or dispute that pursuant to the express terms of this Agreement is
subject to arbitration (“Arbitratable Dispute”) that the Parties are
unable to resolve pursuant to Section 16(b)i, shall be submitted to
binding arbitration. Despite the foregoing, Arbitratable Dispute will not
include controversies or disputes relating to validity or enforceability of
patents, ownership of intellectual property, scope of license grants, and
patent claim interpretation.

 

A.           The arbitration will be conducted in New York, New
York, U.S.A. except as may otherwise be agreed by the Parties, in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (“Rules”). Each Arbitratable Dispute shall be
submitted to a single neutral arbitrator appointed in accordance with the Rules within
fifteen (15) days after the commencement of the arbitration period. Each Party
must bear its own attorneys’ fees, witness’ fees and associated costs and
expenses. Other than attorneys’ fees and expenses, the costs of arbitration
shall be borne equally by the Parties. Any judgment or decision rendered by the
arbitrator will be binding upon the Parties and will be enforceable by any
court of competent jurisdiction. Any arbitration hereunder will commence within
thirty (30) days after appointment of the arbitrator. The arbitrator will make
final determinations as to any discovery disputes and all other procedural
matters in accordance with the Rules. If any Party fails to comply with the
procedures in any arbitration in a manner deemed material by the arbitrator,
then the arbitrator will fix a reasonable time for compliance, and if the Party
does not comply within such period, then a remedy deemed just by the
arbitrator, including an award of default, may be imposed. The decision of the
arbitrator shall be rendered no later than one hundred and eighty (180) days
after commencement of the arbitration period.

 

B.             Arbitratable Disputes will be decided in accordance
with the foregoing provisions of this Section 16(b)iii and the following:

 

1.               Each Party to
the arbitration shall prepare a written report setting forth its position or
proposal with respect to the Arbitratable Dispute, and shall submit such report
to the arbitrator within the later of (I) forty-five (45) days following a
request by either Party for such arbitration, or (II) ten (10) days
after selection of the arbitrator.

 

2.               The arbitrator
will limit discovery as reasonably practicable to complete the arbitration in
the foregoing time frames.

 

3.               The arbitrator
shall select one of the requested positions as its decision, and will not have
the authority to render any substantive decision other than to so 

 

52

 

select
the position of either Party. The final decision of the arbitrators under this Section 16(b)iii
with respect to the Arbitratable Dispute, will be limited to a finding fully in
favor of one Party’s position, and no compromise or split decisions will be
allowed.

 

(c)                        Injunctive
Relief. Notwithstanding any other provision of this Section 16, either
Party, at any time, may seek from a court of competent jurisdiction any interim
or provisional injunctive relief that may be necessary to protect the rights or
property of that Party.

 

17.                                             MISCELLANEOUS

 

(a)                        Non-Solicitation. Neither Party
may solicit, recruit, hire or retain as a consultant, directly, indirectly or
through a Third Party, any employees of the other during the term of this
Agreement or any extension thereof and for a period of twenty-four (24) months
thereafter, provided that any employee’s response to a Party’s general
advertisement in the newspaper, trade journal or on the internet will not be
deemed a breach of the provision by such Party.

 

(b)                       Force Majeure. Neither Party
will be held liable or responsible to the other Party nor be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling
or performing any term hereof, other than an obligation to make payments
hereunder, when such failure or delay is caused by or results from fire; flood;
earthquake; tornado; embargo; government regulation; prohibition or
intervention; war; act of war (whether war be declared or not); insurrection;
act of terrorism; riot; civil commotion; strike; act of God or any other cause
where failure to perform is beyond the reasonable control and not caused by the
negligence or misconduct of the affected Party (“Force Majeure Event”)
so long as the affected Party has used Commercially Reasonable Efforts to
avoid, mitigate and/or overcome the effects of the Force Majeure Event.

 

(c)                        Severability. Both Parties
hereby expressly acknowledge and agree that it is the intention of neither
Party to violate any public policy, statutory or common law, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries and
specifically agree that if any word, sentence, paragraph, clause or combination
thereof herein is found by a court or executive body with judicial powers
having jurisdiction over this Agreement or any of the Parties in a final
unappealed order, to be in violation of any such provisions in any country or
community or association of countries, then in such event such words,
sentences, paragraphs, clauses or combination will be inoperative in such
country or community or association of countries (or reformed, for example but
without limitation, to apply for a shorter period of time, such that their
effect is in compliance with law) and the remainder hereof will remain binding
upon the Parties.

 

(d)                       Notices. Any notice
required or permitted to be given hereunder shall be in writing and will be
deemed to have been properly given if delivered by an internationally
recognized overnight delivery service, delivery confirmation requested (e.g.,
FedEx) to the addresses given below for each Party or such other addresses as
may be designated in writing by the Parties from time to time during the term
hereof. Any such notice will be deemed received on the first business day after
posted with the courier.

 

If to SGI, addressed to:                                                      SuperGen, Inc.

4140 Dublin Blvd., Suite 200

Dublin, CA 94568

Attn: Legal Dept.

Facsimile: (925) 551-6483

 

53

 

If to GSK, addressed to:                                                 SmithKline
Beecham Corporation, d/b/a GlaxoSmithKline

One Franklin Plaza

Philadelphia, PA 19101

Attn: Senior Vice President,
Worldwide Business Development

Facsimile: (610) 270-5166

 

with a copy to:                                                                                   SmithKline
Beecham Corporation d/b/a GlaxoSmithKline

2301 Renaissance Boulevard

King of Prussia, PA
19406-2772

Vice President and Associate
General Counsel, R&D Legal Operations

Facsimile: (610) 787-7084

 

(e)                        Assignment. This
Agreement may not be assigned or otherwise transferred, in whole or in part, by
either Party without the written consent of the other Party, which consent
shall not be unreasonably withheld; provided, however, that either Party may,
without such consent, assign this Agreement (i) to a Successor in
connection with a Change of Control Transaction or the transfer or sale of all
or substantially all of its business to which this Agreement pertains; and/or (ii) to
an Affiliate. Any purported assignment in violation of the preceding sentence
will be null and void. Except as otherwise expressly provided herein, any
permitted assignee shall assume all obligations of its assignor hereunder.
Subject to the foregoing, this Agreement will be binding on and inure to the
benefit of the Parties and their respective successors and permitted assignees.

 

(f)                          Performance by
Affiliates. Each of SGI and GSK acknowledge that their
obligations and rights hereunder may be performed and exercised by Affiliates
of SGI and GSK, respectively. Obligations of the Party for which one of its
Affiliates is performing hereunder will be deemed to extend to such performing
Affiliate. Each of SGI and GSK guarantee performance hereof by its Affiliates.
Wherever herein the Parties delegate responsibility to Affiliates or local
operating entities, the Parties agree that such entities shall not make
decisions inconsistent with this Agreement, amend the terms hereof or act
contrary to its terms in any way. If a Party’s Affiliate breaches any aspect
hereof in the performance of any activity which has been delegated to such
Affiliate, then the other Party will be entitled to proceed against the Party
whose Affiliate so breached, and will not first be required to proceed against
the Affiliate that so breached.

 

(g)                       Waiver. The failure
or delay of a Party to enforce or to exercise, at any time for any period of
time, any provisions hereof or any right or remedy hereunder will not be
construed as a waiver of such provision or right or remedy or of the right of
such Party thereafter to enforce or exercise the same; provided that such right
or remedy is not time-barred or otherwise precluded by law or by a writing
expressly waiving such right or remedy and signed by that Party seeking to
assert such right or remedy. The written waiver by either Party of a breach of
any term or provision hereof by the other Party will not be construed as a
waiver of any subsequent breach.

 

(h)                       No Implied
Licenses. Except as expressly and specifically provided
hereunder, the Parties agree that neither Party is granted any implied rights
to or under any of the other Party’s current or future patents, trade secrets,
copyrights, moral rights, trade or service marks, trade dress, or any other
intellectual property rights.

 

(i)                           Independent
Contractors. The Parties agree that the relationship of SGI and
GSK established 

 

54

 

by this Agreement is that of independent
contractors. Furthermore, the Parties agree that this Agreement does not, is
not intended to, and will not be construed to, establish a partnership or joint
venture, and nor will this Agreement create or establish an employment, agency
or any other relationship. Neither Party will have any right, power or
authority, nor will they represent themselves as having any authority to
assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other Party, or otherwise act as an agent for the
other Party for any purpose.

 

(j)                           No Third Party
Beneficiaries. All rights, benefits and remedies hereunder are
solely intended for the benefit of SGI and GSK, and no Third Party, Affiliate
or Sublicensee will have any rights whatsoever to (i) enforce any
obligation contained herein; (ii) seek a benefit or remedy for any breach
hereof; or (iii) take any other action relating to this Agreement under
any legal theory, including but not limited to, actions in contract, tort
(including but not limited to negligence, gross negligence and strict
liability), or as a defense, setoff or counterclaim to any action or claim
brought or made by the Parties.

 

(k)                        Limitation of
Liability.

 

i.                            IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS OR
INTERRUPTION OF BUSINESS, OR FOR ANY OTHER INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGES. IN NO CASE WILL EITHER
PARTY BE LIABLE FOR ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY TO
ANY THIRD PARTY;

 

ii.                         IN NO EVENT SHALL SGI’S
LIABILITY FOR DIRECT DAMAGES BE GREATER THAN [***]; AND

 

iii.                      NOTHING IN THIS SECTION 17(k) IS
INTENDED TO LIMIT EITHER PARTY’S OBLIGATIONS UNDER SECTION 14 IN RELATION
TO AMOUNTS PAID TO A THIRD PARTY, BREACH OF SECTION 11, FRAUDULENT OR
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.

 

(l)                           Other
Obligations. Except as expressly provided herein or as
separately agreed upon in writing between SGI and GSK, each Party shall bear
its own costs incurred in connection with the implementation of the obligations
hereunder.

 

(m)                     Further
Assurances. At any time or from time-to-time on and after the
Effective Date, either Party shall at the request of the other Party (i) deliver
to the requesting Party such records, data or other documents consistent with
the provisions hereof, (ii) execute, and deliver or cause to be delivered,
all such consents, documents or further instruments of assignment, transfer or
license, and (iii) take or cause to be taken all such actions, as the
requesting Party may reasonably deem necessary or desirable in order for the
requesting Party to obtain the full benefits hereof and the transactions
contemplated hereby.

 

(n)                       Export Laws.
Notwithstanding anything to the contrary contained herein, all obligations of
SGI and GSK are subject to prior compliance with US export regulations and such
other US laws and regulations as may be applicable, and to obtaining all
necessary approvals required by the 

 

***              CONFIDENTIAL
TREATMENT REQUEST

Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

55

 

applicable agencies of the government of the
US or the European Union. SGI and GSK, respectively, shall each use its best
efforts to obtain such approvals for its own activities. Each Party shall
cooperate with the other Party and shall provide assistance to the other Party
as reasonably necessary to obtain any required approvals.

 

(o)                       Governmental
Matters.

 

i.                            Governmental
Filings. To the extent, if any, that a Party concludes in good faith that it
is required to file or register this Agreement or a notification thereof with
any governmental authority, including without limitation the US Securities and
Exchange Commission and the Competition Directorate of the Commission of the
European Communities, in accordance with applicable laws and regulations, such
Party may do so, and the other Party shall reasonably cooperate in such filing
or notification and shall execute all documents reasonable required in
connection therewith, at the expense of the requesting Party. The Parties shall
promptly notify each other as to the activities or inquires of any such
governmental authority relating to this Agreement, and shall cooperate, to
respond to any request for further information therefrom at the expense of the
requesting Party.

 

ii.                         License
Registrations. GSK may, at its expense, register the License
granted hereunder in any country of, or community or association of countries
in, the Territory. SGI shall reasonably cooperate in such registration at GSK’s
expense. Upon request by GSK, SGI agrees promptly to execute any “short form”
licenses developed in a form reasonably acceptable to both GSK and SGI and
reasonably submitted to it by GSK from time to time in order to affect the
foregoing registration in such country. No such “short form” license will be
deemed to amend or be used to interpret this Agreement. If there is any
conflict between such a license or other recordation document and this
Agreement, this Agreement will control.

 

(p)                       Headings. The Section and
paragraph headings contained herein are for ease of reference purposes only and
will not affect in any way the meaning or interpretation of any provision
contained herein.

 

(q)                       Counterparts. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original but all of which together will constitute one and the same
document. A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more of the Parties and delivered by such Party by facsimile
or any similar electronic transmission device pursuant to which the signature of
or on behalf of such Party can be seen. Such execution and delivery will be
considered valid, binding and effective for all purposes. At the request of a
Party, all Parties agree to execute and deliver an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.

 

(r)                          Amendment. The Parties
may amend, modify or alter any of the provisions hereof, but only by a written
instrument that explicitly refers to the provisions hereof which are being
amended and is duly executed by both Parties.

 

56

 

(s)                        Entire
Agreement. This Agreement together with the attached Exhibits
and any and all letter agreements relating to the Research Plan, PoC Criteria
and Candidate Selection Criteria, which are hereby incorporated herein by
reference and made a part of this Agreement, constitutes the entire agreement,
both written or oral, between the Parties with respect to the subject matter
hereof, and supersedes all prior or contemporaneous understandings or
agreements, whether written or oral, between GSK and SGI with respect to such
subject matter.

 

[SIGNATURES APPEAR ON THE
FOLLOWING PAGE]

 

57

 

The Parties have caused this Amended and Restated
Commercial Research and License Agreement to be executed by their duly
authorized representatives as of the Execution Date.

 

	
  GLAXOSMITHKLINE LLC

  	
  SUPERGEN, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ William J. Mosher

  	
   

  	
  By:

  	
  /s/ Michael Molkentin

  
	
  Name:

  	
  William J. Mosher

  	
   

  	
  Name:

  	
  Michael Molkentin

  
	
  Title:

  	
  Company Secretary

  	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

58

 

EXHIBIT SCHEDULE

 

	
  Exhibit A

  	
   

  	
  Common Stock Purchase Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Example of How Net Sales is Calculated

  

 

59

 

EXHIBIT A

COMMON STOCK PURCHASE AGREEMENT

 

See
attached

 

60

 

EXHIBIT B

 

EXAMPLE OF HOW 

COMBINATION NET SALES IS CALCULATED

 

Combination Product Calculation

 

	
   

  	
   

  	
   

  	
   

  	
  Cumulative

  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ratio A

  	
   

  	
  Weighted Ave

  	
   

  
	
  Market

  	
   

  	
  Net Sales

  	
   

  	
  of Total

  Sales

  	
   

  	
  % of 80%

  Basket

  	
   

  	
  List Price

  Product A*

  	
   

  	
  List Price

  Product B*

  	
   

  	
  Total Price

  A+B

  	
   

  	
  to Total

  A/(A+B)

  	
   

  	
  Ratio A

  to Basket

  	
   

  
	
  UNITED
  STATES (PH)

  	
   

  	
  98000

  	
   

  	
  45.6

  	
  %

  	
  57.0

  	
  %

  	
  206.05

  	
   

  	
  133.75

  	
   

  	
  339.80

  	
   

  	
  60.6

  	
  %

  	
  34.5

  	
  %

  
	
  FRANCE
  (PH)

  	
   

  	
  19000

  	
   

  	
  54.4

  	
  %

  	
  11.0

  	
  %

  	
  126.91

  	
   

  	
  94.06

  	
   

  	
  220.97

  	
   

  	
  57.4

  	
  %

  	
  6.3

  	
  %

  
	
  ITALY
  (PH)

  	
   

  	
  12000

  	
   

  	
  60.0

  	
  %

  	
  7.0

  	
  %

  	
  89.59

  	
   

  	
  81.75

  	
   

  	
  171.34

  	
   

  	
  52.3

  	
  %

  	
  3.6

  	
  %

  
	
  UNITED
  KINGDOM (PH)

  	
   

  	
  8000

  	
   

  	
  63.7

  	
  %

  	
  4.7

  	
  %

  	
  152.14

  	
   

  	
  110.98

  	
   

  	
  263.12

  	
   

  	
  57.8

  	
  %

  	
  2.7

  	
  %

  
	
  PORTUGAL
  (PH)

  	
   

  	
  7000

  	
   

  	
  67.0

  	
  %

  	
  4.1

  	
  %

  	
  133.62

  	
   

  	
  79.28

  	
   

  	
  212.90

  	
   

  	
  62.8

  	
  %

  	
  2.6

  	
  %

  
	
  SPAIN
  (PH)

  	
   

  	
  6500

  	
   

  	
  70.0

  	
  %

  	
  3.8

  	
  %

  	
  120.65

  	
   

  	
  78.12

  	
   

  	
  198.77

  	
   

  	
  60.7

  	
  %

  	
  2.3

  	
  %

  
	
  MEXICO
  (PH)

  	
   

  	
  6000

  	
   

  	
  72.8

  	
  %

  	
  3.5

  	
  %

  	
  108.89

  	
   

  	
  53.27

  	
   

  	
  162.16

  	
   

  	
  67.1

  	
  %

  	
  2.3

  	
  %

  
	
  RUSSIA
  (PH)

  	
   

  	
  4500

  	
   

  	
  74.9

  	
  %

  	
  2.6

  	
  %

  	
  122.40

  	
   

  	
  63.15

  	
   

  	
  185.55

  	
   

  	
  66.0

  	
  %

  	
  1.7

  	
  %

  
	
  BELGIUM
  (PH)

  	
   

  	
  3900

  	
   

  	
  76.7

  	
  %

  	
  2.3

  	
  %

  	
  139.79

  	
   

  	
  99.88

  	
   

  	
  239.67

  	
   

  	
  58.3

  	
  %

  	
  1.3

  	
  %

  
	
  TAIWAN
  (PH)

  	
   

  	
  3600

  	
   

  	
  78.4

  	
  %

  	
  2.1

  	
  %

  	
  102.90

  	
   

  	
  61.32

  	
   

  	
  164.22

  	
   

  	
  62.7

  	
  %

  	
  1.3

  	
  %

  
	
  GERMANY
  (PH)

  	
   

  	
  3500

  	
   

  	
  80.0

  	
  %

  	
  2.0

  	
  %

  	
  194.26

  	
   

  	
  161.40

  	
   

  	
  355.66

  	
   

  	
  54.6

  	
  %

  	
  1.1

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Sales of 80% basket

  	
   

  	
  172,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  59.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Combination Sales

  	
   

  	
  215,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

* Can be adjusted to take into account situations where
individual pack sizes differ from pack sizes used for combination

 

61

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]