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8720 Stony Point Parkway
                                                            Suite 200
Richmond, Virginia 23235
                                                      Phone: (804) 565-3000
                                                  Fax: (804) 565-3500

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July 2, 2009
 
 
Dr. Geoffrey Allan,
XX XXX XXX,
Richmond, Virginia, xxxxx
 
RE:    Separation Agreement and General Release
 
Dear Geoff:
    
    This letter sets out the terms of our agreement regarding your separation
and release of claims with respect to the termination of your employment with
Insmed Incorporated (“Insmed” or “us”) effective on June 15, 2009 (your “Date of
Termination”).
 
    Following your Date of Termination, we will pay you (or, in the event of
your death, your estate) a single lump-sum severance payment in the amount of
$675,000, which shall be reduced for applicable withholding taxes, and which
represents the sum of (i) your current annual base salary rate of $450,000, plus
(ii) a payment of $225,000 representing your annual bonus for 2009.  This amount
will be paid on the first regular pay date following the date on which you have
signed and returned this letter to Insmed and the revocation period described
below has expired.
 
    In addition, we will directly pay or reimburse you for 100% of the
applicable COBRA premiums for continued coverage under our group health plan for
you and your qualified beneficiaries for a period of up to eighteen months
following your Date of Termination.  If at the end of such period you are
eligible to and choose to convert your coverage under our group health policy to
an individual policy, we will also pay or reimburse you for 100% of your
premiums under the converted individual policy for an additional period of up to
eighteen months; provided, however, that if you become eligible for alternate
health coverage during such period, our obligation to continue to pay or
reimburse for your such premiums will cease at such time.  You may apply for
short term disability and long term disability benefits under the Insmed short
term disability and long term disability policies, with any benefits being
subject to the terms of those policies.
 
    We will provide you with the use of the automobile that is currently made
available to you until the end of the current lease period, which is
approximately 18 months.  We will pay for the lease and insurance costs on the
automobile until the end of the current lease period.
 
    With respect to your stock options that were vested as of your Date of
Termination, the exercise period for each option will be extended to the
expiration date of that option as set in the option agreement.  Otherwise, the
provisions of your stock options, restricted stock and restricted stock unit
awards, as applicable, will be governed by the terms and conditions of your
award agreements and of our equity incentive plan, including the forfeiture of
any unvested stock options.
 
    In exchange for the severance benefits described above, you agree on behalf
of yourself, your heirs, representatives, executors, estate, successors and
assigns, to waive and release Insmed, its directors, officers, employees,
agents, insurers, reinsurers, attorneys, successors, assigns and any parent,
subsidiary and affiliated companies (collectively, the “Released Parties”), from
all claims you ever had or might now have against the Released Parties relating
in any way to your employment with Insmed or the termination of that employment,
whether or not you are, or ever were, aware that they existed.  The claims you
are agreeing to release specifically include, but are not limited to,  any and
all claims against the Released Parties based upon state, federal, local,
foreign or common law, including but not limited to claims under the Age
Discrimination Act of 1967, as amended, Title VII of the Civil Right Act of
1964, as amended, the Americans with Disabilities Act, the Employee Retirement
Income Security Act of 1974, the National Labor Relations Act, the Fair Labor
Standards Act, the Portal to Portal Act, the Worker Adjustment and Retraining
Act, the Equal Pay Act, claims for wrongful discharge, emotional distress,
wages, damage to reputation, attorneys’ fees, and any claim based on contract or
tort, including without limitation any claim under your change in control
agreement with us dated March 14, 2007 (your “Change in Control Agreement”).
 
    In addition, you agree that you will continue to abide through and after
your Date of Termination by the confidentiality restriction contained in Section
17 of your Change in Control Agreement.  You also agree that you will abide for
a period of eighteen months following your Date of Termination by the covenant
not to compete set forth in Section 18 of your Change in Control Agreement as
though your employment had been terminated under such agreement.  In addition,
you also agree to abide by the applicable terms of the covenants not to compete
or solicit contained in our agreement with Merck & Co. dated February 12, 2009,
as well as in any other agreement to which Insmed or any of our subsidiaries is
a party.  You further agree that you will continue to comply through and after
your Date of Termination with all applicable terms and conditions of our insider
trading policy with respect to the exercise or sale of the equity awards you
have received from us or otherwise with respect to any transactions in our
stock, including without limitation the prohibition of trading while in
possession of material non-public information and the requirement to obtain
pre-clearance and following the other procedures under the policy in connection
with any trading in our stock.
 
    You have a period of twenty-one days in which to consider the terms of this
letter before you sign it, although you are free to sign and return it at any
time before such period has elapsed.  You acknowledge that you have been advised
to consult with counsel before signing this letter.  The terms of this letter
will automatically become effective seven days after the date on which you have
signed and returned the letter to me.  You have the right to revoke this letter
at any time within that seven-day period.  If you decide to revoke this letter,
you must provide me with a signed notice of revocation on or before the end of
the seven-day period.
If you agree with the terms of this letter, please sign below and return the
signed letter to me by not later than July 6th. 2009.
 
Sincerely,
 
                   /s/ Kevin P. Tully
__________________________
Name: Kevin P. Tully
Title  : CFO
 
ACCEPTED AND AGREED:
     
         /s/ Geoffrey Allan
_______________________
Geoffrey Allan
 
 July 2, 2009
_______________________
Date