Document:

Exhibit 10.54

 

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

Dated 22
September 2005

 

 

(1) UNIVERSITY COLLEGE LONDON

 

(2)  UCL BIOMEDICA PLC

 

(3) CIPHERGEN BIOSYSTEMS, INC

 

 

COLLABORATIVE RESEARCH
AGREEMENT

 

 

THIS
AGREEMENT dated 22 September 2005 is made BETWEEN:

 

(1)         UNIVERSITY
COLLEGE LONDON, whose administrative offices are at
Gower Street London, WC1E 6BT (“the University”); and

 

(2)        UCL
BIOMEDICA PLC, a company registered in England
under number 02776963 whose registered office is at c/o Finance Division,
University College London, Gower Street, London WC1E 6BT (“UCL Biomedica”); and

 

(3)        CIPHERGEN
BIOSYSTEMS, INC, a company registered in the United
States whose registered office is at 6611 Dumbarton Circle, Fremont, California
94555 (“the Sponsor”)

 

hereinafter each known as “Party” or
collectively as “the Parties”

 

WHEREAS,

 

(A)
Professor Ian Jacobs of the University (the “Principal
Investigator”) has research objectives that encompass the discovery,
validation, and characterization of novel Biomarkers related to ovarian cancer;

 

(B) The
Principal Investigator desires to further such research objectives by
collaborating with the Sponsor, a company that has developed a
number of technologies that are uniquely enabling in the investigation of
Biomarkers,  such technologies including,
without limitation, Surface Enhanced Laser Desorption/Ionization (“SELDI”), as
described in United States Patent Application 08/068,896 and all patents and
applications claiming priority thereto including, but not limited to, U.S.
Patent No. 5,719,060 and U.S. Patent No. 6,225,047;

 

(C) The Sponsor
is willing to engage in the Principal Investigator’s desired collaboration in
exchange for UCL Biomedica’s grant of an option to an exclusive licence on
terms as further set out in this Agreement with respect to use of discovered
Biomarkers in all areas, including without limitation, research, diagnostic,
therapeutic, theranostic and/or prophylactic areas throughout the world; and

 

(D) UCL
Biomedica was established for the purpose of protecting and commercially
exploiting the results arising from research undertaken by University
researchers in the University, or by University researchers in collaboration
with other academic institutions or commercial entities;

 

(E) It
is the intention of the University and UCL Biomedica that all Resulting
Intellectual Property generated in the course of the Project hereunder that are
(1) invented solely by the University shall be owned solely by the University
and assigned to UCL Biomedica and (2) jointly invented by the Sponsor
and the University, shall be assigned to UCL Biomedica for the purposes of
protection and commercial exploitation.

 

(F) In      light of the Sponsor’s
willingness to collaborate in the discovery, purification, identification
and/or validation of Biomarkers and the University’s and UCL Biomedica’s desire
to facilitate the use of the discovered, purified, identified and/or validated
Biomarkers in generally available health care products and services, UCL
Biomedica is willing to grant to the

 

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Sponsor an option to an
exclusive licence on the terms specified in Schedule 3 with respect to the
aforementioned Biomarkers throughout the world;

 

NOW, THEREFORE, in consideration of the foregoing
premises and of the faithful performance of the covenants herein contained, the
Parties agree as follows:

 

1.             DEFINITIONS

 

In this Agreement the following expressions have the
meaning set opposite:

 

	
  Academic Publication:

  	
   

  	
  the
  publication of an abstract, article or paper in a journal, or its
  presentation at a conference or seminar; and in clauses 6 and 7 “to Publish”
  and “Publication” are to be construed as references to Academic Publication;

  
	
   

  	
   

  	
   

  
	
  this Agreement:

  	
   

  	
  this
  document, including its Schedules, as amended from time to time in accordance
  with clause 11.9;

  
	
   

  	
   

  	
   

  
	
  a Business Day:

  	
   

  	
  Monday
  to Friday (inclusive) except bank or public holidays;

  
	
   

  	
   

  	
   

  
	
  Biomarker

  	
   

  	
  a
  substance or characteristic that, measured in certain absolute or relative
  amounts in blood, other body fluids, or tissues may suggest or be linked with
  a certain biological, pathogenic, and/or pharmacological process. Examples of
  known Biomarkers used for the purpose of diagnosing cancer include CA 125
  (ovarian cancer), CA 15-3 (breast cancer), CEA (ovarian, lung, breast,
  pancreas, and GI tract cancers), and PSA (prostate cancer);

  
	
   

  	
   

  	
   

  
	
  Confidential Information:

  	
   

  	
  each
  Party’s confidential information is: any Background Intellectual Property
  disclosed by that Party to the other for use in the Project and identified as
  confidential before or at the time of disclosure; business information; and
  any Resulting Intellectual Property in which that Party owns the Intellectual
  Property;

  
	
   

  	
   

  	
   

  
	
  the Effective Date:

  	
   

  	
  1
  October 2005;

  
	
   

  	
   

  	
   

  
	
  External Funding:

  	
   

  	
  any
  funding or assistance provided for the Project, or to any Party for use in
  the Project by any third party, including without limitation, any state or
  public body;

  
	
   

  	
   

  	
   

  
	
  the Financial Contribution:

  	
   

  	
  the
  financial contribution to be provided by the 

  

 

3

 

	
   

  	
   

  	
  Sponsor
  set out in Schedule 1;

  
	
   

  	
   

  	
   

  
	
  the Research Field:

  	
   

  	
  the
  field of research and development activities that is directed at the
  discovery, purification, identification and/or validation of Biomarkers
  related to breast and ovarian cancer;

  
	
   

  	
   

  	
   

  
	
  the Licensed Field:

  	
   

  	
  the
  research, development and commercialization of Licensed Products (as that
  term is defined in Schedule 3) for Diagnostics and Therapeutics for cancer,
  as more particularly specified in Schedule 3;

  
	
   

  	
   

  	
   

  
	
  a Group Company:

  	
   

  	
  any
  undertaking which is, on or after the date this Agreement is last signed by a
  Party hereto from time to time, a subsidiary undertaking of the Sponsor, a
  parent undertaking of the Sponsor or a subsidiary undertaking of a parent
  undertaking of the Sponsor, as those terms are defined in section 258 of the
  Companies Act 1985;

  
	
   

  	
   

  	
   

  
	
  Intellectual Property:

  	
   

  	
  any intellectual property rights in patents, registered
  designs, copyrights, database rights, design rights, trade marks, application
  to register any of the aforementioned rights, trade secrets, know-how, rights
  of confidence and inventions or discoveries;

  
	
   

  	
   

  	
   

  
	
  Resulting Intellectual Property:

  	
   

  	
  any Intellectual Property which is conceived, created,
  discovered, developed, identified or first reduced to practice in the
  course of the Project, derived directly from the use of SELDI or from the use
  of SELDI together with any other technology(ies) and any patents and patent
  applications, including any continuations, continuations in part, extensions,
  reissues or divisions thereof and any patents, supplementary protection
  certificates and similar rights that are based on or derive priority from the
  foregoing.

  
	
   

  	
   

  	
   

  
	
  Background Intellectual Property:

  	
   

  	
  any
  Intellectual Property other than Resulting Intellectual Property, used in, or
  disclosed in connection with the performance of, the Project;

  
	
   

  	
   

  	
   

  
	
  the Key Personnel:

  	
   

  	
  the
  Principal Investigator, Sponsor’s Supervisor and any other key personnel
  identified in Schedule 2;

  
	
   

  	
   

  	
   

  
	
  the Location:

  	
   

  	
  the
  location(s) at which the Project will be 

  

 

4

 

	
   

  	
   

  	
  carried
  out as set out in Schedule 2;

  
	
   

  	
   

  	
   

  
	
  the Principal Investigator:

  	
   

  	
  Ian
  Jacobs or his successor appointed under clause 10.2;

  
	
   

  	
   

  	
   

  
	
  the Project:

  	
   

  	
  the
  programme of work described in Schedule 2, as amended from time to time in
  accordance with clause 11.9;

  
	
   

  	
   

  	
   

  
	
  the Project Period:

  	
   

  	
  the
  period described in clause 2.1;

  
	
   

  	
   

  	
   

  
	
  Samples

  	
   

  	
  any
  material provided by the University for use within the Project that is
  biological or of biological origin;

  
	
  SELDI

  	
   

  	
  Surface
  Enhanced Laser Desorption/Ionization, as set forth in Recital B;

  
	
   

  	
   

  	
   

  
	
  the Sponsor’s Supervisor:

  	
   

  	
  Dr.
  Eric Fung or his successor appointed under clause 10.2;

  
	
   

  	
   

  	
   

  
	
  the Territory:

  	
   

  	
  worldwide

  

 

2.             THE PROJECT

 

2.1           The Project will begin on the Effective Date and will continue for
one (1) year or until this Agreement is terminated in accordance with clause 9
or 10, provided that the Sponsor shall have the option of renewing the Project
Period for an additional one (1)-year. If this Agreement is entered into after
the Effective Date, it will apply retrospectively to work carried out in
relation to the Project on or after the Effective Date. 

 

2.2           Each of the parties will carry out the tasks allotted to it in
Schedule 2, and will provide the human resources, materials, facilities and
equipment that are designated as its responsibility in Schedule 2. The Project
will be carried on under the direction and supervision of the Principal
Investigator. The Project will be carried out at the Location.

 

2.3           Although the University will use reasonable endeavours to carry out
the Project in accordance with Schedule 2, the University does not undertake
that any research will lead to any particular result, nor does it guarantee a
successful outcome to the Project.

 

2.4           The University will provide the Sponsor with quarterly written
reports summarising the progress of the Project and a copy of all Resulting
Intellectual Property.

 

2.5           The University warrants to the Sponsor that the University has full
power and authority under its constitution, and has taken all necessary actions
and obtained all authorisations, licences, consents and approvals, to allow it
to enter into this Agreement and to carry out the Project.

 

5

 

3.             FINANCIAL
CONTRIBUTION AND EXTERNAL FUNDING

 

3.1           The Sponsor will pay the Financial Contribution to the University in
accordance with the budget set out in Schedule 1 within 30 days after receipt
by the Sponsor of quarterly invoices.

 

3.2           The Sponsor will also support the Project
by providing, where and when appropriate, proprietary operational,
bioinformatics software and data analysis support, including data mining using
advanced non-linear statistics, pattern recognition algorithms, Deep ProteomeTM
tools, neural network analyses for the discovery and validation of diagnostic
biomarkers and/or profiles, and the supply of standard ProteinChip® Arrays and
custom ProteinChip Arrays incorporating surfaces with enhanced binding
performance characteristics for discovery and assay development and in
acccordance with the budget set out in Schedule 1.

 

3.3           The University will own all equipment purchased and/or constructed
by it, or for it, for use on the Project, using the Financial Contribution or
any External Funding.

 

3.4           All amounts payable to the University under this Agreement are
exclusive of VAT (or any similar tax) which the Sponsor will have no obligation
to pay.

 

3.5           External Funding: The University and the
Principal Investigator shall be free, at any time: 

 

(a) to
engage in internal, non-commercial research outside of the Research Field using
SELDI  and to seek funding for such
research from any source, including without limitation, a commercial sponsor
other than the Sponsor. The University acknowledges that use of SELDI is
subject to Ciphergen’s standard “Label License,” which restricts the University’s
use of SELDI to internal research and specifically prohibits the University’s
use of SELDI for the benefit of third parties; and 

 

(b) to
engage in research inside the Research Field without the use of SELDI, and to
seek funding for such research from any source, including without limitation, a
commercial sponsor other than the Sponsor; and 

 

(c) to
seek additional funding for the Project hereunder from any state or federal
agency, private or public foundation (other than foundations owned or operated
by a commercial entity other than the Sponsor), provided that the terms and
conditions of such additional funding are not in conflict with the terms and
conditions of this Agreement including, but not limited to, the Sponsor’s
rights in and to the Resulting Intellectual Property as defined in Clause 1. 

 

3.6           Governmental Interest. The Parties acknowledge that the
University has received, and expects to continue to receive, funding in support
of the University’s research activities from the national, state and/or local
governments where the University is located (“Government Entities”). The
Parties acknowledge and agree that their respective rights and obligations
pursuant to this Agreement shall be subject to the University’s obligations to
Government Entities that arise or result from the University’s receipt of
research support from such Government Entities including, without limitation,
the possible University and/or UCL Biomedica obligation to grant to such
Government 

 

6

 

Entities a non-exclusive, irrevocable, royalty-free
license to utilize the  Resulting
Intellectual Property hereunder for governmental purposes.

 

4.             EXCHANGE OF SAMPLES

 

In connection with the Project, should the University be required to
provide Samples to the Sponsor, the University shall promptly and
systematically provide those Samples, under the terms and conditions of the
Material Transfer Agreement as set out at Schedule 4. The University represents
and warrants that, to the best of its knowledge, the University has obtained
and is obtaining Samples in accordance with all applicable laws, regulations
and ethical standards and that the University has all necessary rights to
dispose of Samples as contemplated herein. 

 

5.             USE AND EXPLOITATION OF INTELLECTUAL PROPERTY

 

5.1           This Agreement does not affect the ownership of any Background
Intellectual Property. The Background Intellectual Property will remain the
property of the Party that contributes said Background Intellectual Property to
the Project (or its licensors). No licence to use any Intellectual Property is
granted or implied by this Agreement except as expressly granted in this
Agreement.

 

5.2           Each Party grants the other a royalty-free, non-exclusive licence to
use its Background Intellectual Property for the purpose of carrying out the
Project, but for no other purpose. Neither Party may grant any sub-licence to
use the other’s Background Intellectual Property except that the Sponsor may
allow its Group Companies, and any person working for, or on behalf of the
Sponsor or any Group Company, to use the University’s Background Intellectual
Property for the purpose of carrying out the Project, but for no other purpose.

 

5.3           Each Party will notify the other promptly after identifying any
Resulting Intellectual Property that the disclosing Party believes is
patentable, and will supply the other with copies of that Resulting
Intellectual Property. UCL Biomedica will notify the Sponsor of other Resulting
Intellectual Property in the reports provided under clause 2.4.

 

5.4    5.4.1               The Resulting
Intellectual Property will be owned by the University, who shall assign its
rights in it to UCL Biomedica, as specified in Recital E. Where any third party
such as a student or contractor is involved in the Project, the University, UCL
Biomedica or the Party engaging that contractor (as the case may be) will
ensure that that student and that contractor assign any Intellectual Property
they may have in the Resulting Intellectual Property in order to be able to
give effect to the provisions of this clause 5.

 

5.4.2             As partial consideration for the grant of the exclusive licence
hereunder, the Sponsor may take such steps as it may decide from time to time,
but in accordance with clause 5.4.3 below, and at its own expense, to register
and maintain in UCL Biomedica’s name, any protection for the Resulting
Intellectual Property including filing and prosecuting patent applications for
any of the Resulting Intellectual Property. Where any employee of the Sponsor
is a

 

7

 

co-inventor of such Resulting Intellectual Property,
he or she shall be named on said patent applications, as appropriate.

 

5.4.3             The Sponsor agrees to send UCL Biomedica, in a timely manner, copies
of all material correspondence with the Sponsor’s patent counsel concerning all
patent applications pursuant to clause 5.4.2 above and shall give UCL Biomedica
an opportunity to comment thereon before filing with any patent office. The Sponsor
shall act upon such solicited UCL Biomedica comments in good faith in the
prosecution and maintenance of the patent applications and patents.

 

5.5     5.5.1              UCL Biomedica grants to
the Sponsor an option to take an exclusive licence under all of UCL Biomedica’s
rights in  the Resulting Intellectual
Property for any purpose within the Licensed Field and Territory, as defined in
clause 1, on the terms specified in Schedule 3 to this Agreement.

 

5.5.2           [***] This Option Period
can be extended by mutual written agreement of the Parties. The Sponsor shall
exercise the option by giving written notice thereof to UCL Biomedica at any
time during the Option Period.

 

5.5.3           UCL Biomedica will not,
during the Option Period, negotiate with any third party with a view to
granting a licence to use the Resulting Intellectual Property or assigning the
Intellectual Property in the Resulting Intellectual Property. 

 

5.5.4           Should the Sponsor decide
not to take the option to the licence in clause 5.5.1, within the Option Period,
UCL Biomedica shall be free to licence the Resulting Intellectual Property as
it deems appropriate, save that UCL Biomedica shall not offer a licence to the
Resulting Intellectual Property to any other party on more favourable terms
than those last offered to the Sponsor, for a period of six (6) months after
the Sponsor declines to take the option. 

 

5.6           Subject to clause 3.5, the Principal Investigator shall be free to
use the SELDI technology to carry out other work on samples outside the
Research Field in the course of his internal, non-commercial research
activities at the University to the full extent of the Sponsor’s right to use
such technology for such purposes. During the term of this Agreement and for a
period of 2 (two) years after the termination hereof (the “Sponsor’s Rights
Period”), the Sponsor shall have the following rights in relation to that work:

 

5.6.1           Where SELDI is used for
other work on Samples collected in the course of carrying out Research Workplan
#1 in Schedule 2  (adnexal mass study)
outside the Research Field, the Sponsor shall be informed in advance of the
nature and scope of the work to be undertaken and shall have the option to
sponsor that work. [***] Should the Sponsor elect to exercise such option, the
Sponsor shall also have an option to licence the results of the work it
sponsors under this clause 5.6.1, on terms identical to those set out in above
in this clause 5. 

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

8

 

5.6.2           Where SELDI is used for any
other work outside the Research Field, the Sponsor shall be informed in advance
of the nature and scope of the work to be undertaken and shall have the option
to sponsor that work. [***] Should the Sponsor elect to exercise such option,
the Sponsor shall also have an option to licence the results of the work it
sponsors under this clause 5.6.2, on fair and reasonable terms to be agreed by
the Parties in a separate written agreement. 

 

All
obligations of the University pursuant to this clause 5.6 shall cease upon
termination of the Sponsor’s Rights Period.

 

5.7           The University and each employee and student of the University will
have the irrevocable, royalty-free right to use the Resulting Intellectual
Property of the Project for the purposes of academic teaching and academic
research only. The rights in this clause are subject to the rules on Academic
Publication in clause 6.

 

6.             ACADEMIC
PUBLICATION 

 

6.1           The Project is undertaken in pursuance of a primary charitable
purpose of the University; that is the advancement of education through
teaching and research. Therefore, any employee or student of the University
(whether or not involved in the Project) may, provided the University has not
received a Confidentiality Notice under clause 6.2:

 

6.1.1        discuss work undertaken as part of the Project in University
seminars, tutorials and lectures; and

 

6.1.2        Publish any of the Resulting Intellectual Property.

 

6.2           The University will submit to the Sponsor, in writing, details of
any Resulting Intellectual Property that any employee or student of the
University intends to Publish, at least 30 days before the date of the proposed
Publication. The Sponsor may, by giving written notice to the University (“a
Confidentiality Notice”), require the University to delay the proposed
Publication for a maximum of 3 months after receipt of the Confidentiality
Notice if, in the Sponsor’s reasonable opinion, that delay is necessary in
order to seek patent or similar protection for any Resulting Intellectual
Property that is to be Published; or prevent the Publication of any of the
Sponsor’s Confidential Information. The Sponsor must give that Confidentiality
Notice within 15 days after the Sponsor receives details of the proposed
Publication. If the University does not receive a Confidentiality Notice within
that period, its employee or student may proceed with the proposed Publication,
provided that, whether or not it has received a Confidentiality Notice, any of
the Sponsor’s Background Intellectual Property or Confidential Information may
not be published.

 

6.3           Where, with the agreement
of the Sponsor, any registered student of the University has been involved in
the Project he will follow the University’s regulations for the submission of
any thesis or theses for examination. In any event the University will procure
that the student will submit a draft thesis to the Principal Investigator and
the Sponsor’s Supervisor at least 30 days before the date for submission for
examination. The Student may not, without the Sponsor’s express written
consent, include in any

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

 

9

 

thesis any of
the Sponsor’s Background Intellectual Property or Confidential Information, or
Resulting Intellectual Property belonging to Sponsor.

 

7.             CONFIDENTIALITY

 

7.1           Subject to clause 6, neither Party will disclose to any third party,
other than to its Group Companies, nor use for any purpose except carrying out
the Project, any of the other Party’s Confidential Information.

 

7.2           Neither Party will be in breach of any obligation to keep any
Background Intellectual Property, Resulting Intellectual Property or other
information confidential or not to disclose it to any other party to the extent
that it:

 

7.2.1        is known to the Party making the disclosure before its receipt from
the other Party, and not already subject to any obligation of confidentiality
to the other Party;

 

7.2.2        is or becomes publicly known without any breach of this Agreement or
any other undertaking to keep it confidential;

 

7.2.3        has been obtained by the Party making the disclosure from a third
party in circumstances where the Party making the disclosure has no reason to
believe that there has been a breach of an obligation of confidentiality owed
to the other Party;

 

7.2.4        has been independently developed by the Party making the disclosure;

 

7.2.5        is disclosed pursuant to the requirement of any law or regulation
(provided, in the case of a disclosure under the Freedom of Information Act
2000, none of the exceptions to that Act applies to the information disclosed)
or the order of any Court of competent jurisdiction, and the Party required to
make that disclosure has informed the other, within a reasonable time after
being required to make the disclosure, of the requirement to make the
disclosure and the information required to be disclosed; or

 

7.2.6        is approved for release in writing by an authorised representative
of the other Party.

 

7.3           The University will not be in breach of any obligation to keep any
of the Resulting Intellectual Property owned by or licensed to the Sponsor, or
other information, confidential or not to disclose them to any third party, by
Publishing any of the same if the University has followed the procedure in
clause 6.2 and has received no Confidentiality Notice within the period stated
in that clause.

 

7.4           The Sponsor will not be in breach of any obligation to keep any of
the Resulting Intellectual Property owned by the University, the University’s
Background Intellectual Property, or other information, confidential or not to
disclose them to any third party, by making them available to any Group Company
or any person working for or on behalf of the Sponsor or a Group Company, who
needs to know the same in order to exercise the rights granted in clause 5.5,
provided they are not used except as expressly permitted by this Agreement and
the recipient undertakes to keep that

 

10

 

Background
Intellectual Property, the Resulting Intellectual Property or that information
confidential.

 

7.5           If the University receives a request under the Freedom of
Information Act 2000 to disclose any information that, under this Agreement, is
the Sponsor’s Confidential Information, it will notify the Sponsor and will
consult with the Sponsor. The Sponsor will respond to the University within 10
days after receiving the University’s notice if that notice requests the
Sponsor to provide information to assist the University to determine whether or
not an exemption to the Freedom of Information Act applies to the information
requested under that Act. 

 

7.6           Neither the University nor the Sponsor will use the other’s name or
logo in any press release or product advertising, or for any other promotional
purpose, without first obtaining the other’s written consent; except that the
University may identify the sums received from the Sponsor in the University’s
Annual Report and similar publications.

 

8.             LIMITATION OF
LIABILITY

 

8.1           Each of the parties warrants to the other that, to the best of its
knowledge and belief as of the Effective Date (having made reasonable enquiry
of those of its employees involved in the Project or likely to have relevant
knowledge, and in the case of the University any student involved in the
Project, but not having made any search of any public register)  any advice or information given by it or any
of its employees or students who work on the Project, or the content or use of
any Resulting Intellectual Property, Background Intellectual Property or
materials, works or information provided in connection with the Project, will
not constitute or result in any infringement of third-party rights.

 

8.2           Except under the warranty in clause 8.1 and the indemnity in clause
8.3, and subject to clause 8.6, neither Party accepts any responsibility for
any use which may be made by the other Party of any Resulting Intellectual
Property, nor for any reliance which may be placed by that other Party on any
Resulting Intellectual Property, nor for advice or information given in
connection with any Resulting Intellectual Property.

 

8.3           The Sponsor will indemnify the University and UCL Biomedica (the UCL
Indemnified Parties), and keep them fully and effectively indemnified, against
each and every claim made against any of the UCL Indemnified Parties as a
result of the Sponsor’s use of any of the Resulting Intellectual Property or
any materials, works or information received from them pursuant to the terms of
this Agreement. The University and UCL Biomedia will indemnify the Sponsor and
its Group Companies (the Sponsor Indemnified Parties), and keep them fully and
effectively indemnified, against each and every claim made against any of the Sponsor
Indemnified Parties as a result of any breach of the University’s
representations and warranties hereunder or the University’s provision or use
of any of the Samples, Resulting Intellectual Property or any materials, works
or information received from the Sponsor pursuant to the terms of this
Agreement. The Indemnified Party must:

 

8.3.1        promptly notify the indemnifying Party of details of the claim;

 

8.3.2        not make any admission in relation to the claim;

 

8.3.3        allow the indemnifying Party to have the conduct of the defence or
settlement of the claim; and

 

11

 

8.3.4        give the indemnifying Party all reasonable assistance (at the
indemnifying Party’s expense) in dealing with the claim.

 

The indemnity in this clause will not apply to the
extent that the claim arises as a result of any Indemnified Party’s negligence,
breach of clause 7 or the deliberate breach of this Agreement.

 

8.4           Subject to clause 8.6, and except under the indemnity in clause 8.3,
the liability of either Party to the other for any breach of this Agreement,
any negligence or arising in any other way out of the subject matter of this
Agreement, the Project and the Resulting Intellectual Property, will not extend
to any indirect damages or losses, or any loss of profits, loss of revenue,
loss of data, loss of contracts or opportunity, whether direct or indirect,
even if the Party bringing the claim has advised the other of the possibility
of those losses, or if they were within the other Party’s contemplation.

 

8.5           Subject to clause 8.6, and except under the indemnity in clause 8.3,
the aggregate liability of each Party to the other for all and any breaches of
this Agreement, any negligence or arising in any other way out of the subject
matter of this Agreement, the Project and the Resulting Intellectual Property,
will not exceed in total the Financial Contribution.

 

8.6           Nothing in this Agreement limits or excludes either Party’s
liability for:

 

8.6.1        death or personal injury;

 

8.6.2        any fraud or for any sort of liability that, by law, cannot be
limited or excluded; or

 

8.6.3        any loss or damage caused by a deliberate breach of this Agreement
or a breach of clause 7.

 

8.7           The express undertakings and warranties given by the parties in this
Agreement are in lieu of all other warranties, conditions, terms, undertakings
and obligations, whether express or implied by statute, common law, custom,
trade usage, course of dealing or in any other way. All of these are excluded
to the fullest extent permitted by law.

 

9.             FORCE MAJEURE

 

If the
performance by either Party of any of its obligations under this Agreement
(except a payment obligation) is delayed or prevented by circumstances beyond
its reasonable control, that Party will not be in breach of this Agreement
because of that delay in performance. However, if the delay in performance is
more than 6 months, the other Party may terminate this Agreement with immediate
effect by giving written notice.

 

10.           TERMINATION 

 

10.1         Either Party may terminate this Agreement with immediate effect by
giving notice to the other Party if: 

 

12

 

10.1.1      the other Party is in breach of any material provision of this
Agreement and (if it is capable of remedy) the breach has not been remedied
within 30 days after receipt of written notice specifying the breach and
requiring its remedy; or

 

10.1.2      the other Party becomes insolvent, or if an order is made or a
resolution is passed for its winding up (except voluntarily for the purpose of
solvent amalgamation or reconstruction), or if an administrator, administrative
receiver or receiver is appointed over the whole or any part of the other Party’s
assets, or if the other Party makes any arrangement with its creditors.

 

10.2         Each of the parties will notify the other in writing within 5 (five)
business days after receipt of formal notice that any of the Key Personnel
appointed by that Party (the “Notifying Party”) is unable or unwilling to
continue to be involved in the Project. Such notice will also state the date of
termination of such Key Personnel’s involvement in the Project and nominate a
successor to replace such departing Key Personnel. If the parties are unable to
agree on a successor acceptable to the other Party, either Party may terminate
this Agreement by giving the other not less than 3 months’ written notice.

 

10.3         The Sponsor may also terminate this Agreement, by giving the
University not less than 3 months’ written notice, if the Sponsor determines,
in its reasonable judgment, that the Resulting Intellectual Property does not
justify continuing the Project.

 

10.4         Clauses 1, 4, 5 (except clause 5.5 if the University terminates this
Agreement under clause 10.1), 6, 7, 8, 9, 10.4, 10.5 and 11 will survive the
expiry of the Project Period or the termination of this Agreement for any
reason and will continue indefinitely.

 

10.5         On the termination of this
Agreement, the Sponsor will pay the University for all work done prior to
termination, as mutually agreed by the Parties, including any uncancellable or
unavoidable expenditures to which the Sponsor has agreed in advance of such
expenditure. Subject to 10.6 below, if the Sponsor has paid any of the
Financial Contribution in advance and the whole of that contribution has not,
by the end of the Project Period or the termination of this Agreement, been
used by the University for the purposes for which that Financial Contribution
was provided, the University will return to the Sponsor the unused portion of
that contribution.

 

10.6         If the Sponsor terminates this Agreement under clause 10.3[***] The
University shall take all reasonable steps to minimise those costs.

 

11.         GENERAL

 

11.1         Notices:  Any notice to be given under this Agreement
must be in writing, may be delivered to the other Party or parties by any of
the methods set out in the left hand

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

13

 

column
below, and will be deemed to be received on the corresponding day set out in
the right hand column:

 

	
  Method of service

  	
   

  	
  Deemed day of receipt

  
	
  By
  hand or courier

  	
   

  	
  the
  day of delivery

  
	
   

  	
   

  	
   

  
	
  By
  pre-paid first class post

  	
   

  	
  the
  second Business Day after posting

  
	
   

  	
   

  	
   

  
	
  By
  recorded delivery post

  	
   

  	
  the
  next Business Day after posting

  
	
   

  	
   

  	
   

  
	
  By
  fax (provided the sender’s fax machine confirms complete and error-free
  transmission of that notice to the correct fax number)

  	
   

  	
  the
  next Business Day after sending or, if sent before 16.00 (sender’s local
  time) on the Business Day it was sent

  

 

The parties’ respective representatives for the receipt of notices are,
until changed by notice given in accordance with this clause, as follows:

 

 

	
  For the University:

  	
   

  	
  For the Sponsor:

  
	
  Trish
  Monaghan

  Contract Manager

  Contract Research Office

  UCL Business

  The Network Building

  97 Tottenham Court Road

  London

  W1T 4TP

  	
   

  	
  Gail
  Page

  President Diagnostics Division

  Ciphergen Biosystems, Inc.

  6611 Dumbarton Circle

  Fremont, California 94555

  USA

  
	
  Fax
  number:00 44 20 7679 9801

  	
   

  	
  Fax
  number: 510.505.2101

  

 

11.2         Headings:  The headings in this Agreement are for ease
of reference only; they do not affect its construction or interpretation.

 

11.3         Assignment:  Neither Party may assign or transfer this
Agreement as a whole, or any of its rights or obligations under it, without
first obtaining the written consent of the other Party, which consent may not
be unreasonably withheld or delayed. Notwithstanding the above, the Sponsor may
at its own discretion, and without approval by the University or UCL Biomedica,
transfer its interest or any part thereof under this Agreement to a
wholly-owned subsidiary or partnership of which the Sponsor is the general
partner or any assignee or purchaser of the portion of the Sponsor’s business
associated with the licences and rights granted under this Agreement. In the
event of any such transfer, the transferee shall assume and be bound by the
provisions of this Agreement.

 

11.4         Illegal/unenforceable provisions:  If the whole or any part of
any provision of this Agreement is void or unenforceable in any jurisdiction,
the other provisions of this Agreement, and the rest of the void or
unenforceable provision, will continue in force in

 

14

 

that jurisdiction, and the validity and
enforceability of that provision in any other jurisdiction will not be
affected.

 

11.5         Waiver of rights:  If a Party fails
to enforce, or delays in enforcing, an obligation of the other Party, or fails
to exercise, or delays in exercising, a right under this Agreement, that
failure or delay will not affect its right to enforce that obligation or
constitute a waiver of that right. Any waiver of any provision of this
Agreement will not, unless expressly stated to the contrary, constitute a
waiver of that provision on a future occasion.

 

11.6         No agency:  Nothing in this Agreement creates, implies or
evidences any partnership or joint venture between the parties, or the
relationship between them of principal and agent. Neither Party has any
authority to make any representation or commitment, or to incur any liability,
on behalf of the other.

 

11.7         Entire agreement: This Agreement constitutes the entire agreement between the parties
relating to its subject matter. Each Party acknowledges that it has not entered
into this Agreement on the basis of any warranty, representation, statement,
agreement or undertaking except those expressly set out in this Agreement. Each
Party waives any claim for breach of this Agreement, or any right to rescind
this Agreement in respect of, any representation which is not an express
provision of this Agreement. However, this clause does not exclude any
liability which either Party may have to the other (or any right which either
Party may have to rescind this Agreement) in respect of any fraudulent
misrepresentation or fraudulent concealment prior to the execution of this
Agreement.

 

11.8         Formalities: Each
Party will take any action and execute any document reasonably required by the
other Party to give effect to any of its rights under this Agreement, or to
enable their registration in any relevant territory provided the requesting
Party pays the other Party’s reasonable expenses.

 

11.9         Amendments:  No
variation or amendment of this Agreement will be effective unless it is made in
writing and signed by each Party’s representative.

 

11.10       Third parties:  No one except a
Party to this Agreement has any right to prevent the amendment of this
Agreement or its termination, and no one except a Party to this Agreement may
enforce any benefit conferred by this Agreement, unless this Agreement
expressly provides otherwise.

 

11.11       Governing law:  This Agreement is governed by, and is to be
construed in accordance with, English law. The English Courts will have
exclusive jurisdiction to deal with any dispute which has arisen or may arise
out of, or in connection with, this Agreement, except that either Party may
bring proceedings for an injunction in any jurisdiction.

 

11.12       Escalation: If the
parties are unable to reach agreement on any issue concerning this Agreement or
the Project within 14 days after one Party has notified the other of that
issue, they will refer the matter to the Commercial Director, UCL Business in
the case of the University, and to the President, Diagnostics Division in the
case of the Sponsor in an attempt to resolve the issue within 14 days after the
referral. Either Party may bring proceedings in accordance with clause 11.11 if
the matter has not been resolved within that 14 day period, and either Party
may apply to the court for an injunction, whether or not any issue has been
escalated under this clause.

 

15

 

 

	
  SIGNED for and on behalf of the
  University:

  	
   

  	
  SIGNED for and on behalf of the
  Sponsor:

  
	
   

  	
   

  	
   

  
	
  Name

  	
  Dr.
  J.D. Skinner

  	
   

  	
  Name

  	
  Gail
  Page

  
	
   

  	
   

  	
   

  
	
  Position
  

  	
  Commercial
  Director

  	
   

  	
  Position

  	
  President
  and COO

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED for and on behalf of UCL
  Biomedica:

  
	
   

  
	
  Name

  	
  C.A.
  Tarhan

  
	
   

  	
   

  
	
  Position

  	
  Managing
  Director

  
	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
  Date

  	
   

  
						

 

16

 

SCHEDULE 1

 

The Financial Contribution

 

 

1. ADNEXAL MASS STUDY - COLLECTION INCLUDING SAMPLE PREPARATION

 

A. CONTRIBUTION TO STAFF COSTS

 

	
  Staff

  	
   

  	
  Annual

  salary

  with on

  costs

  	
   

  	
  FTE

  	
   

  	
  No of

  yrs

  	
   

  	
  Total Cost

  	
   

  	
  Ciphergen

  Contribution

  YR1

  	
   

  	
  Ciphergen

  Contribution

  YR2

  	
   

  
	
  Research fellow

  	
   

  	
  40000

  	
   

  	
  2

  	
   

  	
  2

  	
   

  	
  £

  	
  160,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Research Nurses (G 27)

  	
   

  	
  33348

  	
   

  	
  0.5

  	
   

  	
  2

  	
   

  	
  £

  	
  33,348.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Research assistant (1A)

  	
   

  	
  40000

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  £

  	
  80,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Laboratory manager (MTO4 Spinal 34)

  	
   

  	
  35000

  	
   

  	
  0.5

  	
   

  	
  2

  	
   

  	
  £

  	
  35,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Laboratory technician (MLA)

  	
   

  	
  18000

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  £

  	
  36,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Database manager (ALC3 Sp 17)

  	
   

  	
  44558

  	
   

  	
  0.2

  	
   

  	
  2

  	
   

  	
  £

  	
  17,823.20

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Research Nurses (G 27)

  	
   

  	
  33348

  	
   

  	
  0.5

  	
   

  	
  2

  	
   

  	
  £

  	
  333,480.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Laboratory technician (MTO2 Sp Point 22)

  	
   

  	
  24906.5

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  £

  	
  49,813.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Consultant histopathologist

  	
   

  	
  80000

  	
   

  	
  0.2

  	
   

  	
  2

  	
   

  	
  £

  	
  32,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Ciphergen contribution

  	
   

  	
   

  	
   

  	
  Over two
  years

  	
   

  	
  2

  	
   

  	
  £

  	
  777,464

  	
   

  	
  £

  	
  100,000

  	
   

  	
  £

  	
  100,000

  	
   

  
																	

 

17

 

 

B. CONTRIBUTION TO CONSUMABLES COSTS

 

	
  Consumables

  	
   

  	
  Comments

  	
   

  	
  Cost per

  unit (£)

  	
   

  	
  No of

  units

  	
   

  	
  Total Cost

  	
   

  	
  Total

  Ciphergen

  contribution

  	
   

  
	
  Pt information

  	
   

  	
   

  	
   

  	
  0.2

  	
   

  	
  9000

  	
   

  	
  £

  	
  1,800.00

  	
   

  	
  £

  	
  900.00

  	
   

  
	
  Pt consent form

  	
   

  	
   

  	
   

  	
  0.15

  	
   

  	
  9000

  	
   

  	
  £

  	
  1,350.00

  	
   

  	
  £

  	
  0.00

  	
   

  
	
  Office supplies

  	
   

  	
  For GCRC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  3,000.00

  	
   

  	
  £

  	
  2,000.00

  	
   

  
	
  ONS flagging of cancer pts

  	
   

  	
  For operator
  flagging and copy of death certificate

  	
   

  	
  2.15

  	
   

  	
  2000

  	
   

  	
  £

  	
  4,300.00

  	
   

  	
  £

  	
  0.00

  	
   

  
	
  Recruitment costs

  	
   

  	
  Adverts

  	
   

  	
  1200

  	
   

  	
  6

  	
   

  	
  £

  	
  7,200.00

  	
   

  	
  £

  	
  7,200.00

  	
   

  
	
  Blood tubes for cases

  	
   

  	
  Maybe less -
  cannot use Beckton Dickson tube which costs approx £6 per tube

  	
   

  	
  3

  	
   

  	
  5000

  	
   

  	
  £

  	
  15,000.00

  	
   

  	
  £

  	
  13,800.00

  	
   

  
	
  Transport of case samples

  	
   

  	
  4
  collections on dry ice per centre (every 6 months)

  	
   

  	
  250

  	
   

  	
  80

  	
   

  	
  £

  	
  20,000.00

  	
   

  	
  £

  	
  14,000.00

  	
   

  
	
  Sample storage consumables

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  26,250.00

  	
   

  	
  £

  	
  26,250.00

  	
   

  
	
  TRL lab supplies (Eppendorf, pipette etc)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  4,000.00

  	
   

  	
  £

  	
  4,000.00

  	
   

  
	
  DNA extraction kits

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  8000

  	
   

  	
  £

  	
  80,000.00

  	
   

  	
  £

  	
  0.00

  	
   

  
	
  Paraffin slide section / tissue block for cases

  	
   

  	
   

  	
   

  	
  15

  	
   

  	
  2500

  	
   

  	
  £

  	
  37,500.00

  	
   

  	
  £

  	
  37,500.00

  	
   

  
	
  Travel budget

  	
   

  	
  Between
  centres for set up and occasionally data audit

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  5,000.00

  	
   

  	
  £

  	
  1,000.00

  	
   

  
	
  Meetings etc

  	
   

  	
   

  	
   

  	
  3000

  	
   

  	
  4

  	
   

  	
  £

  	
  12,000.00

  	
   

  	
  £

  	
  12,000.00

  	
   

  
	
  PCs

  	
   

  	
   

  	
   

  	
  1000

  	
   

  	
  20

  	
   

  	
  £

  	
  20,000.00

  	
   

  	
  £

  	
  13,000.00

  	
   

  
	
  80 freezer at each centre

  	
   

  	
   

  	
   

  	
  5400

  	
   

  	
  10

  	
   

  	
  £

  	
  54,000.00

  	
   

  	
  £

  	
  54,000.00

  	
   

  
	
  Refrigerated centrifuge

  	
   

  	
   

  	
   

  	
  2200

  	
   

  	
  10

  	
   

  	
  £

  	
  22,000.00

  	
   

  	
  £

  	
  0.00

  	
   

  
	
  Webbased database

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  25,000.00

  	
   

  	
  £

  	
  25,000.00

  	
   

  
	
  Total

  	
   

  	
  Over two
  years

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  338,400

  	
   

  	
  £

  	
  210,650

  	
   

  
																

 

18

 

2. PROTEOMICS TEAM + EQUIPMENT     (studies involving UKCTOCS and adnexal mass) 

 

A. CASH AWARD

 

	
  Staff

  	
   

  	
  FTE

  	
   

  	
  Salary

  (approx)*

  	
   

  	
  Total Cost

  YR1

  	
   

  	
  Total Cost YR2

  	
   

  	
  Ciphergen

  Contribution

  YR1

  	
   

  	
  Ciphergen

  Contribution

  YR2

  	
   

  
	
  Proteomics Team

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior scientist

  	
   

  	
  1

  	
   

  	
  £

  	
  45,000.00

  	
   

  	
  £

  	
  45,000.00

  	
   

  	
  £

  	
  45,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PhD student

  	
   

  	
  1

  	
   

  	
  £

  	
  15,000.00

  	
   

  	
  £

  	
  15,000.00

  	
   

  	
  £

  	
  15,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Biostatistician

  	
   

  	
  1

  	
   

  	
  £

  	
  60,000.00

  	
   

  	
  £

  	
  60,000.00

  	
   

  	
  £

  	
  60,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total salary costs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  120,000

  	
   

  	
  £

  	
  120,000

  	
   

  	
  £

  	
  60,000

  	
   

  	
  £

  	
  60,000

  	
   

  
	
  For consumables

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  £

  	
  30,000

  	
   

  	
  £

  	
  30,000

  	
   

  	
  £

  	
  30,000

  	
   

  	
  £

  	
  30,000

  	
   

  

 

B. In kind AWARD

 

	
   

  	
   

  	
   

  	
   

  	
  YR1

  	
   

  	
  YR2

  	
   

  
	
  ProteinChip reader, arrays, and associated
  consumables and software

  	
   

  	
  For carryiny
  out SELDI analysis

  	
   

  	
  £

  	
  300,000.00

  	
   

  	
  £

  	
  70,000.00

  	
   

  
										

 

TOTAL RESEARCH AWARD FROM CIPHERGEN

 

	
   

  	
   

  	
  TOTAL

  	
   

  	
  Ciphergen

  Contribution

  YR1

  	
   

  	
  Ciphergen

  Contribution

  YR2

  	
   

  
	
  CASH

  	
   

  	
  £

  	
  590,650.00

  	
   

  	
  £

  	
  295,325.00

  	
   

  	
  £

  	
  295,325.00

  	
   

  
	
  UCL OVERHEAD heading 1A

  	
   

  	
  £

  	
  200,000.00

  	
   

  	
  £

  	
  100,000.00

  	
   

  	
  £

  	
  100,000.00

  	
   

  
	
  UCL OVERHEAD heading 2A

  	
   

  	
  £

  	
  120,000.00

  	
   

  	
  £

  	
  60,000.00

  	
   

  	
  £

  	
  60,000.00

  	
   

  
	
  IN KIND

  	
   

  	
  £

  	
  370,000.00

  	
   

  	
  £

  	
  300,000.00

  	
   

  	
  £

  	
  70,000.00

  	
   

  
	
  TOTAL

  	
   

  	
  £

  	
  1,280,650.00

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

19

 

SCHEDULE
2

 

The
Project

 

RESEARCH
WORKPLAN #1

 

Title
of Research Workplan: University College
London (UCL)-Ciphergen collaboration in the field of gynecologic disease. This
Research Workplan #1 is intended to identify biomarkers that may aid in the
diagnosis of an adnexal mass. Research Workplan #2 is intended to determine the
pre-analytical variables and quality of serum integrity of samples taken under
the UK screening trial; it is intended to provide the preliminary data required
to justify a larger analysis of samples taken from this trial. 

 

For the
avoidance of doubt University College London will be the custodians of the
samples collected using funding provided under this Agreement, for the adnexal
mass study described in Research Workplan #1. No rights of ownership in respect
of these samples will pass to Ciphergen.

 

Objectives: This project aims to find diagnostic biomarkers for the
differential diagnosis of an adnexal mass. 

 

Location: Translational Research Laboratory and Clinical Research Centre,
Institute for Women’s Health, UCL

 

UCL
Researchers: Dr. Ian Jacobs and Dr. Usha
Menon. 

 

Ciphergen
Researchers: 
Dr. Eric Fung. 

 

Diagnostic Biomarkers Discovery Study

 

Monetary
or In-kind Contributions: Ciphergen will
contribute cash and in-kind support, as outlined in the budget in Schedule 1
and clause 3.2 of this Agreement. The values for array consumables are
estimates; Ciphergen will provide the arrays necessary to complete the project.

 

Samples
or Materials to be Transferred: 

 

1. Preliminary
Analysis to Ascertain Most Effective Method of Sample Collection and Transport
to Laboratory. UCL will collect blood from a set of 50 healthy volunteers
and collect serum and plasma under varying conditions from each patient,
including one tube of serum in standard SST tubes, one tube of serum in the
Becton Dickinson proteomics serum sample collection tube, and one tube of EDTA
plasma. UCL and Ciphergen will perform analyses of these samples to determine
the effect of tube type, incubation at room temperature, and other
pre-analytical variables on proteomic profiles. Ciphergen will provide
expertise in the form of factorial design of experiments to plan this study. 

 

20

 

2. Initial
Biomarker Discovery Study. Based on this preliminary analysis, UCL will
collect blood (pre- and post-op), urine, and baseline data from women
presenting with an adnexal mass. 

 

The
urine will be collected according to the following parameters:

 

Urine will be collected at the day of
surgery.

The patients will be NPO commencing at
midnight on the day of surgery.

The urine samples will be aliquotted in 2
ml cryovials and stored in a -80 freezer.

 

Patients
will be monitored so that a final anatomic diagnosis can be obtained. It is
expected that no fewer than 500 women (patients with malignant and benign
ovarian neoplasms and healthy controls) will be enrolled in this study by the
end of the first year of the project.

 

Work to
be Conducted:  UCL and Ciphergen will perform protein
expression profiling according to Ciphergen’s best practices, including novel
proteomic technologies such as Ciphergen’s Deep ProteomeTM tools. Ciphergen
will, in collaboration with the UCL adnexal mass study group, perform
univariate and multivariate statistical analyses to determine the optimal
multi-marker panel for the differential diagnosis of an adnexal mass. The
adnexal mass study group will take active part in the evaluation of the
performed protein expression profiles.

 

2. Diagnostic
Biomarkers Purification and Identification Study

 

Samples
or Materials to be Transferred: UCL will
provide adequate amounts of the required serum samples (approximately 5-10
samples, 400-1ml of each) for the purification and identification of biomarkers
resulting from the Diagnostic Biomarkers Discovery Study in Part 1 above based
on evaluation of the results of such study by Ciphergen and the adnexal mass
study group.

 

Work to
be Conducted: Ciphergen and UCL will purify
the biomarkers using chromatography procedures and identify the biomarkers
using peptide fingerprinting and/or tandem mass spectrometry. The number of
biomarkers and the specific biomarkers to be purified will be mutually agreed
upon by UCL and Ciphergen, and will consist of the markers that are deemed to
provide the highest classification power.

 

3. Diagnostic
Biomarkers Validation Study

 

Samples
or Materials to be Transferred: 

 

Work to
be Conducted: Ciphergen staff will work with
the UCL scientist(s) to co-develop a high-throughput diagnostic assay for
biomarkers mutually agreed upon in the Diagnostic Biomarkers Discovery Study.
This assay will then be performed in the research setting at UCL on samples
maintained within the adnexal mass program.

 

Anticipated
Timeline: The study will start as soon as
possible after execution of the Collaborative Research Agreement after
completion of recruitment of a mutually agreed on number of women for the
Diagnostic Biomarkers Discovery Study. Recruitment is scheduled to last for 2
years from the start at any particular centre. At such time as an adequate
number of samples have been collected, protein expression profiling may
commence. Samples may continue to be collected for purposes of independent and
prospective validation.

 

21

 

RESEARCH
WORKPLAN #2

 

Title
of Research Workplan: Preliminary analysis
of pre-analytical variables and integrity of samples obtained from the UKCTOCS.
Research Workplan #1 is intended to identify biomarkers that may aid in the
diagnosis of an adnexal mass. This Research Workplan #2 is intended to
determine the pre-analytical variables and quality of serum integrity of samples
taken under the UK screening trial; it is intended to provide the preliminary
data required to justify a larger analysis of samples taken from this trial.
For the avoidance of doubt University College London will be the custodians of
the samples referred to in Research Workplan #2. No rights of ownership in
respect of these samples will pass to Ciphergen.

 

Location: Translational Research Laboratory and Clinical Research Centre,
Institute for Women’s Health, UCL

 

UCL
Researchers: Dr. Ian Jacobs and Dr. Usha
Menon. 

 

Ciphergen
Researchers: 
Dr. Eric Fung. 

 

Monetary
or In-kind Contributions: Ciphergen will
contribute cash and in-kind support, as outlined in the budget in Schedule 1
and clause 3.2 of this Agreement. The values for array consumables are estimates;
Ciphergen will provide the arrays necessary to complete the project.

 

	
  Age

  	
   

  	
  50-54

  	
   

  	
  55-59

  	
   

  	
  60-64

  	
   

  	
  65-69

  	
   

  	
  70-74

  	
   

  
	
  No. of women

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  
	
  2001 samples

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  
	
  2002 samples

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  
	
  2003 samples

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  
	
  Total samples/assays

  	
   

  	
  60

  	
   

  	
  60

  	
   

  	
  60

  	
   

  	
  60

  	
   

  	
  60

  	
   

  

 

Samples will be chosen
randomly to include representative samples from various collecting institutions
and time in transit to the central repository.

 

Analysis: Proteomic
studies will provide spectral data sets for data analysis to identify
consistent features in the ‘normal’ proteomic pattern in healthy postmenopausal
women (sample set Ia) and variations in the ‘normal’ proteomic pattern which
are attributable to age, increasing years post menopause and use of hormone
replacement therapy (sub groups of sample set Ia). Once the ‘normal’ serum
proteomic pattern has been characterised, further analysis will document the
changes in the proteomic pattern over time in the same women (serial samples in
set Ia from 2001, 2002 and 2003). As the time (hours) between venepuncture and
serum separation UKCTOCS is well documented (range 2 hours – 56 hours it will
also be possible to assess the impact of this variable. In addition the
performance of each proteomic technology in terms of intraassay and interassay
variability for spectral peaks identified as consistent features in the ‘normal’
SELDI pattern will be assessed based on replicate analysis of these samples. 

 

22

 

SCHEDULE
3

Agreed
Licence Terms

 

 

Licence
agreement 

 

THIS
AGREEMENT is made the 22nd day of September 2005.

 

BETWEEN:

	
   

  	
   

  	
   

  
	
  (1)

  	
   

  	
  UCL BIOMEDICA PLC, (the ‘Owner’) a company incorporated in
  England and Wales under company registration number 02776963 whose principal
  place of business is at C/o Finance Division, University College London,
  Gower Street, London WC1E 6BT, UK and

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  CIPHERGEN BIOSYSTEMS, INC., (the ‘Licensee’) a Delaware
  corporation having its principal place of business at 6611 Dumbarton Circle,
  Fremont, California 94555, U.S.A

  
	
   

  	
   

  	
   

  
	
  RECITALS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (1)

  	
   

  	
  The Owner is the registered proprietor of, or applicant
  for, the Patents and possesses related Resulting Intellectual Property.

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  The Owner is willing to grant to the Licensee, and the
  Licensee is willing to accept, a licence under the Patents and a licence to
  use the Resulting Intellectual Property, in accordance with the provisions of
  this Agreement.

  

 

IT IS AGREED
as follows:

 

1.         Definitions

 

In this
Agreement, the following words shall have the following meanings:

 

	
  ‘Analyte Specific Reagents’

  	
   

  	
  means any antibodies, both polyclonal
  and monoclonal, specific receptor proteins, protein ligands, nucleic acid
  sequences, and similar reagents which, through specific binding or chemical reaction
  with substances in a specimen,

  

 

23

 

	
   

  	
   

  	
  are intended for use in a diagnostic
  application for identification and quantification of an individual chemical
  substance or ligand in biological specimens

  
	
   

  	
   

  	
   

  
	
  ‘Biomarker’

  	
   

  	
  means a substance or characteristic
  that, measured in certain absolute or relative amounts in blood, other body
  fluids, or tissues may suggest or be linked with a certain biological,
  pathogenic, and/or pharmacological process. Examples of known Biomarker used
  for the purpose of diagnosing cancer include CA 125 (ovarian cancer), CA 15-3
  (breast cancer), CEA (ovarian, lung, breast, pancreas, and GI tract cancers),
  and PSA (prostate cancer).

  
	
   

  	
   

  	
   

  
	
  ‘Collaborative Research Agreement’

  	
   

  	
  Means the Collaborative Research
  Agreement between University College London, UCL BioMedica Plc and Ciphergen
  Biosystems, Inc dated 22 September 2005.

  
	
   

  	
   

  	
   

  
	
  ‘Commencement Date’

  	
   

  	
  1 October 2005.

  
	
   

  	
   

  	
   

  
	
  ‘Disposable Component’

  	
   

  	
  means any item that is either a General
  Purpose Reagent or an Analyte Specific Reagent and specifically excluding any
  capital equipment or software of any kind. Such capital equipment or software
  includes, any ProteinChip® Systems, ProteinChip® Software, Biomarker PatternsTM
  Software, CiphergenExpressTM Software and any software that
  embodies a classification algorithm that is used in performing a Diagnostic
  Test

  
	
   

  	
   

  	
   

  
	
  ‘Diagnostics’

  	
   

  	
  means any product or service that is
  optimized for specific biomarker or biomarker pattern detection or otherwise
  optimized to perform a specific assay, purification or separation process
  including, without limitation, for diagnostic or theranostic purposes
  including, without limitation, for purposes of diagnosis of disease,
  prognosis of disease, prognosis of treatment, monitoring of disease and
  monitoring of treatment. “Theranostic” means a diagnostic test intended to
  predict the utility of a therapeutic regimen in managing a condition, by way
  of example but not of limitation, for disease risk prediction, disease diagnosis,
  disease prognosis, patient stratification, 

  

 

24

 

	
   

  	
   

  	
  therapeutic stratification and
  monitoring therapeutic response.

  
	
   

  	
   

  	
   

  
	
  ‘Diagnostic Test’

  	
   

  	
  means any test method performed for
  Diagnostic purposes. ‘

  
	
   

  	
   

  	
   

  
	
  ‘Diagnostic Test Kit’

  	
   

  	
  means a collection of Disposable
  Components with instructions for performing one or more Diagnostic Test,
  which collection is approved for sale by the relevant government regulatory
  agency in the jurisdiction of sale.

  
	
   

  	
   

  	
   

  
	
  ‘General Purpose Reagent’

  	
   

  	
  means any chemical reagent that has
  general laboratory application, that is used to collect, prepare, and examine
  specimens from the human body for diagnostic purposes, and that is not
  labelled or otherwise intended for a specific diagnostic application. It may
  be either an individual substance, or multiple substances reformulated,
  which, when combined with or used in conjunction with an appropriate Analyte
  Specific Reagent and other General Purpose Reagents, is part of a diagnostic
  test procedure or system constituting a finished in vitro diagnostic (IVD)
  test. General Purpose Reagents are appropriate for combining with one or more
  than one Analyte Specific Reagent in producing such systems and include
  labware or disposable constituents of tests; but they do not include
  laboratory machinery, automated or powered systems. General Purpose Reagents
  include cytological preservatives, decalcifying reagents, fixatives and
  adhesives, tissue processing reagents, isotonic solutions and pH buffers. Reagents
  used in tests for more than one (1) individual chemical substance or ligand
  are General Purpose Reagents [e.g., Thermus aquaticus (TAQ) polymerase,
  substrates for enzyme immunoassay (EIA)].

  
	
   

  	
   

  	
   

  
	
  ‘a
  Group Company’

  	
   

  	
  any
  undertaking which is, on or after the Commencement Date of this Agreement, a
  subsidiary undertaking of the Licensee, a

  

 

25

 

	
   

  	
   

  	
  parent
  undertaking of the Licensee or a subsidiary undertaking of a parent
  undertaking of the Licensee, as those terms are defined in section 258 of the
  Companies Act 1985;

  
	
   

  	
   

  	
   

  
	
  ‘Issued Licensed Patents’

  	
   

  	
  means Licensed Patents that have issued
  and that are not in any manner still pending.

  
	
   

  	
   

  	
   

  
	
  ‘Laboratory’

  	
   

  	
  The laboratory of the ‘Principal
  Investigator’ (Professor Ian Jacobs) within University College London’s
  Department of Gynaecological Oncology.

  
	
   

  	
   

  	
   

  
	
  ‘Licensed Field’

  	
   

  	
  The research, development and
  commercialization of Licensed Products for Diagnostics and Therapeutics for
  cancer.

  
	
   

  	
   

  	
   

  
	
  ‘Licensed Products’

  	
   

  	
  Any and all processes, products and
  services practiced, sold or otherwise supplied by the Licensee or a Group
  Company of Licensee or its sub-licensee, and which Licensed Products or the
  use of such Licensed Products are within any Valid Claim of the Licensed Patents
  in the jurisdiction in which such Licensed Products are sold. A Licensed
  Product may include, without limitation a Diagnostic Test Kit, a Diagnostic
  Test, a Medical Implement or a Therapeutic.

  
	
   

  	
   

  	
   

  
	
  ‘Licensed Technology’

  	
   

  	
  means Resulting Intellectual Property
  and Licensed Patents.

  
	
   

  	
   

  	
   

  
	
  ‘Medical Implement’

  	
   

  	
  means a medical implement used in the
  delivery of a Therapeutic or in Theranostic or Diagnostic applications, and
  which may include, specialized probes, catheters, imaging equipment, or
  similar process.

  
	
   

  	
   

  	
   

  
	
  ‘Net Receipts’

  	
   

  	
  The amounts received by the Licensee or
  its Group Companies from the grant of sub-licences under the Licensed
  Patents, less any Value Added Tax or other sales tax, based on the timing of
  cash received and irrespective of whether the amounts may be immediately
  recognized as revenue or must be treated as deferred under the accounting
  principles generally accepted in

  

 

26

 

	
   

  	
   

  	
  the United States of America. Net
  Receipts shall not include any (a) up-front non-recurring payments, (b)
  annual and/or milestone payments and (c) amounts received by Licensee or its
  Group Companies from a sub-licensee in consideration of conducting research
  or development work.

  
	
   

  	
   

  	
   

  
	
  ‘Net Sales Value’

  	
   

  	
  The gross revenue (as recognized under
  accounting principles generally accepted in the United States of America),
  which has been actually collected (in the form of cash or equivalent) by the
  Licensee or its Group Companies on direct sales of Licensed Products to
  independent third parties in arm’s length transactions exclusively for money
  or, where the sale is not at arm’s length, the price that would have been so
  invoiced if it had been at arm’s length, after deduction of normal trade
  discounts actually granted and any credits actually given, and, provided the
  amounts are separately charged on the relevant invoice any costs of
  packaging, insurance, carriage and freight, any value added tax or other
  sales tax, and any import duties or similar applicable government levies.

  

  Notwithstanding the above:

  

  Transfer or provision of a product or service by the Licensee to a Group
  company for later sale, use or further licensing by such Group Company for
  the use, consumption by or benefit of an end customer shall not be considered
  a sale for the purpose of calculating Net Sales Value; and in the case of
  such a transfer, the only amount to be included in the calculation of Net
  Sales Value shall be the net sales price (calculated in accordance with
  exclusions and exceptions analogous to those set forth herein with respect to
  determining Net Sales Value) received by the Group Company from its end
  customer for such product or service; and

  

  The following types of transfers or provision of any product or service, and
  any associated consideration received therefore, shall not be included in Net
  Sales Value: (a) transfers for the assurance of product testing or control,
  (b) promotional 

  

 

27

 

	
   

  	
   

  	
  distribution to potential users,
  provided that the Licensee shall use reasonable commercial efforts to limit
  distribution of Licensed Products for promotional purposes to no more than
  25% (twenty-five percent) of the total volume of Licensed Products sold
  during any calendar year during the term of this Agreement, (c) distribution
  to researchers by or on behalf of the Licensee or any of its Group Companies
  or (4) disclosure or dissemination for obtaining regulatory approvals.

  
	
   

  	
   

  	
   

  
	
  ‘Parties’

  	
   

  	
  The Owner and the Licensee, and ‘Party’
  shall mean either of them.

  
	
   

  	
   

  	
   

  
	
  ‘Licensed Patents’

  	
   

  	
  Any and all of the patents and patent
  applications referred to in Schedule 1, including any continuations,
  continuations in part, extensions, reissues, divisions, and any patents,
  supplementary protection certificates and similar rights that are based on or
  derive priority from the foregoing.

  
	
   

  	
   

  	
   

  
	
  ‘Project’

  	
   

  	
  the
  programme of work described in Schedule 3, as amended from time to time in
  accordance with clause 10.9 of the Collaborative Research Agreement.

  
	
   

  	
   

  	
   

  
	
  ‘Resulting
  Intellectual Property’

  	
   

  	
  has
  the meaning given such term in Clause 1 of the Collaborative Research
  Agreement;

  
	
   

  	
   

  	
   

  
	
  ‘SELDI’

  	
   

  	
  Surface Enhanced Laser
  Desorption/Ionization, as set forth in Recital B of the Collaborative
  Research Agreement.

  
	
   

  	
   

  	
   

  
	
  ‘Territory’

  	
   

  	
  The World.

  
	
   

  	
   

  	
   

  
	
  ‘Therapeutic’

  	
   

  	
  means any drug, pharmaceutical,
  protein, polypeptide, peptide, nucleic acid, small molecule, gene therapy,
  vaccine, other substance or process that is used for the treatment of a
  disease or health condition.

  
	
   

  	
   

  	
   

  
	
  ‘Valid Claim’

  	
   

  	
  A claim of a patent or patent
  application that has not expired or 

  

 

28

 

 

	
   

  	
   

  	
  been held invalid or unenforceable by a
  court of competent jurisdiction in a final and non-appealable judgement.

  

 

 

2. Grant of
rights

 

	
  2.1

  	
   

  	
  Licences

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Owner hereby grants to the Licensee, subject to the
  provisions of this Agreement, an exclusive licence, with the right to
  sub-license, subject to clause 2.3 below, under the Licensed Technology to
  develop, manufacture, use, sell, offer for sale and/or import Licensed
  Product(s) and any improvement thereto, or have done any of these on its
  behalf and otherwise exploit the Licensed Technology, but only in the
  Licensed Field in the Territory.

  
	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Formal licences

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Parties
  shall execute such formal licences as may be necessary or appropriate for
  registration with Patent Offices and other relevant authorities in particular
  territories. In the event of any conflict in meaning between any such licence
  and the provisions of this Agreement, the provisions of this Agreement shall
  prevail wherever possible. Prior to the execution of the formal licence(s)
  (if any) referred to in clause 2.2, the Parties shall so far as possible have
  the same rights and obligations towards one another as if such licence(s) had
  been granted. The Parties shall use reasonable endeavours to ensure that, to
  the extent permitted by relevant authorities, this Agreement shall not form
  part of any public record.

  

 

2.3       Sub-licensing

 

The Licensee shall be
entitled to grant sub-licences of its rights under this Agreement to any
person, provided that:

 

2.3.1    the royalties and other
consideration provided for in the sub-licence shall be at an amount or rate
which is not less than the amount or rate applicable to direct sales or
sublicensing, as appropriate, provided for in this Agreement;

 

2.3.2    the sub-licence shall include
obligations on the sub-licensee which are equivalent to the obligations on the
Licensee under this Agreement;

 

2.3.3    the Licensee shall not
undertake any obligations pursuant to any sub-licence granted by the Licensee
hereunder which, in the Licensee’s reasonable judgment, would be deemed unduly
onerous by the Owner; 

 

2.3.4    within 60 days of the grant of
any sub-licence the Licensee shall provide to the Owner a true copy of it; and

 

2.3.5    the Licensee shall be
responsible for any breach of the sub-licence by the sub-licensee, as if the
breach had been that of the Licensee under this Agreement, and the Licensee

 

29

 

shall
indemnify the Owner against any loss, damages, costs, claims or expenses which
are awarded against or suffered by the Owner as a result of any such breach by
the sub-licensee.

 

2.3.6        Any sublicence granted by the
Licensee as part of a sublicence agreement made between the Licensee and a
sublicensee in accordance with the provisions of this Clause 2.3
("Sublicence Agreement") shall survive the termination of this
Agreement as a direct licence between the Owner and the sublicensee subject to
the provisions of such sublicence agreement and the following conditions:

 

(a)        at the time of such
termination the sublicensee is not in breach of any material provision of
its sublicense agreement with the Licensee and none of the situations referred
to in Clause 8.2.2(b) of this Agreement applies to the sublicensee; and

 

(b)       within 60 days of receiving notice of the
termination of this Agreement, the sublicensee notifies the Owner in writing
that it wishes the sublicence agreement to continue in effect in accordance
with the terms thereof and undertakes to the Owner to comply with the
sublicensee's obligations under such sublicence agreement.

 

2.4       Reservation
of rights

 

The Owner
reserves the non-exclusive right to use the Licensed Technology in the Licensed
Field solely for the purposes of academic research and teaching.

 

2.5       No
other licence

 

It is
acknowledged and agreed that no licence is granted by the Owner to the Licensee
other than the licence(s) expressly granted by the provisions of this clause 2.

 

2.6       Quality

 

The Licensee
shall ensure that all of the Licensed Products sold by it and its sub-licensees
are of satisfactory quality and comply with all applicable laws and regulations
in each part of the Territory.

 

30

 

3. Confidential
information

 

3.1       Responsibility
for development of Licensed Products

 

The Licensee
shall be exclusively responsible for the technical and commercial development
and manufacture of Licensed Products and for incorporating any modifications or
developments thereto that may be necessary or desirable and for all Licensed
Products sold or supplied, and accordingly the Licensee shall indemnify the
Owner in accordance with the terms of clause 7.3.

 

3.2       Confidentiality
obligations

 

Each Party
(‘Receiving Party’) undertakes:

 

3.2.1    to maintain as secret and
confidential all Resulting Intellectual Property and other technical,
scientific or commercial information (collectively “Confidential Information”)
obtained directly or indirectly from the other Party (‘Disclosing Party’) in
the course of or in anticipation of this Agreement and to respect the
Disclosing Party’s rights therein,

 

3.2.2    to use the same exclusively
for the purposes of this Agreement, and

 

3.2.3    to disclose the same only to those
of its Group Companies, employees, contractors and sub-licensees pursuant to
this Agreement (if any) to whom and to the extent that such disclosure is
reasonably necessary for the purposes of this Agreement provided that any such
recipients are bound by obligations of non-use and confidentiality at least as
stringent as those contained herein.

 

3.3       Exceptions
to obligations

 

The provisions of clause
3.2 shall not apply to Confidential Information which the Receiving Party can
demonstrate by reasonable, written evidence:

 

3.3.1    was, prior to its receipt by
the Receiving Party from the Disclosing Party, in the possession of the
Receiving Party and at its free disposal; or

 

3.3.2    is subsequently disclosed to
the Receiving Party without any obligations of confidence by a third party who
has not derived it directly or indirectly from the Disclosing Party; or

 

3.3.3    is or becomes generally
available to the public through no act or default of the Receiving Party or its
agents, employees, Group Company or sub-licensees; or

 

3.3.4    the Receiving Party is
required to disclose to the courts of any competent jurisdiction, or to any
government regulatory agency or financial authority, provided that the
Receiving Party shall:

 

(a)        inform
the Disclosing Party as soon as is reasonably practicable, and

 

31

 

(b)        at
the Disclosing Party’s request use reasonable efforts to seek to persuade the
court, agency or authority to have the information treated in a confidential
manner, where this is possible under the court, agency or authority’s
procedures; or

 

3.3.5    in the case of information
disclosed by the Owner to the Licensee, is disclosed to actual or potential
customers for Licensed Products in so far as such disclosure is reasonably
necessary to promote the sale or use of Licensed Products, provided that the
customers sign a written confidentiality undertaking substantially similar to
clauses 3.2 and 3.3.

 

3.4       Disclosure
to employees

 

The Receiving Party
shall procure that all of its Group Companies, employees, contractors and
sub-licensees pursuant to this Agreement (if any) who have access to any of the
Disclosing Party’s information to which clause 3.2 applies, shall be made aware
of these obligations and shall have entered into written undertakings of
confidentiality substantially similar to clauses 3.2 and 3.3 and which apply to
the Disclosing Party’s information.

 

4. Payments

 

4.1       Royalties.  Subject to This Agreement, the Licensee shall
pay royalties to the Owner as follows: 

 

4.1.1    Sale of Diagnostic Test Kits.  If the Licensee or its Group Company sells to
a third party a Diagnostic Test Kit that is a Licensed Product covered by an
Issued Licensed Patent, then the Licensee shall pay to the Owner a [***]
percent ([***]%) royalty on Net Sales Value of such Diagnostic Test Kits.

 

4.1.2    Sale of Disposable Components for Inclusion in Diagnostic Test Kits. If (i) the Licensee or its Group Company sells, either directly or
indirectly, to a third party any Disposable Component, (ii) such third party,
pursuant to any necessary sublicense from the Licensee or its Group Company
under an Issued Licensed Patent, includes such Disposable Component in a
Diagnostic Test Kit for sale, and (iii) such Diagnostic Test Kit is a Licensed
Product covered by an Issued Licensed Patent, then the Licensee shall pay to
the Owner a [***] percent ([***]%) royalty on Net Sales Value of such
Disposable Components.

 

4.2.3    Sale of Disposable Components for use in performing a Diagnostic
Test, but not for inclusion in a Diagnostic Test Kit offered for sale.  If (i) the Licensee or its
Group Company sells, either directly or indirectly, to a third party any
Disposable Component, (ii) such third party does not include such Disposable
Component in a Diagnostic Test Kit for sale, but instead uses such Disposable
Component in performing a Diagnostic Test as part of a service for a fee, (iii)
such third party has obtained any necessary sublicense

 

*** Confidential treatment request pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
Omitted portions have been filed separately with the Commission.

 

32

 

to perform such Diagnostic Test from the Licensee or
its Group Company under an Issued Licensed Patent, and (iv) such Diagnostic
Test is a Licensed Product covered by an Issued Licensed Patent, then the
Licensee shall pay to the Owner a [***] percent ([***]%) royalty on Net Sales
Value of such Disposable Components.

 

4.2.4    Grant of a sublicense to manufacture and sell a Diagnostic Test Kit
with no associated sale of Disposable Components. If
(i) the Licensee or its Group Company grants to a third party a sublicense to
manufacture and sell a Diagnostic Test Kit, (ii) such Diagnostic Test Kit is a
Licensed Product covered by an Issued Licensed Patent, and (iii) neither the
Licensee nor any of its Group Companies sells either directly or indirectly to
such third party any Disposable Components that are sold as part of such
Diagnostic Test Kit, then the Licensee shall pay to the Owner [***] percent ([***]%)
of the Net Receipts for such sublicense.

 

4.2.5    Grant of a sublicense to
perform a Diagnostic Test with no Associated Sale of Diagnostic Test Kits or
Disposable Components. If: (i) the Licensee or its
Group Company grants to a third party a sublicense to sell a service involving
the performance of a Diagnostic Test, (ii) such Diagnostic Test is a Licensed
Product covered by an Issued Licensed Patent, and (iii) neither the Licensee nor
any of its Group Companies sells either directly or indirectly to such third
party any Diagnostic Test Kits or Disposable Components for use in the
performance of such Diagnostic Test, then the Licensee shall pay to the Owner
[***] percent ([***]%) of the Net Receipts for such sublicense.

 

4.2.6    Performance of Diagnostic Test by the Licensee or its Group Company. If the Licensee or its Group Company sells a service involving the
performance of a Diagnostic Test, which Diagnostic Test is a Licensed Product
covered by an Issued Licensed Patent, then the Licensee shall pay to the Owner
[***] ([***]%) on Net Sales Value of such Diagnostic Test

 

4.2.7    Grant of sublicense to commercialise a Therapeutic or Medical
Implement. If the Licensee or its Group Company
grants to a third party a sublicense to commercialise a Therapeutic or a
Medical Implement that is a Licensed Product covered by an Issued Licensed
Patent, then the Licensee shall pay to the Owner [***] percent ([***]%) of the
Net Receipts for such sublicense. 

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

33

 

4.2.8     Exclusions and Limitations

 

(a)   No Royalties on Software or Capital Equipment. In no case shall Licensee or its Group Company pay to UCL
Biomedica any royalties or other fees for the sale of capital equipment or
software, including without limitation: ProteinChip® Readers, ProteinChip®
Software, Biomarker PatternsTM software, CiphergenExpress TM Software
and any software that embodies a classification algorithm that is used in
performing a Diagnostic Test. The full amounts received in connection with
periodic deliveries of Disposable Components or Diagnostic Test Kits under a
“Reagent Rental Plan” (a method for customers to pay for capital equipment or
software over a series of periodic amortized payments in connection with
periodic shipments of specialized Diagnostic Test Kits or Disposable Components
that are used on or in connection with the capital equipment and software) shall not be used in determining Net
Sales. Instead, in determining Net Sales of such Diagnostic Test Kits or
Disposable Components, the full amounts received in connection with periodic
deliveries under a “Reagent Rental Plan” shall be adjusted so as to deduct the
amortized cost of software and capital equipment that have been allocated along
with the true charges for such Diagnostic Test Kits or Disposable Components in
the Reagent Rental Plan. Ultimately, Net Sales of Diagnostic Test Kits or
Disposable Components should reflect only those amounts actually attributable
to such products, as if such products were sold on a stand-alone basis.

 

(b)   No Royalties on Licenses to Patents or Licensed Patents that are Not
Issued Licensed Patents. 

(i) In no case shall Licensee or its Group Company pay
to UCL Biomedica any royalties for the grant of a license to any patent that is
not an Issued Licensed Patent. For example, but not by way of limitation, any
consideration received for a license grant under a Baylor University-owned
SELDI patent or a Licensee-owned Retentate Chromatography patent shall not
trigger any royalty obligation to UCL Biomedica, even if such grant may be
necessary in the manufacture, sale or use of any Diagnostic Test Kit or in the
performance of any Diagnostic Test.

 

(ii) In no case shall Licensee or its Group Company
pay UCL Biomedica any royalties for the grant of a license to any Licensed
Patent that is not an Issued Licensed Patent. Notwithstanding the above, once
there is an Issued Licensed Patent in a given country or jurisdiction, the
Licensee shall pay royalties to UCL Biomedica on sales of Licensed Products in
such country or jurisdiction (i) retroactively on a lump sum basis from the
date of first commercial sale of such

 

34

 

Licensed Products, if any, through the date of
issuance of such Issued Licensed Patent Patent (“Licensed Patent Issue Date”)
and (ii) on a prospective basis, in accordance with this clause 4.2. Licensee
shall make such retroactive payment in accordance with subclause (i) above
within 60 (sixty) days after such Licensed Patent Issue Date. Ciphergen shall
use take reasonable steps to ensure that its patent counsel prosecute Licensed
Patents in a diligent manner.

 

(c)   No Royalty owed on Revenue Received in Exchange for Performance of
Product or Service Development and/or Marketing Activities. Under no circumstances shall Licensee or its Group Companies be
liable to UCL Biomedica for royalties on revenue received in consideration of
product or service development and/or marketing activities.

 

(d)   One Royalty Per Transaction. Only one
royalty shall be due and payable to UCL Biomedica by the Licensee on the sale
of any product or service subject to a royalty under this Agreement regardless
of the number of Licensed Patents or Licensed Patent claims that may cover any
such product or service, its manufacture and/or use. Moreover, if the
performance of any service that triggers a royalty hereunder requires the use
of a product, the sale of which triggers a royalty hereunder, only the one
royalty of higher value among the two royalties triggered shall be due and
payable to UCL Biomedica by the Licensee.

 

(e)   No Other Royalties Owed. Except as
explicitly set forth herein, neither the Licensee nor its Group Companies shall
pay to UCL Biomedica any royalties under this Agreement.

 

4.3       Combination
Products

 

Proportional sharing of royalties in cases of
multi-Biomarker-based Diagnostic Tests with multiple intellectual property
owners. In the event that any
royalty-bearing event hereunder involves a Diagnostic Test that employs any
Biomarkers (as defined herein below) on which royalties are owed to a third
party (a “Third Party Licensor”), Net Sales (or Net Receipts from sublicensing,
as applicable) for such royalty-bearing event shall be reduced to reflect the
proportion of Biomarkers on which royalties are owed to a Party hereunder
(“Collaborative Research Biomarkers”)  as
opposed to Biomarkers on which royalties are owed to a Third Party Licensor
(“Third Party Biomarkers”). Specifically, Net Sales (or Net Receipts, as applicable)
for such royalty-bearing event shall be reduced by multiplying the fraction A
over A+B where “A” is

 

35

 

the number of Collaborative Research Biomarkers
covered by Issued Licensed Patents and “B” is the number of Third Party
Biomarkers.

 

4.4       In the event that, due to market conditions, the royalty paid to the
Owner constitutes a reduction in the return realised by the Licensee such that
the reduction diminishes the Licensee’s capability to be profitable or
competitive with respect to the sale, provision or use of any Licensed Product,
the Owner agrees to consider a reasonable reduction in the royalty paid to the
Owner in such cases for the period during which such market condition exists.
Factors determining the size of the reduction will include, without limitation,
the Licensee’s then-current profit margin on such Licensed Products. 

 

4.5       If the Licensee or any of its Group Companies is required to pay a
royalty or royalties to any obtain a licence from any third party licensor
(“Third Party Licence”) for technology that is not a Biomarker in connection
with the manufacture, use, practice, sale, or marketing of a Licensed Product
hereunder, at the Licensee’s sole discretion, the royalties payable under this
Agreement shall be reduced by (a) the amount of royalties paid under the Third
Party Licence or (b) 50% or (c) royalties paid under the Third
Party Licence shall be treated as a deductible item when calculating Net Sales
Value provided that the amount of royalty payable by the Licensee to the Owner
in any semi-annual period shall not be reduced by more than 50% of the amount
which would have been payable in the absence of this clause.

 

4.6       Payment
terms

 

Royalties due
under this Agreement shall be calculated and paid semiannually as of June 30th
and December 31st for the six (6)-month period prior to such
respective date and shall be paid semiannually within 60 days next following
such respective date, in respect of sales of Licensed Products made during such
six (6)-month period and within 60 days of the termination of this Agreement.

 

4.7       All
sums due under this Agreement:

 

4.7.1    are exclusive of Value Added
Tax which will be paid by the Licensee only if the Licensee is required to do
so pursuant to applicable law;

 

4.7.2    shall be paid in pounds
sterling by bank transfer:

 

Barclays Bank Plc – Bloomsbury &
Tottenham Court Road Branch

PO Box 11345

London W12 8GG 

 

Sort Code: 20 10 53

Account No: 30782270

 

36

 

Account name: UCL BioMedica Plc

Swift Code BARCGB22

 

or cheque
made payable to UCL BioMedica Plc and in the case of sales or sub-licence
income received by the Licensee in a currency other than pounds sterling, the
royalty shall be calculated in the other currency and then converted into equivalent
pounds sterling at the buying rate of such other currency as quoted by Barclays
Bank plc in London as at the close of business on the last business day of the
quarterly period with respect to which the payment is made;

 

4.7.3    subject to clause 1 (definition
of “Net Sales Value”) shall be made without deduction of income tax or other
taxes charges or duties that may be imposed, except insofar as the Licensee is
required to deduct the same to comply with applicable laws. The Parties shall
co-operate and take all steps reasonably and lawfully available to them, at the
expense of the Owner, to avoid deducting such taxes and to obtain double
taxation relief. If the Licensee is required to make any such deduction it
shall provide the Owner with such certificates or other documents as it can
reasonably obtain to enable the Owner to obtain appropriate relief from double
taxation of the payment in question; and

 

4.7.4    shall be made by the due date,
failing which the Owner may charge interest on any outstanding amount on a
daily basis at a rate equivalent to 1% above the most favourable Bank of
England base rate then in force.

 

4.8       If
at any time during the continuation of this Agreement the Licensee is
prohibited from making any of the payments required hereunder by a governmental
authority in any country then the Licensee will within the prescribed period
for making the said payments in the appropriate manner use its best endeavours
to secure from the proper authority in the relevant country permission to make
the said payments and will make them within 30 (thirty) days of receiving such
permission. If such permission is not received within 30 (thirty) days of the
Licensee making a request for such permission then, at the option of the Owner,
the Licensee shall deposit the royalty payments due in the currency of the
relevant country either in a bank account designated by the Owner within such
country or such royalty payments shall be made to an associated company of the
Owner designated by the Owner and having offices in the relevant country
designated by the Owner.

 

4.9       Royalty
statements

 

The Licensee shall send
to the Owner at the same time as each royalty payment is made in accordance
with clause 4.2 a statement setting out, in respect of each territory or region
in which Licensed Products are sold, the types of Licensed Product sold, the
quantity of each type sold,

 

37

 

and the total Net Sales
Value in respect of each type, expressed both in local currency and pounds
sterling and showing the conversion rates used, during the period to which the
royalty payment relates.

 

4.10     Records

 

4.10.1  The Licensee shall keep at its
normal place of business detailed and up to date records and accounts showing
the quantity, description and value of Licensed Products sold by it, and the
amount of Net Receipts received by it in respect of Licensed Products, on a
country by country basis, and being sufficient to ascertain the royalties due
under this Agreement.

 

4.10.2  The Licensee shall make such
records and accounts available, on reasonable notice but no more than once each
year, for inspection during business hours by an independent chartered
accountant nominated by the Owner for the purpose of verifying the accuracy of
any statement or report given by the Licensee to the Owner under this clause
4.10. The accountant shall be required to keep confidential all information
learnt during any such inspection, and to disclose to the Owner only such
details as may be necessary to report on the accuracy of the Licensee’s
statement or report. The Owner shall be responsible for the accountant’s
charges unless the accountant certifies that there is an inaccuracy of more
than 5% per
cent in any royalty statement, in which case the Licensee shall pay his charges
in respect of that inspection.

 

4.10.3  The Licensee shall ensure that
the Owner has the same rights as those set out in this clause 4.10 in respect
of any sub-licensee of the Licensee which is sub-licensed under the Licensed
Patents pursuant to this Agreement.

 

5.         Commercialisation

 

5.1       The
Licensee shall diligently proceed to develop and commercially exploit Licensed
Products to the maximum extent worldwide.

 

5.2       Without
prejudice to the generality of the Licensee’s obligations under clause 5.1, the
Licensee shall provide at least annually to the Owner an updated, written
Development Plan, showing all past, current and projected activities taken or
to be taken by the Licensee to bring Licensed Products to market and maximise
the sale of Licensed Products worldwide. The Owner’s receipt or approval of any
such plan shall not be taken to waive or qualify the Licensee’s obligations
under clause 5.1.

 

38

 

5.3       If
the Owner considers at any time during the period of this Agreement that the
Licensee has without legitimate reason failed to proceed diligently to develop
and commercially exploit Licensed Products, the Owner shall so notify the
Licensee in writing. By not later than 10 (ten) days after Licensee’s receipt
of such notice, the parties shall commence informal discussions with the goal
of reaching a mutually acceptable resolution of the matter. If the parties have
not been able to arrive at such resolution within 3 (three) months after commencement
of such negotiations, either Party shall be entitled to refer the matter to an
alternative dispute resolution (“ADR”) process, in accordance with Schedule 2. 

 

6          Intellectual
property

 

6.1       Maintain
the Licensed Patents

 

The Licensee
shall at his own cost and expense pay all expenses associated with the
preparation and filing of patent applications in accordance with clause 5.4 of
the Collaborative Research Agreement and pay all maintenance and renewal fees
in respect of the Licensed Patents as and when due; provided that if the
Licensee wishes to abandon any patent application or not to maintain any such
Licensed Patent (or to cease funding any such application or Licensed Patent)
it shall give 3 months’ prior written notice thereof to the Owner and on the
expiry of such notice period the Licensee shall cease to be licensed under the
patent application or Licensed Patent identified in the notice.

 

6.2       Infringement
of the Licensed Patents

 

6.2.1    Each Party shall inform the
other Party promptly if it becomes aware of any infringement or potential
infringement of any of the Licensed Patents, and the Parties shall consult with
each other to decide the best way to respond to such infringement.

 

6.2.2    If the Parties fail to agree
on a joint programme of action, including how the costs of any such action are
to be borne and how any damages or other sums received from such action are to
be distributed, then the Licensee shall be entitled to take action in its own
name against the third party at its sole expense and it shall be entitled to
all damages or other sums received from such action, after reimbursing the
Owner for any reasonable expenses incurred in assisting it in such action. The
Owner may agree to be joined in any suit to enforce such rights and shall have
the right to be separately represented by its own counsel at its own expense.
If the alleged infringement is both within and outside the Licensed Field, the
Parties shall also co-operate with the Owner’s other licensees (if any) in
relation to any such action.

 

39

 

6.3       Infringement
of third party rights

 

6.3.1    If any warning letter or other
notice of infringement is received by a Party, or legal suit or other action is
brought against a Party, alleging infringement of third party rights in the
manufacture, use or sale of any Licensed Product, that Party shall promptly
provide full details to the other Party, and the Parties shall discuss the best
way to respond.

 

6.3.2    The Licensee shall have the
right but not the obligation to defend such suit and shall have the right to
settle with such third party, provided that if any action or proposed
settlement involves the making of any statement, express or implied, concerning
the validity of any Patent, the consent of the Owner must be obtained before
taking such action or making such settlement.

 

7.         Warranties
and liability

 

7.1       Warranties
by owner

 

The Owner warrants, represents and undertakes as follows:

 

7.1.1    it is the absolute and
unencumbered owner of the Licensed Patents and has caused its directors and
employees to execute such assignments of the Licensed Patents as may be
necessary to give title to the Licensed Patents to the Owner; and

 

7.1.2    it has not done, and will not
do nor agree to do during the continuation of this Agreement, any of the
following things if to do so would be inconsistent with the exercise by the
Licensee of the rights granted to it under this Agreement, namely:

 

(a)        grant
or agree to grant any rights in the Licensed Patents or any improvements
thereto; or

 

(b)        assign,
mortgage, charge or otherwise transfer any of the Licensed Patents or (subject
to clause 7.2 below) any of its rights or obligations under this Agreement; and

 

(c)        it
is not aware that any third party owns or claims any rights in the Licensed
Patents; and

 

(d)        it
is not aware (but without having carried out any investigation other than
asking the Principal Investigator and the Owner’s patent agents for their
understanding of the position) that any third party owns or claims that it owns
any rights which would be infringed by use of the Licensed Patents in
accordance with the provisions of this Agreement.

 

40

 

7.2       No
other warranties

 

7.2.1    Each of the Licensee and the
Owner acknowledges that, in entering into this Agreement, it does not do so in
reliance on any representation, warranty or other provision except as expressly
provided in this Agreement, and any conditions, warranties or other terms
implied by statute or common law are excluded from this Agreement to the
fullest extent permitted by law.

 

7.2.3    Without limiting the scope of
clause 7.2.1, the Owner does not give any warranty, representation or
undertaking:

	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  as to the efficacy or usefulness of the Licensed Technology;
  or

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  that any of the Licensed Patents is or will be valid or
  subsisting or (in the case of an application) will proceed to grant; or

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  that the use of any of the Licensed Technology, the
  manufacture, sale or use of the Licensed Products or the exercise of any of
  the rights granted under this Agreement will not infringe any other
  intellectual property or other rights of any other person; or

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  that the Resulting Intellectual Property or any other
  information communicated by the Owner to the Licensee under or in connection
  with this Agreement will produce Licensed Products of satisfactory quality or
  fit for the purpose for which the Licensee intended; or

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  as imposing any obligation on the Owner to bring or
  prosecute actions or proceedings against third parties for infringement or to
  defend any action or proceedings for revocation of any of the Licensed
  Patents; or

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  as imposing any liability on the Owner in the event that
  any third party supplies Licensed Products to customers located in the
  Territory.

  

 

7.3       Indemnity

 

The Licensee
shall indemnify the Owner against any loss, damages, costs or expenses which
are awarded against or incurred by the Owner as a result of any claim
concerning the use by the Licensee or any of its sub-licensees of the Licensed
Technology or otherwise in connection with the manufacture, use or sale of or
any other dealing in any of the Licensed Products by the Licensee or its Group
Companies or any of its sub-licensees.

 

7.4       Liability

 

Notwithstanding
any other provision of this Agreement, no Party shall be liable to any other
Party to this Agreement in contract, tort, negligence, breach of statutory duty
or otherwise for any loss, damage, costs or expenses of any nature whatsoever
incurred or suffered by that

 

41

 

other Party
or its Group Companies of an indirect or consequential nature including without
limitation any economic loss or other loss of turnover, profits, business or
goodwill. Each Party’s liability for direct damages hereunder shall be limited
to the total amount of royalties paid by the Licensee to the Owner at the time
the event giving rise to any such liability occurs.

 

8          Duration
and termination

 

8.1       Commencement
and termination by expiry

 

This
Agreement, and the licences granted hereunder, shall come into effect on the
Commencement Date and, unless terminated earlier in accordance with this clause
8, shall continue in force on a country by country basis until the later of:

	
   

  	
   

  	
   

  
	
  8.1.1

  	
   

  	
  The date of expiration of the last to expire patent
  included within the Issued Licensed Patents in each such country, or

  
	
   

  	
   

  	
   

  
	
  8.2.2

  	
   

  	
  The tenth anniversary of the Commencement Date;

  
	
   

  	
   

  	
  and on such
  date the licences granted hereunder with respect to the affected country
  shall terminate automatically.

  
	
   

  	
   

  	
   

  

8.2       Early
termination

 

8.2.1    The Licensee may terminate
this Agreement at any time on 90 days’ prior notice in writing to the Owner.

 

8.2.2    Without prejudice to any other
right or remedy, either Party may terminate this Agreement at any time by
notice in writing to the other Party (‘Other Party’), such notice to take
effect as specified in the notice:

 

(a)        if
the Other Party is in breach of any material provision of this Agreement and,
in the case of a breach capable of remedy within 90 days, the breach is not
remedied within 90 days of the Other Party receiving notice specifying the
breach and requiring its remedy; or

 

(b)        if
the Other Party becomes insolvent, or if an order is made or a resolution is
passed for the winding up of the Other Party (other than voluntarily for the
purpose of solvent amalgamation or reconstruction), or if an administrator,
administrative receiver or receiver is appointed in respect of the whole or any
part of the Other Party’s assets or business, or if the Other Party makes any
composition with its creditors or takes or suffers any similar or analogous
action in consequence of debt.

 

42

 

8.2.3    The Owner may forthwith
terminate this Agreement by giving written notice to the Licensee if the
Licensee or its Affiliate or sub-licensee commences legal proceedings, or
assists any third party to commence legal proceedings, to challenge the
validity of any of the Licensed Patents.

 

8.3       Consequences
of termination

 

8.3.1    Upon termination of this
Agreement by expiry under clause 8.1 above, the Licensee shall have the
non-exclusive right to use the Resulting Intellectual Property without charge
or other obligation to the Owner.

 

8.3.2    Upon termination of this
Agreement for any reason:

 

(a)        the
Licensee and its sub-licensees shall be entitled to sell, use or otherwise
dispose of (subject to payment of royalties under clause 4) any unsold or
unused stocks of the Licensed Products for a period of 1 (one) year following
the date of termination;

 

(b)        subject
to clauses 8.1 and 8.3.1 above, the Licensee shall no longer be licensed to use
or otherwise exploit in any way, either directly or indirectly, the Licensed
Patents, in so far and for as long as any of the Licensed Patents remains in
force or the Resulting Intellectual Property;

 

(c)        subject
to paragraph 8.3.1 above, the Licensee shall consent to the cancellation of any
formal licence granted to it, or of any registration of it in any register, in
relation to any of the Licensed Patents; and

 

(d)        Except
as provided in this clause 8.3.2 and 8.3.3 and 8.3.4, and except in respect of
any rights that may have accrued prior to termination of this Agreement,
neither Party shall be under any further obligation to the other.

 

	
  9.

  	
  General

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Force majeure

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Neither
  Party shall have any liability or be deemed to be in breach of this Agreement
  for any delays or failures in performance of this Agreement which result from
  circumstances beyond the reasonable control of that Party, including without
  limitation labour disputes involving that Party. The Party affected by such
  circumstances shall promptly notify the other Party in writing when such
  circumstances cause a delay or failure in performance and when they cease to
  do so.

  
	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Amendment

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This
  Agreement may only be amended in writing signed by duly authorised
  representatives of the Owner and the Licensee.

  
	
   

  	
   

  	
   

  

43

 

9.3       Assignment
and third party rights

 

9.3.1    Subject to clause 9.3.2 below,
neither Party shall assign, mortgage, charge or otherwise transfer any rights
or obligations under this Agreement, nor any of the Licensed Patents or rights
under the Licensed Patents, without the prior written consent of the other
Party, which consent shall not unreasonably be with held.

 

9.3.2    Either Party may assign all
[or part] of its rights and obligations under this Agreement together with its
rights in the Licensed Patents to a wholly-owned subsidiary or partnership of
which such Party is the general partner or any company to which it transfers
all [or part] of its assets or business, PROVIDED that the assignee undertakes
to the other Party to be bound by and perform the obligations of the assignor
under this Agreement. However a Party shall not have such a right to assign
this Agreement if it is insolvent or any other circumstance described in clause
8.2.2(b) applies to it.

 

9.4       Waiver

 

No failure or
delay on the part of either Party to exercise any right or remedy under this
Agreement shall be construed or operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy preclude the further exercise
of such right or remedy.

 

9.5       Invalid
clause

 

If any
provision or part of this Agreement is held to be invalid, amendments to this
Agreement may be made by the addition or deletion of wording as appropriate to
remove the invalid part or provision but otherwise retain the provision and the
other provisions of this Agreement to the maximum extent permissible under
applicable law.

 

9.6       No
agency

 

Neither Party
shall act or describe itself as the agent of the other, nor shall it make or
represent that it has authority to make any commitments on the other’s behalf.

 

9.7       Interpretation

 

In this
Agreement:

 

9.7.1    the headings are used for
convenience only and shall not affect its interpretation;

 

9.7.2    references to persons shall
include incorporated and unincorporated persons; references to the singular
include the plural and vice versa;
and references to the masculine include the feminine;

 

9.7.3    references to clauses and
Schedules mean clauses of, and schedules to, this Agreement; and

 

44

 

9.7.4    references to the grant of
‘exclusive’ rights shall mean that the person granting the rights shall neither
grant the same rights (in the same Licensed Field and Territory) to any other
person, nor exercise those rights directly to the extent that and for as long
as the Licensed Products are within Valid Claims of unexpired Licensed Patents.

 

9.8       Notices

 

9.8.1    Any notice to be given under
this Agreement shall be in writing and shall be sent by express courier or
personal delivery, first class mail or air mail, or by fax (confirmed by first
class mail or air mail) to the address of the relevant Party set out at the
head of this Agreement, or to the relevant fax number set out below, or such
other address or fax number as that Party may from time to time notify to the
other Party in accordance with this clause 9.8. The fax numbers of the Parties
are as follows: Owner +44 (0) 20 7679 9838; Licensee 510.505.2101, attention
President Diagnostics Division.

 

9.8.2    Notices sent as above shall be
deemed to have been received on the date delivered if sent via express courier
or otherwise delivered personally, three working days after the day of posting
(in the case of inland first class mail), or seven working days after the date
of posting (in the case of air mail), or on the next working day after transmission
(in the case of fax messages, but only if a transmission report is generated by
the sender’s fax machine recording a message from the recipient’s fax machine,
confirming that the fax was sent to the number indicated above and confirming
that all pages were successfully transmitted).

 

9.9       Law
and Jurisdiction

 

The validity,
construction and performance of this Agreement shall be governed by English law
and shall be subject to the exclusive jurisdiction of the English courts to
which the parties hereby submit, except that a Party may seek an interim
injunction in any court of competent jurisdiction.

 

9.10     Further
action

 

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

 

9.11     Announcements

 

Neither Party
shall make any press or other public announcement concerning any aspect of this
Agreement, or make any use of the name of the other Party in connection with or
in consequence of this Agreement, without the prior written consent of the
other Party.

 

45

 

9.12     Entire
agreement

 

This
Agreement, including its Schedules, sets out the entire agreement between the
Parties relating to its subject matter and supersedes all prior oral or written
agreements, arrangements or understandings between them relating to such
subject matter. The Parties acknowledge that they are not relying on any
representation, agreement, term or condition which is not set out in this
Agreement.

 

10.  Third
parties

 

This
Agreement does not create any right enforceable by any person who is not a
party to it ('Third Party') under the Contracts (Rights of Third Parties) Act
1999, but this clause does not affect any right or remedy of a Third Party
which exists or is available apart from that Act.

 

AGREED
by the Parties through their authorised signatories:

 

	
  For and on behalf of UCL Biomedica plc

  	
   

  	
   

  	
  For and on behalf of Ciphergen
  Biosystems, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  signed

  	
   

  	
   

  	
  signed

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  print name

  	
   

  	
   

  	
  print name

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  title

  	
   

  	
   

  	
  title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  date

  	
   

  	
   

  	
  date

  	
   

  

 

46

 

Schedule 1

 

The Licensed Patents

 

47

 

Schedule 2

 

Alternative Dispute Resolution

 

Alternative Dispute
Resolution. For any and all claims, disputes, or
controversies arising under, out of, or in connection with this Agreement,
including any dispute relating to patent validity or infringement, which the
Parties shall be unable to resolve within sixty (60) days, the Party raising
such dispute shall promptly advise the other Party of such claim, dispute or
controversy in a writing that describes in reasonable detail the nature of such
dispute. By not later than ten (10) business days after the recipient has
received such notice of dispute, each Party shall have selected for itself a
representative who shall have the authority to bind each such Party and shall
additionally have advised the other Party in writing of the name and title of
such representative. By not later than twenty (20) business days after the date
of such notice of dispute, such representatives shall select a mutually agreed
upon independent expert schedule a date for engaging in an ADR process. Thereafter,
the representatives of the Parties shall engage in good faith in an ADR process.
If the representatives of the Parties have not been able to resolve the dispute
within thirty (30) business days after the termination of the ADR, the Parties
shall have the right to pursue any other remedies legally available to resolve
such dispute in the English courts, to whose jurisdiction for such purposes the
Owner and the Licensee each irrevocably consents and submits. Notwithstanding
the foregoing, nothing in this Schedule 2 shall be construed to waive any
rights or timely performance of any obligations existing under this Agreement.
The costs of such ADR process shall be borne equally by the Parties.

 

48

 

SCEHDULE 4

 

Material Transfer Agreement

 

UNIVERSITY COLLEGE LONDON

Gower Street London WC1E 6BT

 

 

MATERIAL TRANSFER AGREEMENT

 

UNIVERSITY COLLEGE LONDON has collected and/or developed the materials known as: (Insert description of materials below)

 

[To be completed]               (“Materials”)

 

Providing University College London Scientist is: (Insert name and department)

 

Professor Ian Jacobs Department of Gynaecological
Oncology

(the
“Provider”)

 

Company Scientist is: (Insert name)

 

[To
be completed]

(the
“Company Scientist”)

 

The Company Scientist is an employee of: (Insert company name and full address)

 

Ciphergen
Biosystems, Inc. a Delaware corporation having its principal place of business
at

6611 Dumbarton Circle, Fremont, California 94555, U.S.A 

(the
“Company”)

 

The Company wishes to acquire a sample of the Materials for academic
research relating to: (Insert

description of academic research for which Materials are to be used)

 

The
“Project” as defined in clause 1 of the Collaborative Research Agreement between
UCL,

UCL BioMedica Plc and Ciphergen Biosystems, Inc dated           2005 

 

(the “Collaborative Research
Agreement”)

 

49

 

	
  UCL is willing
  to provide a sample of the Materials for the Project Period (the “Term”) as
  defined in clause 2.1 of the Collaborative Research Agreement on the Terms
  and Conditions shown overleaf provided the Company agrees to comply with
  those Terms and Conditions.

  

 

 

Standard Terms and Conditions for Release of Materials

 

	
  UCL represents and
  warrants to Company that, to the best of its knowledge (a) the Materials have
  been obtained by UCL in accordance with all applicable laws, rules and
  regulations, (b) UCL has
  all necessary rights to transfer and dispose of the Materials as contemplated
  herein and (c) the transfer, shipment and delivery of the Materials to
  Company shall be made in such a manner and by such means as to ensure the
  biological and/or chemical integrity of the Materials and the safety of
  Company’s employees, agents and contractors.

  
	
   

  	
   

  	
   

  
	
  Company shall
  keep the Materials secure at the Company’s laboratory and ensure that access
  to the Materials is restricted to the Company Scientist and his authorised
  co-workers. In this Agreement “the Materials” shall include any and all materials,
  documents and information that UCL may provide to the Company under or in
  connection with this Agreement, and any derivatives, portions, progeny or
  improvements.

  
	
   

  	
   

  	
   

  
	
  The Company
  shall use the Materials only for the Project and not for any other purpose
  even if those purposes are being pursued in the Company’s laboratory without
  the prior written consent of UCL.

  
	
   

  	
   

  	
   

  
	
  The Company
  shall not supply the Materials to any party other than its Group Companies
  (as defined in the Collaborative Research Agreement).

  
	
   

  	
   

  	
   

  
	
  The Term may be extended with the written
  agreement of the parties.

  
	
   

  	
   

  	
   

  
	
  The
  Company shall acknowledge UCL as the source of the materials in any
  publication that mentions them. The Company shall send UCL a copy of any
  reports or publications which describe work carried out using the Materials,
  and UCL shall be entitled to use all such reports and publications subject to
  the provisions of the Collaborative Research Agreement.

  
	
   

  	
   

  	
   

  
	
  The Materials and any copies
  thereof made by or in the possession of or under the control of the Company
  pursuant to this Agreement shall remain under the custody of UCL and shall be immediately
  returned or if UCL so requires, destroyed, provided that UCL acknowledges and understands
  that (a) the Materials may be partially or totally damaged, destroyed,
  consumed or otherwise rendered unusable for any other purpose in the course
  of the Project and (b) Company may not be able to return some or all of the
  received Materials upon completion of the Project.

  

 

 

	
  on termination of this Agreement, and

  
	
   

  
	
  in the event that the Company is in breach of any
  of the conditions of this Agreement, and

  
	
   

  
	
  at any other time on request of UCL and request
  and any copies thereof made by or in the

  

 

50

 

	
   

  	
  possession of or under the control of the Company
  pursuant to this Agreement. If UCL so dictates the Material should be
  destroyed under the circumstances that might arise under this Clause 6.

  
	
   

  
	
  UCL shall at
  all times remain the custodian of the materials and which will not be removed
  from the Company’s address. No licence under any UCL intellectual property is
  granted or implied by this Agreement.

  
	
   

  
	
  In the event
  that the Company makes or observes any new discovery, improvement or
  invention (“Invention”) relating to the Materials or as a direct result of
  the Project then the Company will bring this to the attention of UCL and such
  Invention shall be subject to the provisions of the Collaborative Research
  Agreement.

  
	
   

  
	
  The Company
  shall use the Materials in accordance with good laboratory practice and the
  highest standards of skill and care and shall ensure compliance with any
  applicable laws and regulations governing the transportation, keeping or use
  of the Materials.

  
	
   

  
	
  The Company
  shall reimburse UCL for any reasonable shipping and related costs that may be
  incurred when preparing and sending the Materials to the Company.

  
	
   

  
	
  The Materials
  are experimental in nature and, subject to UCL’s representations and
  warranties set forth above, UCL makes no representation and gives no warranty
  or undertaking, in relation to them. As examples, but without limiting the
  foregoing, UCL give no warranty:

  
	
   

  
	
   

  	
  that use of the
  Materials will not infringe any patent, copyright, trade mark or other right
  owned by any third party; or

  
	
   

  
	
   

  	
  that the
  Materials are of merchantable or satisfactory quality or fit for any
  particular purpose, have been developed with reasonable care and skill or
  tested, for the presence of pathogens or otherwise, or are viable, safe, or
  non-toxic.

  
	
   

  
	
  UCL shall have
  no liability to the Company, whether in contract, tort or otherwise, in
  relation to the supply of the Materials to the Company or their use or
  keeping by the Company Scientist and/or Company or by any other person, or
  the consequences of their use, to the maximum extent permitted under
  applicable law. The Company shall indemnify and hold harmless the Indemnified
  Parties from and against all Claims and Losses arising from such supply, use
  or keeping, including without limitation Claims and Losses arising from:

  
	
   

  
	
   

  	
  injury to the Company's employees and third
  parties;

  
	
   

  
	
   

  	
  infringement of third party intellectual property
  rights; and

  
	
   

  
	
   

  	
  use of the Materials within or outside the scope
  of this Agreement.

  

 

For the purposes
of this Agreement: 

 

“Indemnified
Parties” shall
mean UCL and its directors, officers, employees,

 

51

 

representatives and
associated undertakings; 

 

“Claims” shall mean all demands, claims,
proceedings, penalties, fines and liability (whether criminal or civil, in
contract, tort or otherwise); and 

 

“Losses” shall mean all losses including
without limitation financial losses, damages, legal costs and other expenses of
any nature whatsoever.

 

The Company
agrees to be bound by this Agreement in consideration of UCL making the
Materials available to the Recipient.

 

English law shall
apply to this Agreement, and the English courts shall have exclusive
jurisdiction.

 

AGREED by the parties
through their authorised signatories:-

 

 

	
  For and on behalf of

  	
   

  	
  For and on behalf of

  	
   

  
	
  University College
  London

  	
   

  	
  Ciphergen Biosystems,
  Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signed

  	
   

  	
  Signed

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Print Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Date

  	
   

  

 

***
Confidential treatment request pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission. Omitted portions have been
filed separately with the Commission.

 

52Exhibit 4.13

 

The EXCO
Resources, Inc.

 

2005
LONG-TERM INCENTIVE PLAN

 

The EXCO Resources, Inc.
2005 Long-Term Incentive Plan (the “Plan”) was originally adopted by the Board
of Directors and the stockholders of EXCO Holdings II, Inc., a Delaware
corporation (“Holdings II”), on September 15, 2005. As a result of the
merger of Holdings II with and into EXCO Holdings Inc., a Delaware corporation
(“Holdings”), the Plan was assumed by Holdings, effective as of September 30,
2005, and ratified by Holdings’ Board of Directors, effective as of October 5,
2005, and Holdings’ stockholders, effective as of October 3, 2005. As a
result of the merger of Holdings with and into EXCO Resources, Inc., a
Texas corporation (the “Company”), the Plan was assumed by the Company,
effective as of February 14, 2006, in accordance with the terms of that
certain Agreement and Plan of Merger, dated February 9, 2006, which
agreement, including the merger and the Company’s assumption of the Plan
contemplated thereby, were approved, effective as of February 4, 2006, by (i) the
Boards of Directors of the Company and Holdings, (ii) the sole shareholder
of the Company, and (iii) the stockholders of Holdings. The Awards
previously granted under this Plan have been converted into awards in EXCO
Resources, Inc. common stock pursuant to the requirements of Treasury
Regulation section 1.424-1. The Plan shall be known as the EXCO Resources, Inc.
2005 Long-Term Incentive Plan from and after February 14, 2006.

 

ARTICLE 1

PURPOSE

 

The purpose of the Plan
is to attract and retain the services of key employees, consultants and Outside
Directors of the Company and its Subsidiaries and to provide such persons with
a proprietary interest in the Company through the granting of incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
stock, restricted stock units, performance awards, dividend equivalent rights,
and other awards, whether granted singly, or in combination, or in tandem, that
will

 

(a)                                  increase
the interest of such persons in the Company’s welfare;

 

(b)                                 furnish
an incentive to such persons to continue their services for the Company; and

 

(c)                                  provide
a means through which the Company may attract able persons as employees,
and Outside Directors.

 

With respect to Reporting
Participants, the Plan and all transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the “1934 Act”) in the event the Common Stock
as a class should ever be registered under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void ab initio, to
the extent permitted by law and deemed advisable by the Committee. No Incentive
Stock Options shall be issued to Consultants, independent contractors or
Outside Directors of the Company.

 

ARTICLE 2

DEFINITIONS

 

For the purpose of the
Plan, unless the context requires otherwise, the following terms shall have the
meanings indicated:

 

 

2.1                                 “Award”
means the grant of any Incentive Stock Option, Nonqualified Stock Option, Reload Option, Restricted Stock, SAR,
Restricted Stock Units, Performance Award, Dividend Equivalent Right or Other
Award, whether granted singly or in combination or in tandem (each individually
referred to herein as an “Incentive” or as “Award”).

 

2.2                                 “Award
Agreement” means a written agreement between a Participant and the Company
which sets out the terms of the grant of an Award.

 

2.3                                 “Award
Period” means the period set forth in the Award Agreement during which one or
more Incentives granted under an Award may be exercised.

 

2.4                                 “Board”
means the board of directors of the Company.

 

2.5                                 “Callable”
means Common Stock issued to a Participant which is subject to the Company’s right
to call and repurchase such Common Stock upon Termination of Employment
pursuant to the terms of the Award Agreement under which the Participant
purchased the Common Stock.

 

2.6                                 “Change
in Control” means that following an offering of the Common Stock pursuant to an
IPO, a “Change in Control” shall mean any of the following:  (i) any consolidation, merger or share
exchange of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company’s Common Stock would be
converted into cash, securities or other property, other than a consolidation,
merger or share exchange of the Company in which the holders of the Company’s
Common Stock immediately prior to such transaction have the same proportionate
ownership of Common Stock of the surviving corporation immediately after such
transaction or the merger of the Company into one of its subsidiaries; (ii) any
sale, lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of
all or substantially all of the assets of the Company; (iii) the
stockholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; (iv) the cessation of control (by virtue of
their not constituting a majority of directors) of the Board by the individuals
(the “Continuing Directors”) who (x) at the date of an IPO were directors
or (y) become directors after the date of an IPO and whose election or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then in office who were directors at the
date of an IPO or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning
of Rule 13d-3 under the 1934 Act) of an aggregate of 50% or more of the voting power of the
Company’s outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under the 1934 Act) who beneficially owned less than 50% of the voting power of the Company’s
outstanding voting securities on the date of an IPO; provided, however,
that notwithstanding the foregoing, an acquisition shall not constitute a
Change in Control hereunder if the acquirer is (x) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company and acting in
such capacity, (y) a Subsidiary of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of voting securities of the Company or
(z) any other person whose acquisition of shares of voting securities is
approved in advance by a majority of the Continuing Directors or (aa) a
purchase(s) of the shares are sold pursuant to effective registration under
applicable federal and state securities laws; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7. Notwithstanding the above, no
amount may become payable under a SAR or any other Award which is subject
to Code section 409A unless the Change in Control also satisfies the
definition of a Change in Control under the guidance issued under section 409A
of the Code, and the payment occurs within the time specified in such guidance
for the payment to be treated as on account of the Change in Control.

 

2

 

2.7                                 “Code”
means the Internal Revenue Code of 1986, as amended.

 

2.8                                 “Committee”
means the committee appointed or designated by the Board to serve as the
Compensation Committee (or a similarly named Committee generally intended to
administer and oversee employee compensation plans such as the Plan) of the
Board to administer the Plan in accordance with Article 3 of this Plan.

 

2.9                                 “Common
Stock” means the Common Stock, par value $0.001 per share, which the Company is
currently authorized to issue or may in the future be authorized to issue,
or any securities into which or for which the common stock of the Company may be
converted or exchanged, as the case may be, pursuant to the terms of this
Plan.

 

2.10                           “Company”
means EXCO Resources, Inc., a Texas corporation, and any successor entity.

 

2.11                           “Consultant”
means any person performing advisor or consulting services to the Company or a
Subsidiary, with or without compensation, to whom the Company chooses to grant
an Award in accordance with the Plan, provided that bona fide services must be
rendered by such person and such services shall not be rendered in connection
with the offer or sale of securities in a capital raising transaction. A
Consultant is not eligible to receive Incentive Stock Options (or Statutory
Stock Options).

 

2.12                           “Corporation”
means any entity that (i) is defined as a corporation under Section 7701
of the Code and (ii) is the Company or is in an unbroken chain of
corporations (other than the Company) beginning with the Company, if each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing a majority of the total combined voting power of all classes
of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof,
an entity shall be treated as a “corporation” if it satisfies the definition of
a corporation under Section 7701 of the Code.

 

2.13                           “Date
of Grant” means the effective date on which an Award is made to a Participant
as set forth in the applicable Award Agreement; provided, however, that solely
for purposes of Section 16 of the 1934 Act and the rules and
regulations promulgated thereunder in the event the Common Stock should ever be
registered under the 1934 Act, the Date of Grant of an Award shall be the date
of stockholder approval of the Plan if such date is later than the effective
date of such Award as set forth in the Award Agreement.

 

2.14                           “Dividend
Equivalent Right” means the right of the holder thereof to receive credits as
set forth in Section 6.9 hereof based on the cash dividends that would
have been paid on the shares of Common Stock specified in the Award if such
shares were held by the Participant to whom the Award is made.

 

2.15                           “Employee”
means common law employee (as defined in accordance with the Regulations and
Revenue Rulings then applicable under Section 3401(c) of the Code) of
the Company or any Subsidiary of the Company.

 

2.16                           “Executive
Officer” means an officer of the Company or a Subsidiary subject to Section 16
of the 1934 Act in the event the Common Stock should ever be registered under
the 1934 Act or a “covered employee” as defined in Section 162(m)(3) of
the Code.

 

2.17                           “Fair
Market Value” means, as of a particular date, (a) if the shares of Common
Stock are listed on a national securities exchange, the closing sales price per
share of Common Stock on the consolidated transaction reporting system for the
principal securities exchange for the Common Stock on that date, or, if there
shall have been no such sale so reported on that date, on the last preceding
date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market

 

3

 

System, the closing sales
price per share of Common Stock on the Nasdaq National Market System on that
date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported, (c) if the
Common Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available,
as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount
as may be determined by the Board (acting on the advice of an Independent
Third Party, should the Board elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the fair market
value per share of Common Stock and in compliance with the valuation methods
permitted under Treasury Regulations § 1.422-2(e) and § 20.2031-2.

 

2.18                           “Incentive”
is defined in Section 2.1 hereof.

 

2.19                           “Incentive
Stock Option” or “Statutory Stock Option” or “ISO” means an incentive stock
option within the meaning of Section 422 of the Code, granted pursuant to
this Plan.

 

2.20                           “Independent
Third Party” means an individual or entity independent of the Company having
experience in providing investment banking or similar appraisal or valuation
services and with expertise generally in the valuation of securities or other
property for purposes of this Plan. The Board may utilize one or more
Independent Third Parties.

 

2.21                           “IPO”
means the first public offering of any class of equity securities of this
Company (or any successor or assign of the Company whether by merger,
consolidation, sale of assets or otherwise occurring after this Plan is
effective) pursuant to a registration statement filed with and declared
effective by the Securities Exchange Commission.

 

2.22                           “Nonpublicly
Traded” means Company Stock as it exists prior to an IPO.

 

2.23                           “Nonqualified
Stock Option” or “Nonstatutory Stock Option” or “NQSO” means a nonqualified
stock option, granted pursuant to this Plan, which is not an Incentive Stock
Option.

 

2.24                           “Option
Price” means the price which must be paid by a Participant upon exercise of a
Stock Option to purchase a share of Common Stock.

 

2.25                           “Other
Award” means an Award issued pursuant to Section 6.10 hereof.

 

2.26                           “Outside
Director” means a director of the Company who is not an Employee. Outside
Directors are not eligible to receive an Incentive Stock Option.

 

2.27                           “Participant”
means an Employee, Consultant, independent contractor, or Outside Director of
the Company or a Subsidiary to whom an Award is granted under this Plan for any
grant that is not an Incentive Stock Option. A Participant also includes an
Employee to whom an Award for an Incentive Stock Option is granted.

 

2.28                           “Plan”
means this EXCO Resources, Inc. 2005 Long-Term Incentive Plan, as amended
from time to time.

 

2.29                           “Performance
Award” means an Award hereunder of cash, shares of Common Stock, units or
rights based upon, payable in, or otherwise related to, Common Stock pursuant
to Section 6.8 hereof.

 

4

 

2.30                           “Performance
Goal” means any of the goals set forth in Section 6.11 hereof.

 

2.31                           “Reload
Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option
granted pursuant to Section 8.3(c) hereof.

 

2.32                           “Reporting
Participant” means a Participant who is subject to the reporting requirements
of Section 16 of the 1934 Act in the event the Common Stock should ever be
registered under the 1934 Act.

 

2.33                           “Restricted
Stock” means shares of Common Stock issued or transferred to a Participant
pursuant to Section 6.4 of this Plan which are subject to restrictions or
limitations set forth in this Plan and in the related Award Agreement.

 

2.34                           “Restricted
Stock Units” means units awarded to Participants pursuant to Section 6.7
hereof, which are convertible into Common Stock at such time as such units are
no longer subject to restrictions as established by the Committee.

 

2.35                           “Retirement”
means any Termination of Service solely due to retirement upon or after
attainment of age sixty-five (65), or permitted early retirement as determined
by the Committee.

 

2.36                           “SAR”
or “stock appreciation right” means the right to receive a payment, in cash
and/or Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on a specified date, provided the
amount is fixed on the date the SAR is exercised over the SAR Price for such
shares.

 

2.37                           “SAR
Price” means the exercise price of each share of Common Stock covered by a SAR,
determined on the Date of Grant of the SAR.

 

2.38                           “Stock
Option” means a Nonqualified Stock Option, a Reload Stock Option or an Incentive Stock Option.

 

2.39                           “Subsidiary”
means (i) any corporation in an unbroken chain of corporations beginning
with the Company, if each of the corporations other than the last corporation
in the unbroken chain owns stock possessing a majority of the total combined
voting power of all classes of stock in one of the other corporations in the
chain, (ii) any limited partnership, if the Company or any corporation
described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and (iii) any
partnership or limited liability company, if the partners or members thereof
are composed only of the Company, any corporation listed in item (i) above
or any limited partnership listed in item (ii) above. “Subsidiaries” means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

 

2.40                           “Termination
of Service” occurs when a Participant who is an Employee of the Company or any
Subsidiary shall cease to serve as an Employee of the Company and its Subsidiaries,
for any reason; or, when a Participant who is an Outside Director of the
Company or a Subsidiary shall cease to serve as a director of the Company and
its Subsidiaries for any reason. Except as may be necessary or desirable
to comply with applicable federal or state law, a “Termination of Service”
shall not be deemed to have occurred when a Participant who is an Employee
becomes an Outside Director or vice versa. If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but
does not suffer a Termination of Service, and if that Participant does not
exercise the Incentive Stock Option within the time required under Section 422
of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter
become a Nonqualified Stock Option. Notwithstanding the above, effective on and
after January 1,

 

5

 

2005, for any Award which
is deferred compensation subject to Section 409A of the Code, “Termination
from Service” shall have the same meaning as “Separation from Service” under Section 409A(a)(2)(A)(i) and
any guidance issued thereunder.

 

2.41                           “Total
and Permanent Disability” means a Participant is qualified for long-term
disability benefits under the Company’s or Subsidiary’s disability plan or
insurance policy; or, if no such plan or policy is then in existence or if the
Participant is not eligible to participate in such plan or policy, that the
Participant, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder which prevents the Participant from
performing his or her duties of employment for a period of six (6) continuous
months, as determined in good faith by the Committee, based upon medical
reports or other evidence satisfactory to the Committee; provided  that,
with respect to any Incentive Stock Option, Total and Permanent Disability
shall have the meaning given it under the rules governing Incentive Stock
Options under the Code. Notwithstanding the above, for purposes of any Award
hereunder which is deemed to be deferred compensation subject to Section 409A
of the Code, effective for all periods on or after January 1, 2005, “Total
and Permanent Disability” shall mean a participant who either (a) is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to last for a
continuous period of not less than 12 months, or (b) is, by reason of any
medically determinable physical or mental impairment which can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an accident
and health plan covering employees of the participant’s employer, or otherwise
satisfies such definition as it is modified by any guidance issued under or
regarding Section 409A of the Code.

 

ARTICLE 3

ADMINISTRATION

 

3.1                               General
Administration; Establishment of Committee. Subject to the terms of this Article 3,
the Plan shall be administered by the Board or such committee of the Board as
is designated by the Board to administer the Plan (the “Committee”). The
Committee shall consist of not fewer than two persons. Any member of the
Committee may be removed at any time, with or without cause, by resolution
of the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board. At any time there is no Committee to
administer the Plan, any references in this Plan to the Committee shall be
deemed to refer to the Board.

 

Membership on the
Committee shall be limited to those members of the Board who are “outside
directors” under Section 162(m) of the Code and “non-employee directors”
as defined in Rule 16b-3 promulgated under the 1934 Act only in the event
the Common Stock should ever be registered under the 1934 Act. The Committee
shall select one of its members to act as its Chairman. A majority of the
Committee shall constitute a quorum, and the act of a majority of the members
of the Committee present at a meeting at which a quorum is present shall be the
act of the Committee.

 

3.2                               Designation
of Participants and Awards.

 

(a)                                  The
Committee or the Board shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement, where applicable, the Award Period, the Date of Grant,
and such other terms, provisions, limitations, and performance requirements, as
are approved by the Committee, but not inconsistent with the Plan. The
Committee shall determine whether an Award shall include one type of Incentive
or two or more Incentives granted in combination or two or more Incentives
granted in tandem (that is, a joint grant where exercise of one Incentive
results in cancellation of all or a portion of the other Incentive).

 

6

 

Although
the members of the Committee shall be eligible to receive Awards, all
decisions with respect to any Award, and the terms and conditions thereof, to
be granted under the Plan to any member of the Committee shall be made solely
and exclusively by the other members of the Committee, or if such member is the
only member of the Committee, by the Board.

 

(b)                                 Notwithstanding
Subsection 3.2(a), the Board may, in its discretion and by a resolution
adopted by the Board, authorize one or more officers of the Company (an “Authorized
Officer”) to (i) designate one or more Employees as eligible persons to
whom Awards will be granted under the Plan and (ii) determine the number
of shares of Common Stock that will be subject to such Awards; provided,
however, that the resolution of the Board granting such authority shall (x)
specify the total number of shares of Common Stock that may be made subject
to the Awards, (y) set forth the price or prices (or a formula by which such
price or prices may be determined) to be paid for the purchase of the
Common Stock subject to such Awards, and (z) not authorize an officer to
designate himself as a recipient of any Award.

 

3.3                               Authority
of the Committee. The Committee, in its discretion, shall (i) interpret
the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, (iii) establish
performance goals for an Award and certify the extent of their achievement, and
(iv) make such other determinations or certifications and take such other
action as it deems necessary or advisable in the administration of the Plan. Any
interpretation, determination, or other action made or taken by the Committee
shall be final, binding, and conclusive on all interested parties. The
Committee’s discretion set forth herein shall not be limited by any provision
of the Plan, including any provision which by its terms is applicable
notwithstanding any other provision of the Plan to the contrary.

 

The Committee may delegate
to officers of the Company, pursuant to a written delegation, the authority to
perform specified functions under the Plan. Any actions taken by any
officers of the Company pursuant to such written delegation of authority shall
be deemed to have been taken by the Committee.

 

With respect to
restrictions in the Plan that are based on the requirements of Rule 16b-3
promulgated under the 1934 Act in the event the Common Stock should ever be
registered under the 1934 Act, Section 422 of the Code, Section 162(m)
of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company’s securities are listed or quoted, or any other applicable
law, rule or restriction (collectively, “applicable law”), to the extent
that any such restrictions are no longer required by applicable law, the
Committee shall have the sole discretion and authority to grant Awards that are
not subject to such mandated restrictions and/or to waive any such mandated
restrictions with respect to outstanding Awards.

 

3.4                               Prohibition
on Acceleration of Benefits. Any Award which constitutes deferred
compensation under Section 409A of the Code shall not have the time or schedule of
any payment thereunder accelerated, except as permitted under the guidance
issued under Section 409A of the Code.

 

ARTICLE 4

ELIGIBILITY

 

Any Employee (including
an Employee who is also a director or an officer), or Outside Director of the
Company or any Subsidiary whose judgment, initiative, and efforts contributed
or may be expected to contribute to the successful performance of the
Company or any Subsidiary is eligible to participate in the Plan; provided that
only Employees of the Company or any Subsidiary shall be eligible to receive
Incentive Stock Options. An independent contractor providing services to the
Company or any Subsidiary whose judgment, initiative, and efforts contributed
or may be expected to contribute to the successful performance of the

 

7

 

Company or any Subsidiary
is eligible to participate in the Plan; provided that independent contractors
shall not be eligible to receive Incentive Stock Options. The Committee, upon
its own action, may grant, but shall not be required to grant, an Award to
any Employee or Outside Director of the Company or any Subsidiary. Awards may be
granted by the Committee at any time and from time to time to new Participants,
or to some or all of the existing Participants, and may include or exclude
previous Participants, as the Committee shall determine. Except as required by
this Plan, Awards granted at different times need not contain similar
provisions. The Committee’s determinations under the Plan (including without
limitation determinations of which Employees or Outside Directors, if any, are
to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be uniform and
may be made by it selectively among Participants who receive, or are
eligible to receive, Awards under the Plan.

 

ARTICLE 5

SHARES
SUBJECT TO PLAN

 

5.1                               Number
Available for Awards. Subject to adjustment as provided in Articles 11
and 12, the maximum number of shares of Common Stock that may be delivered
pursuant to Awards granted under the Plan is ten million (10,000,000) shares. Shares
to be issued may be made available from authorized but unissued Common
Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan. The maximum number of shares of Common Stock that may be
delivered pursuant to Awards under the Plan that are Incentive Stock Option
grants is ten million (10,000,000) shares.

 

5.2                               Reuse
of Shares. To the extent that any Award under this Plan shall be forfeited,
shall expire or be canceled, in whole or in part, then the number of shares of
Common Stock covered by the Award or stock option so forfeited, expired or
canceled may again be awarded pursuant to the provisions of this Plan. In
the event that previously acquired shares of Common Stock are delivered to the
Company in full or partial payment of the exercise price for the exercise of a
Stock Option granted under this Plan, the number of shares of Common Stock
available for future Awards under this Plan shall be reduced only by the net
number of shares of Common Stock issued upon the exercise of the Stock Option. Awards
that may be satisfied either by the issuance of shares of Common Stock or
by cash or other consideration shall be counted against the maximum number of
shares of Common Stock that may be issued under this Plan only during the
period that the Award is outstanding or to the extent the Award is ultimately
satisfied by the issuance of shares of Common Stock. Awards will not reduce the
number of shares of Common Stock that may be issued pursuant to this Plan
if the settlement of the Award will not require the issuance of shares of
Common Stock, as, for example, a SAR that can be satisfied only by the payment
of cash.

 

ARTICLE 6

GRANT OF
AWARDS

 

6.1                               In
General.

 

(a)                                  The
grant of an Award shall be authorized by the Committee and shall be evidenced
by an Award Agreement setting forth the Incentive or Incentives being granted,
the total number of shares of Common Stock subject to the Incentive(s), the
Option Price (if applicable), the Award Period, the Date of Grant, and such
other terms, provisions, limitations, and performance objectives, as are
approved by the Committee, but not inconsistent with the Plan. The Company
shall execute an

 

8

 

Award Agreement with a
Participant after the Committee approves the issuance of an Award. Any Award
granted pursuant to this Plan must be granted within ten (10) years of the
date of adoption of this Plan. The Plan shall be submitted to the Company’s
stockholders for approval; however, the Committee may grant Awards under
the Plan prior to the time of stockholder approval. Any such Award granted
prior to such stockholder approval shall be made subject to such stockholder
approval. The grant of an Award to a Participant shall not be deemed either to
entitle the Participant to, or to disqualify the Participant from, receipt of
any other Award under the Plan.

 

(b)                                 If
the Committee establishes a purchase price for an Award, the Participant must
accept such Award within a period of thirty (30) days (or such shorter period
as the Committee may specify) after the Date of Grant by executing the
applicable Award Agreement and paying such purchase price.

 

(c)                                  Any
Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide for interest equivalents to be credited with
respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the
Award. If the Award does not specify inherent equivalents, then no interest
equivalents shall be credited.

 

6.2                               Option
Price. The Option Price for any share of Common Stock which may be
purchased under a Nonqualified Stock Option for any share of Common Stock may be
equal to, or greater than the Fair Market Value of the share on the Date of
Grant. The Option Price shall never be less than the Fair Market Value of the
share of the Date of Grant. The Option Price for any share of Common Stock
which may be purchased under an Incentive Stock Option must be at least
equal to the Fair Market Value of the share on the Date of Grant; if an
Incentive Stock Option is granted to an Employee who owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the
Code) more than ten percent (10%) of the combined voting power of all classes
of stock of the Company (or any parent or Subsidiary), the Option Price shall
be at least 110% of the Fair Market Value of the Common Stock on the Date of
Grant.

 

6.3                               Maximum
ISO Grants. The Committee may not grant Incentive Stock Options under
the Plan to any Employee which would permit the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to which
Incentive Stock Options (under this and any other plan of the Company and its
Subsidiaries) are exercisable for the first time by such Employee during any
calendar year to exceed $100,000. To the extent any Stock Option granted under
this Plan which is designated as an Incentive Stock Option exceeds this limit
or otherwise fails to qualify as an Incentive Stock Option, such Stock Option
(or any such portion thereof) shall be a Nonqualified Stock Option. In such
case, the Committee shall designate which stock will be treated as Incentive
Stock Option stock by causing the issuance of a separate stock certificate and
identifying such stock as Incentive Stock Option stock on the Company’s stock
transfer records.

 

6.4                               Restricted
Stock. If Restricted Stock is granted to or received by a Participant under
an Award (including a Stock Option), the Committee shall set forth in the
related Award Agreement: (i) the number of shares of Common Stock awarded,
(ii) the price, if any, to be paid by the Participant for such Restricted
Stock and the method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture, in whole or in part,
or the schedule which determines when the Participant earns a vested
interest in the shares of Common Stock (subject to the Restricted Stock Award),
(iv) specified Performance Goals of the Company, a Subsidiary, any
division thereof or any group of Employees of the Company, or other criteria,
which the Committee determines must be met in order to remove any restrictions
(including vesting) on such Award, and (v) all other terms, limitations,
restrictions, and conditions of the

 

9

 

Restricted Stock, which
shall be consistent with this Plan. The provisions of Restricted Stock need not
be the same with respect to each Participant.

 

(a)                                  Legend
on Shares. Each Participant who is awarded or receives Restricted Stock
shall be issued a stock certificate or certificates in respect of such shares
of Common Stock which shall vest under the terms of the Award. Such
certificate(s) shall be registered in the name of the Participant, and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, substantially as provided in Section 15.9
of the Plan.

 

(b)                                  Restrictions
and Conditions. Shares of Restricted Stock shall be subject to the
following restrictions and conditions:

 

(i)                                     Subject
to the other provisions of this Plan and the terms of the particular Award Agreements,
during such period as may be determined by the Committee commencing on the
Date of Grant or the date of exercise of an Award (the “Restriction Period”),
the Participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock. Except for these limitations, the Committee may in
its sole discretion, remove any or all of the restrictions on such Restricted
Stock whenever it may determine that, by reason of changes in applicable
laws or other changes in circumstances arising after the date of the Award,
such action is appropriate.

 

(ii)                                  Except
as provided in sub-paragraph (i) above or in the applicable Award
Agreement, the Participant shall have, with respect to his or her Restricted
Stock, all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon. Certificates
for shares of Common Stock free of restriction under this Plan shall be
delivered to the Participant promptly after, and only after, the Restriction
Period shall expire without forfeiture in respect of such shares of Common
Stock or after any other restrictions imposed in such shares of Common Stock by
the applicable Award Agreement or other agreement have expired. Certificates
for the shares of Common Stock forfeited under the provisions of the Plan and
the applicable Award Agreement shall be promptly returned to the Company by the
forfeiting Participant. Each Award Agreement shall require that (x) each Participant, by his or her acceptance
of Restricted Stock, shall irrevocably grant to the Company a power of attorney
to transfer any shares so forfeited to the Company and agrees to execute any
documents requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of stock
certificates with respect to forfeited shares of Common Stock shall be
specifically performable by the Company in a court of equity or law.

 

(iii)                               The
Restriction Period of Restricted Stock shall commence on the Date of Grant or
the date of exercise of an Award, as specified in the Award Agreement, and,
subject to Article 12 of the Plan, unless otherwise established by the
Committee in the Award Agreement setting forth the terms of the Restricted
Stock, shall expire upon satisfaction of the conditions set forth in the Award
Agreement; such conditions may provide for vesting based on such
Performance Goals, as may be determined by the Committee in its sole
discretion.

 

(iv)                              Except
as otherwise provided in the particular Award Agreement, upon Termination of
Service for any reason during the Restriction Period, the nonvested shares of
Restricted Stock shall be forfeited by the Participant. In the event a
Participant has paid any consideration to the Company for such forfeited
Restricted Stock, the Committee shall specify in the Award Agreement that
either (i) the Company shall be obligated to, or (ii) the Company

 

10

 

may, in its sole
discretion, elect to, pay to the Participant, as soon as practicable after the
event causing forfeiture, in cash, an amount equal to the lesser of the total
consideration paid by the Participant for such forfeited shares or the Fair
Market Value of such forfeited shares as of the date of Termination of Service,
as the Committee, in its sole discretion shall select. Upon any forfeiture, all
rights of a Participant with respect to the forfeited shares of the Restricted
Stock shall cease and terminate, without any further obligation on the part of
the Company.

 

6.5                               SARs.
The Committee may grant SARs to any Participant, either as a separate
Award or in connection with a Stock Option. SARs shall be subject to such terms
and conditions as the Committee shall impose. The grant of the SAR may provide
that the holder may be paid for the value of the SAR either in cash or in
shares of Common Stock, or a combination thereof. In the event of the exercise
of a SAR payable in shares of Common Stock, the holder of the SAR shall receive
that number of whole shares of Common Stock having an aggregate Fair Market
Value on the date of exercise equal to the value obtained by multiplying (i) the
difference between the Fair Market Value of a share of Common Stock on the date
of exercise over the SAR Price as set forth in such SAR (or other value
specified in the agreement granting the SAR), by (ii) the number of shares
of Common Stock as to which the SAR is exercised, with a cash settlement to be
made for any fractional shares of Common Stock. The Committee, in its sole
discretion, may place a ceiling on the amount payable upon exercise of a
SAR, but any such limitation shall be specified at the time that the SAR is
granted.

 

Effective for any SAR
granted on or after January 1, 2005, the exercise price of any SAR shall
in no event be less than the Fair Market Value of the Shares at the time of the
grant. The Award of the SAR shall provide for a period during which the
Participant may exercise the SAR which shall be prior to the specified
payment date. The Award of the SAR shall provide the specified date on which
payment will be made. The payment amount shall be based upon the difference in
the Fair Market Value of the shares at the exercise date and the SAR exercise
price set in the Award multiplied by the number of shares exercised (the “Spread”).
The Award for the SAR may provide for crediting of interest equivalents
from the date of exercise to the specified payment date at a rate specified in
the Award provided the interest rate used is permissible under Section 409A
of the Code and the guidance issued thereunder. If the Award does not specify
any interest equivalent, no interest equivalents shall be credited on the
Spread from the date of exercise to the specified payment date. A SAR shall
only be issued following the date the Company’s Common Stock is offered in a
transaction registered under the applicable federal and state securities laws,
when its securities are publicly traded on an established market; however, if
guidance under Code Section 409A provides for any fewer or different
requirements in order for the SAR to avoid being deferred compensation, the
issuance of the SAR shall be permitted when such fewer or different
requirements are satisfied as determined by the Committee in its sole
discretion.

 

6.6                               SAR
Price. The SAR Price for any share of Common Stock subject to a SAR may be
equal to or greater than the Fair Market Value of the share on the Date of
Grant.

 

6.7                               Restricted
Stock Units. Restricted Stock Units may be awarded or sold to any
Participant under such terms and conditions as shall be established by the
Committee. Restricted Stock Units shall be subject to such restrictions as the
Committee determines, including, without limitation, (a) a prohibition
against sale, assignment, transfer, pledge, hypothecation or other encumbrance
for a specified period; or (b) a requirement that the holder forfeit (or
in the case of shares of Common Stock or units sold to the Participant, resell
to the Company at cost) such shares or units in the event of Termination of
Service during the period of restriction.

 

11

 

6.8                               Performance
Awards.

 

(a)                                  The
Committee may grant Performance Awards to any Participant upon such terms
and conditions as shall be specified at the time of the grant and may include
provisions establishing the performance period, the Performance Goals to be
achieved during a performance period, and the maximum or minimum settlement
values. Each Performance Award shall have its own terms and conditions. If the
Committee determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in the
Company’s business, operations, corporate structure, or for other reasons that
the Committee deemed satisfactory, the Committee may modify the
performance measures or objectives and/or the performance period. However, the
Committee may not, in any event, increase the number of shares of Common
Stock earned by any Executive Officer upon satisfaction of any Performance
Goal.

 

(b)                                 Performance
Awards may be valued by reference to the Fair Market Value of a share of
Common Stock or according to any formula or method deemed appropriate by the
Committee, in its sole discretion, including, but not limited to, achievement
of Performance Goals or other specific financial, production, sales or cost
performance objectives that the Committee believes to be relevant to the
Company’s business and/or remaining in the employ of the Company for a
specified period of time. Performance Awards may be paid in cash, shares
of Common Stock, or other consideration, or any combination thereof. If payable
in shares of Common Stock, the consideration for the issuance of such shares may be
the achievement of the performance objective established at the time of the
grant of the Performance Award. Performance Awards may be payable in a
single payment or in installments and may be payable at a specified date
or dates or upon attaining the performance objective. The extent to which any applicable
performance objective has been achieved shall be conclusively determined by the
Committee.

 

6.9                               Dividend
Equivalent Rights. For grants prior to January 1, 2005, the Committee may grant
a Dividend Equivalent Right to any Participant, either as a component of
another Award or as a separate Award. The terms and conditions of the Dividend
Equivalent Right shall be specified by the grant. Dividend equivalents credited
to the holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Common Stock (which may thereafter
accrue additional dividend equivalents). Any such reinvestment shall be at the
Fair Market Value at the time thereof. Dividend Equivalent Rights may be
settled in cash or shares of Common Stock, or a combination thereof, in a
single payment or in installments. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right
shall be settled upon exercise, settlement, or payment of, or lapse of
restrictions on, such other Award, and that such Dividend Equivalent Right
granted as a component of another Award may also contain terms and
conditions different from such other Award.

 

Effective for grants on
or after January 1, 2005, the Committee may grant a Dividend
Equivalent Right to any Participant, either as a component of another Award or
as a separate Award. The terms and conditions of the Dividend Equivalent Right
shall be specified by the grant and will comply with the requirements of Section 409A
of the Code to the extent applicable. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Common Stock (which may thereafter
accrue additional dividend equivalents) and will be paid at a date specified in
the Award. Any such reinvestment shall be at the Fair Market Value at the time
thereof. Dividend Equivalent Rights may be settled in cash or shares of
Common Stock, or a combination thereof, in a single payment or in installments
which payment date or dates shall be specified in the Award. A Dividend
Equivalent Right granted as a component of another Award may provide that
such Dividend Equivalent Right shall be settled upon a specified date or a schedule of
specified payment dates in the Award, and that such Dividend

 

12

 

Equivalent Right granted
as a component of another Award may also contain terms and conditions
different from such other Award.

 

6.10                        Other
Awards. The Committee may grant to any Participant other forms of
Awards, based upon, payable in, or otherwise related to, in whole or in part,
shares of Common Stock, if the Committee determines that such other form of
Award is consistent with the purpose and restrictions of this Plan. The terms
and conditions of such other form of Award shall be specified by the grant.
Such Other Awards may be granted for no cash consideration, for such
minimum consideration as may be required by applicable law, or for such
other consideration as may be specified by the grant.

 

6.11                        Performance
Goals. Awards of Restricted Stock, Restricted Stock Units, Performance
Award and Other Awards (whether relating to cash or shares of Common Stock)
under the Plan may be made subject to the attainment of Performance Goals
relating to one or more business criteria within the meaning of Section 162(m)
of the Code, including, but not limited to, cash flow; cost; ratio of debt to
debt plus equity; profit before tax; economic profit; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
earnings per share; operating earnings; economic value added; ratio of
operating earnings to capital spending; free cash flow; net profit; net sales;
sales growth; price of the Company’s Common Stock; return on net assets, equity
or stockholders’ equity; market share; or total return to stockholders (“Performance
Criteria”). Any Performance Criteria may be used to measure the
performance of the Company as a whole or any business unit of the Company and may be
measured relative to a peer group or index. Any Performance Criteria may include
or exclude (i) extraordinary, unusual and/or non-recurring items of gain
or loss, (ii) gains or losses on the disposition of a business, (iii) changes
in tax or accounting regulations or laws, or (iv) the effect of a merger
or acquisition, as identified in the Company’s quarterly and annual earnings
releases. In all other respects, Performance Criteria shall be calculated in
accordance with the Company’s financial statements, under generally accepted
accounting principles, or under a methodology established by the Committee
prior to the issuance of an Award which is consistently applied and identified
in the audited financial statements, including footnotes, or the Management
Discussion and Analysis section of the Company’s annual report. However,
the Committee may not in any event increase the amount of compensation
payable to an individual upon the attainment of a Performance Goal. Any
Performance Goal Award issued on or after January 1, 2005, shall only be
paid at a time specified or pursuant to a fixed schedule specified in the
Award if such Performance Goal Award constitutes deferred compensation under Section 409A
of the Code and the guidance issued thereunder or related thereto.

 

6.12                        Tandem
Awards. The Committee may grant two or more Incentives in one Award in
the form of a “tandem Award,” so that the right of the Participant to
exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and a SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to 100
shares of Common Stock, the right of the Participant to exercise the related
Stock Option shall be canceled to the extent of 100 shares of Common Stock.

 

6.13                        Maximum
Individual Grants. No participant may receive during any calendar year
of the Company, Awards covering an aggregate of more than two million (2,000,000)
shares of Company Stock.

 

6.14                        Option
Price. The Option Price for a Nonqualified Stock Option shall be such price
as determined by the Committee; provided, however, such Option Price shall not
be less than the Fair Market Value of the Common Stock on the date of the Grant.
The Option Price for an Incentive Stock Option shall be at least one hundred
percent (100%) of the Fair Market Value of the share on the Date of Grant. If
an Incentive Stock Option is granted to an Employee who owns or is deemed to
own (by reason of attribution rules of Section 424(d) of the
Code) more than ten percent (10%) of the combined voting power of all classes

 

13

 

of the Company’s stock
(or of any parent or Subsidiary), the Option Price shall be at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
Date of Grant.

 

ARTICLE 7

AWARD
PERIOD; VESTING; TERMINATION OF SERVICE

 

7.1                               Award
Period. Subject to the other provisions of this Plan, the Committee may, in
its discretion, provide that an Incentive may not be exercised in whole or
in part for any period or periods of time or beyond any date specified in
the Award Agreement. Except as provided in the Award Agreement, an Incentive may be
exercised in whole or in part at any time during its term. The Award
Period for an Incentive shall be reduced or terminated upon Termination of
Service. No Incentive granted under the Plan may be exercised at any time
after the end of its Award Period. No portion of any Incentive may be
exercised after the expiration of ten (10) years from its Date of Grant. However,
if an Employee owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the
combined voting power of all classes of stock of the Company (or any parent or
Subsidiary) and an Incentive Stock Option is granted to such Employee, the term
of such Incentive Stock Option (to the extent required by the Code at the time
of grant) shall be no more than five (5) years from the Date of Grant.

 

7.2                               Vesting.
The Committee, in its sole discretion, may determine that an Incentive
will be immediately vested in whole or in part, or that all or any portion may not
be vested until a date, or dates, subsequent to its Date of Grant, or until the
occurrence of one or more specified events, subject in any case to the terms of
the Plan. If the Committee imposes conditions upon vesting, then, subsequent to
the Date of Grant, the Committee may, in its sole discretion, accelerate the
date on which all or any portion of the Incentive may be vested.

 

7.3                               Termination
of Service. In the event of Termination of Service of a Participant, an
Incentive or Award may only be exercised as determined by the Committee
and as provided in the Award Agreement.

 

ARTICLE 8

EXERCISE
OF INCENTIVE

 

8.1                               In General. A vested Incentive may be exercised during
its Award Period, subject to limitations and restrictions set forth in the
Award Agreement and in Article 7. A vested Incentive may be exercised
at such times and in such amounts as provided in this Plan and the applicable
Award Agreement, subject to the terms, conditions and restrictions of the Plan.

 

8.2                               Securities
Law and Exchange Restrictions. In no event may an Incentive be
exercised or shares of Common Stock be issued pursuant to an Award if a
necessary listing or quotation of the shares of Common Stock on a stock
exchange or inter-dealer quotation system or any registration under state or
federal securities laws required under the circumstances has not been
accomplished.

 

8.3                               Exercise
of Stock Option.

 

(a)                                  In
General. If a Stock Option is exercisable prior to the time it is vested,
the Common Stock obtained on the exercise of the Stock Option shall be
Restricted Stock which is subject to the applicable provisions of the Plan and
the Award Agreement. If the Committee imposes conditions upon exercise, then
subsequent to the Date of Grant, the Committee may, in its sole discretion,
accelerate the date on which all or any portion of the Stock Option may be
exercised. No

 

14

 

Stock Option may be
exercised for a fractional share of Common Stock. The granting of a Stock
Option shall impose no obligation upon the Participant to exercise that Stock
Option.

 

(b)                                  Notice
and Payment. Subject to such administrative regulations as the Committee may from
time to time adopt, a Stock Option may be exercised by the delivery of
written notice to the Company setting forth the number of shares of Common
Stock with respect to which the Stock Option is to be exercised and the date of
exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as provided in the Award Agreement, which may provide
for payment in any one or more of the following ways:  (a) cash or check, bank draft, or money
order payable to the order of the Company, (b) Common Stock (including
Restricted Stock) owned by the Participant on the Exercise Date, valued at its
Fair Market Value on the Exercise Date, and which the Participant has not
acquired from the Company within six (6) months prior to the Exercise
Date, (c) by delivery (including by FAX) to the Company or its designated
agent of an executed irrevocable option exercise form together with
irrevocable instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any
other form of valid consideration that is acceptable to the Committee in
its sole discretion. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of
the Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock so tendered.

 

(c)                                  Reload
Stock Options. In the event that shares of Common Stock are
delivered by a Participant in payment of all or a portion of the exercise price
of a Stock Option as set forth in Section 8.3(b) above and/or shares
of Common Stock are delivered to or withheld by the Company in satisfaction of
the Company’s tax withholding obligations upon exercise in accordance with Section 15.6
hereof, then, subject to Article 10 hereof, the Committee may authorize
the automatic grant to a Participant so exercising a Nonqualified Stock Option,
a replacement Nonqualified Stock Option, and to a Participant so exercising an
Incentive Stock Option, a replacement Incentive Stock Option (in either case, a
“Reload Stock Option”), to purchase that number of shares so delivered to or
withheld by the Company, as the case may be, at an option exercise price
equal to the Fair Market Value per share of the Common Stock on the date of
exercise of the original Stock Option (subject to the provisions of the Plan
regarding Incentive Stock Options and, in any event not less than the par value
per share of the Common Stock). The option period for a Reload Stock Option
will commence on its Date of Grant and expire on the expiration date of the
original Stock Option it replaces (subject to the provisions of the Plan
regarding Incentive Stock Options), after which period the Reload Stock Option
cannot be exercised. The Date of Grant of a Reload Stock Option shall be the
date that the Stock Option it replaces is exercised. A Reload Stock Option
shall automatically vest and be exercisable in full after the expiration of six
(6) months from its Date of Grant. It shall be a condition to the grant of
a Reload Stock Option that promptly after its Date of Grant, a stock option
agreement shall be delivered to the Participant and executed by the Participant
and the Company which sets forth the total number of shares subject to the
Reload Stock Option, the option exercise price, the option period of the Reload
Stock Option and such other terms and provisions as are consistent with the
Plan.

 

(d)                                  Issuance
of Certificate. Except as otherwise provided in Section 6.4 hereof
(with respect to shares of Restricted Stock) or in the applicable Award
Agreement, upon payment of all amounts due from the Participant, the Company
shall cause certificates for the Common Stock then

 

15

 

being purchased to be
delivered as directed by the Participant (or the person exercising the
Participant’s Stock Option in the event of his death) at its principal business
office promptly after the Exercise Date; provided that if the Participant has
exercised an Incentive Stock Option, the Company may at its option retain
physical possession of the certificate evidencing the shares acquired upon
exercise until the expiration of the holding periods described in Section 422(a)(1) of
the Code. The obligation of the Company to deliver shares of Common Stock
shall, however, be subject to the condition that, if at any time the Committee
shall determine in its discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any securities
exchange or inter-dealer quotation system or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the Stock Option or the issuance or
purchase of shares of Common Stock thereunder, the Stock Option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free
of any conditions not reasonably acceptable to the Committee.

 

(e)                                  Failure
to Pay. Except as may otherwise be provided in an Award Agreement, if
the Participant fails to pay for any of the Common Stock specified in such
notice or fails to accept delivery thereof, that portion of the Participant’s
Stock Option and right to purchase such Common Stock may be forfeited by
the Participant, in the Company’s sole discretion.

 

8.4                               SARs.
Subject to the conditions of this Section 8.4 and such administrative
regulations as the Committee may from time to time adopt, a SAR may be
exercised by the delivery (including by FAX) of written notice to the Committee
setting forth the number of shares of Common Stock with respect to which the
SAR is to be exercised and the date of exercise thereof (the “Exercise Date”)
which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. Subject to the terms of the
Award Agreement, on the Exercise Date, the Participant shall be credited by the
Company with cash in an amount equal to the excess (if any) of the Fair Market
Value (as of the date of the exercise of the SAR) per share of Common Stock
over the SAR Price per share specified in such SAR, multiplied by the total
number of shares of Common Stock of the SAR being surrendered, which shall be
paid to the Participant at the date specified in the SAR. In the discretion of
the Committee, and subject to the terms of the Award Agreement, the Company may satisfy
its obligation upon exercise of a SAR by distributing on the specified date for
the Award, that number of shares of Common Stock having an aggregate Fair
Market Value (as of the date of the exercise of the SAR) equal to the amount of
cash otherwise payable to the Participant, with a cash settlement to be made
for any fractional share interests, or the Company may settle such
obligation in part with shares of Common Stock and in part with cash.

 

8.5                               Disqualifying
Disposition of Incentive Stock Option. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant
prior to the expiration of either two (2) years from the Date of Grant of
such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a Participant shall
not affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

 

ARTICLE 9

AMENDMENT
OR DISCONTINUANCE

 

Subject to the
limitations set forth in this Article 9, the Board may at any time
and from time to time, without the consent of the Participants, alter, amend,
revise, suspend, or discontinue the Plan in whole or in

 

16

 

part; provided, however,
that no amendment which requires stockholder approval in order for the Plan and
Incentives awarded under the Plan to continue to comply with Sections 162(m),
421, and 422 of the Code, including any successors to such Sections, shall be
effective unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the Committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any Award Agreement. In the event of any
such amendment to the Plan, the holder of any Incentive outstanding under the
Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed
by the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 9 shall adversely affect any
rights of Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan without the consent
of the affected Participant.

 

ARTICLE 10

TERM

 

The Plan shall be
effective from the date that this Plan is approved by the Board. Unless sooner
terminated by action of the Board, the Plan will terminate on September 15,
2015, but Incentives granted before that date will continue to be effective in
accordance with their terms and conditions.

 

ARTICLE 11

CAPITAL
ADJUSTMENTS

 

In the event that the
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Common Stock, other securities, or other property),
recapitalization, stock split, reverse stock split, rights offering,
reorganization, merger, consolidation, split-up, spin-off, split-off,
combination, subdivision, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate to prevent the dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of the (i) the number of shares and type of
Common Stock (or the securities or property) which thereafter may be made
the subject of Awards, (ii) the number of shares and type of Common Stock
(or other securities or property) subject to outstanding Awards, (iii) the
number of shares and type of Common Stock (or other securities or property)
specified as the annual per-participant limitation, (iv) the Option Price
of each outstanding Award, (v) the amount, if any, the Company pays for
forfeited shares of Common Stock in accordance with Section 6.4, and (vi) the
number of or SAR Price of shares of Common Stock then subject to outstanding
SARs previously granted and unexercised under the Plan to the end that the same
proportion of the Company’s issued and outstanding shares of Common Stock in
each instance shall remain subject to exercise at the same aggregate SAR Price;
provided however, that the number of shares of Common Stock (or other
securities or property) subject to any Award shall always be a whole number. In
lieu of the foregoing, if deemed appropriate, the Committee may make
provision for a cash payment to the holder of an outstanding Award. Notwithstanding
the foregoing, no such adjustment or cash payment shall be made or authorized
to the extent that such adjustment or cash payment would cause the Plan or any
Stock Option to violate Section 422 of the Code. Such adjustments shall be
made in accordance with the rules of any securities exchange, stock
market, or stock quotation system to which the Company is subject.

 

17

 

Upon the occurrence of
any such adjustment or cash payment, the Company shall provide notice to each
affected Participant of its computation of such adjustment or cash payment which
shall be conclusive and shall be binding upon each such Participant.

 

ARTICLE 12

RECAPITALIZATION,
MERGER AND CONSOLIDATION

 

12.1                        No Effect
on Company’s Authority. The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company’s capital structure and its
business, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred or preference stocks ranking prior to or otherwise
affecting the Common Stock or the rights thereof (or any rights, options, or
warrants to purchase same), or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or
otherwise.

 

12.2                        Conversion
of Incentives Where Company Survives. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting corporation in
any merger, consolidation or share exchange, any Incentive granted hereunder
shall pertain to and apply to the securities or rights (including cash,
property, or assets) to which a holder of the number of shares of Common Stock
subject to the Incentive would have been entitled.

 

12.3                        Exchange
or Cancellation of Incentives Where Company Does Not Survive. In the event
of any merger, consolidation or share exchange pursuant to which the Company is
not the surviving or resulting corporation or where stockholders of the Company
prior to such transaction do not control a majority of the voting shares of the
surviving corporation, there shall be substituted for each share of Common
Stock subject to the unexercised portions of outstanding Incentives, that
number of shares of each class of stock or other securities or that amount
of cash, property, or assets of the surviving, resulting or consolidated
company which were distributed or distributable to the stockholders of the
Company in respect to each share of Common Stock held by them, such outstanding
Incentives to be thereafter exercisable for such stock, securities, cash, or
property in accordance with their terms.

 

Notwithstanding the
foregoing, however, all such Incentives may be canceled by the Company, in
its sole discretion, as of the effective date of any such reorganization,
merger, consolidation, or share exchange, or of any proposed sale of all or
substantially all of the assets of the Company, or of any dissolution or
liquidation of the Company, by either:

 

(a)                                  giving
notice to each holder thereof or his personal representative of its intention
to cancel those Incentives for which the issuance of shares of Common Stock
involved payment by the Participant for such shares and, permitting the
purchase during the thirty (30) day period next preceding such effective date
of any or all of the shares of Common Stock subject to such outstanding
Incentives, including in the Board’s discretion some or all of the shares as to
which such Incentives would not otherwise be vested and exercisable; or

 

(b)                                 in
the case of Incentives that are either (i) settled only in shares of
Common Stock, or (ii) at the election of the Participant, settled in
shares of Common Stock, paying the holder thereof an amount equal to a
reasonable estimate of the difference between the net amount per share payable
in such transaction or as a result of such transaction, and the price per share
of such Incentive to be paid by the Participant (hereinafter the “Spread”),
multiplied by the number of shares subject to the

 

18

 

Incentive. In cases where
the shares constitute, or would after exercise, constitute Restricted Stock,
the Company, in its discretion may include some or all of those shares in
the calculation of the amount payable hereunder. In estimating the Spread,
appropriate adjustments to give effect to the existence of the Incentives shall
be made, such as deeming the Incentives to have been exercised, with the
Company receiving the exercise price payable thereunder, and treating the
shares receivable upon exercise of the Incentives as being outstanding in
determining the net amount per share. In cases where the proposed transaction
consists of the acquisition of assets of the Company, the net amount per share
shall be calculated on the basis of the net amount receivable with respect to
shares of Common Stock upon a distribution and liquidation by the Company after
giving effect to expenses and charges, including but not limited to taxes,
payable by the Company before such liquidation could be completed.

 

(c)                                  An
Award that by its terms would be fully vested or exercisable upon a Change of
Control will be considered vested or exercisable for purposes of Section 12.3(a) hereof.

 

ARTICLE 13

LIQUIDATION
OR DISSOLUTION

 

Subject to Section 12.3
hereof, in case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially
all of its property, or (ii) dissolve, liquidate, or wind up its affairs,
then each Participant shall be entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) and an adjustment is determined by the Committee to be appropriate to
prevent the dilution of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may deem
equitable, make such adjustment in accordance with the provisions of Article 11
hereof.

 

ARTICLE 14

INCENTIVES
IN SUBSTITUTION FOR

INCENTIVES
GRANTED BY OTHER ENTITIES

 

Incentives may be
granted under the Plan from time to time in substitution for similar instruments
held by employees or directors of a corporation, partnership, or limited
liability company who become or are about to become Employees or Outside
Directors of the Company or any Subsidiary as a result of a merger or
consolidation of the employing corporation with the Company, the acquisition by
the Company of equity of the employing entity, or any other similar transaction
pursuant to which the Company becomes the successor employer. The terms and
conditions of the substitute Incentives so granted may vary from the terms
and conditions set forth in this Plan to such extent as the Committee at the
time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.

 

19

 

ARTICLE 15

MISCELLANEOUS
PROVISIONS

 

15.1                        Investment Intent. The Company may require that there
be presented to and filed with it by any Participant under the Plan, such
evidence as it may deem necessary to establish that the Incentives granted
or the shares of Common Stock to be purchased or transferred are being acquired
for investment and not with a view to their distribution.

 

15.2                        No Right to Continued Employment. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

 

15.3                        Indemnification of Board and Committee. No member of the
Board or the Committee, nor any officer or Employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board and the Committee, each
officer of the Company, and each Employee of the Company acting on behalf of
the Board or the Committee shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation.

 

15.4                        Effect of
the Plan. Neither the adoption of this Plan nor any action of the Board or
the Committee shall be deemed to give any person any right to be granted an
Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

 

15.5                        Compliance With Other Laws and Regulations. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance
thereof would constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange or inter-dealer quotation system or other forum in
which shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act in the event the Common Stock should ever be
registered under the 1934 Act and Section 162(m) of the Code); and, as a
condition of any sale or issuance of shares of Common Stock under an Incentive,
the Committee may require such agreements or undertakings, if any, as the
Committee may deem necessary or advisable to assure compliance with any
such law or regulation. The Plan, the grant and exercise of Incentives
hereunder, and the obligation of the Company to sell and deliver shares of
Common Stock, shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may be
required.

 

15.6                        Tax Requirements. The Company or, if applicable, any
Subsidiary (for purposes of this Section 15.6, the term “Company” shall be
deemed to include any applicable Subsidiary), shall have the right to deduct
from all amounts paid in cash or other form in connection with the Plan,
any Federal, state, local, or other taxes required by law to be withheld in
connection with an Award granted under this Plan. The Company may, in its sole
discretion, also require the Participant receiving shares of Common Stock
issued under the Plan to pay the Company the amount of any taxes that the
Company is required to withhold in connection with the Participant’s income
arising with respect to the Award. Such payments shall be required to be made
when requested by Company and may be required to be made prior to the
delivery of any certificate representing shares of Common Stock. Such payment may be
made (i) by the delivery of cash to the Company in an amount that equals
or exceeds (to avoid the issuance of fractional shares under (iii) below)
the required tax withholding obligations of the Company; (ii) if the
Company, in its sole discretion, so consents in writing, the actual delivery by
the exercising Participant to the Company of shares of Common Stock that the

 

20

 

Participant has not
acquired from the Company within six (6) months prior to the date of
exercise, which shares so delivered have an aggregate Fair Market Value that
equals or exceeds (to avoid the issuance of fractional shares under (iii) below)
the required tax withholding payment; (iii) if the Company, in its sole
discretion, so consents in writing, the Company’s withholding of a number of
shares to be delivered upon the exercise of the Stock Option, which shares so
withheld have an aggregate fair market value that equals (but does not exceed)
the required tax withholding payment; or (iv) any combination of (i), (ii),
or (iii). The Company may, in its sole discretion, withhold any such taxes from
any other cash remuneration otherwise paid by the Company to the Participant. The
Committee may in the Award Agreement impose any additional tax
requirements or provisions that the Committee deems necessary or desirable.

 

15.7                        Assignability.
Incentive Stock Options may not be transferred, assigned, pledged,
hypothecated or otherwise conveyed or encumbered other than by will or the laws
of descent and distribution and may be exercised during the lifetime of
the Participant only by the Participant or the Participant’s legally authorized
representative, and each Award Agreement in respect of an Incentive Stock
Option shall so provide. The designation by a Participant of a beneficiary will
not constitute a transfer of the Stock Option. The Committee may waive or
modify any limitation contained in the preceding sentences of this Section 15.7
that is not required for compliance with Section 422 of the Code.

 

Except as otherwise
provided herein, Nonqualified Stock Options and SARs may not be
transferred, assigned, pledged, hypothecated or otherwise conveyed or
encumbered other than by will or the laws of descent and distribution. The
Committee may, in its discretion, authorize all or a portion of a Nonqualified
Stock Option or SAR to be granted to a Participant on terms which permit
transfer by such Participant to (i) the spouse (or former spouse),
children or grandchildren of the Participant or a sister or brother of the
Participant (“Immediate Family Members”), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, (iii) a partnership in
which the only partners are (1) the Participant or such Immediate Family
Members and/or (2) entities which are controlled by the Participant or
Immediate Family Members, (iv) an entity exempt from federal income tax
pursuant to Section 501(c)(3) of the Code or any successor provision,
or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of
the Code or any successor provision, provided that (x) there shall
be no consideration for any such transfer, (y) the Award Agreement
pursuant to which such Nonqualified Stock Option or SAR is granted must be
approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of
transferred Nonqualified Stock Options or SARs shall be prohibited except those
by will or the laws of descent and distribution.

 

Following any transfer,
any such Nonqualified Stock Option and SAR shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term
“Participant” shall be deemed to include the transferee. The events of
Termination of Service shall continue to be applied with respect to the
original Participant, following which the Nonqualified Stock Options and SARs
shall be exercisable by the transferee only to the extent and for the periods
specified in the Award Agreement. The Committee and the Company shall have no
obligation to inform any transferee of a Nonqualified Stock Option or SAR
of any expiration, termination, lapse or acceleration of such Stock Option or
SAR. The Company shall have no obligation to register with any federal or state
securities commission or agency any Common Stock issuable or issued under a
Nonqualified Stock Option or SAR that has been transferred by a Participant
under this Section 15.7.

 

15.8                        Use of Proceeds.
Proceeds from the sale of shares of Common Stock pursuant to Incentives
granted under this Plan shall constitute general funds of the Company.

 

15.9                        Compliance With Other Agreements. Any
shares of Common Stock issued upon exercise of an Incentive awarded under this
Plan prior to such date on which such shares of Common Stock are offered

 

21

 

in a transaction
registered under the applicable state and federal securities laws, shall be
subject to all of the terms and provisions of that certain First Amended and
Restated Registration Rights Agreement (the “Registration Rights Agreement”),
effective as of January 5, 2006, among the Company (as successor by merger
to Holdings) and the stockholders signatory thereto. Upon the Award of any
Incentive prior to the date on which such shares of Common Stock were offered
in a transaction registered under the applicable state and federal securities
laws, the Participant shall enter into such joinder agreement or other appropriate
instruments binding them and any shares of Common Stock they may acquire
under any Incentive to said agreement.

 

15.10                 Legend. Each
certificate representing shares of Restricted Stock issued to a Participant
shall bear the following legend, or a similar legend deemed by the Company to
constitute an appropriate notice of the provisions hereof (any such certificate
not having such legend shall be surrendered upon demand by the Company and so
endorsed):

 

On the face of the
certificate:

 

“Transfer of this stock
is restricted in accordance with conditions printed on the reverse of this
certificate.”

 

On the reverse:

 

“The shares of stock
evidenced by this certificate are subject to and transferable only in
accordance with that certain EXCO Resources, Inc. 2005 Long-Term Incentive
Plan, a copy of which is on file at the principal office of the Company in
Dallas, Texas. No transfer or pledge of the shares evidenced hereby may be
made except in accordance with and subject to the provisions of said Plan. By
acceptance of this certificate, any holder, transferee or pledgee hereof agrees
to be bound by all of the provisions of said Plan.”

 

The following legend
shall be inserted on a certificate evidencing Common Stock issued under the
Plan if the shares were not issued in a transaction registered under the
applicable federal and state securities laws:

 

“Shares of stock
represented by this certificate have been acquired by the holder for investment
and not for resale, transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of applicable state and federal
securities laws, and may not be offered for sale, sold or transferred
other than pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to the Company.”

 

Any legend required by
any of the terms of the Registration Rights Agreement.

 

A copy of this Plan shall
be kept on file in the office of the Company at 12377 Merit Drive, Suite 1700,
Dallas, Texas, United States, or any successor location of the Company’s
principal executive offices.

 

***************

 

22

 

IN WITNESS WHEREOF, the
Company has caused this instrument to be executed as of February 14, 2006,
by its Chairman, Chief Executive Officer and Vice Chairman, President and
Secretary pursuant to prior action taken by the Board.

 

 

	
   

  	
  EXCO
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ DOUGLAS H. MILLER

  	
   

  
	
   

  	
  Name:  Douglas
  H. Miller

  
	
   

  	
  Title:  Chairman
  and Chief Executive Officer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ STEPHEN F. SMITH

  	
   

  	
   

  
	
  Stephen F. Smith

  	
   

  
	
  Vice Chairman,
  President and Secretary

  	
   

  
					

 

23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]