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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R.§§ 200.80(B)4, AND 240.24B-2

EXHIBIT 10.1

Execution Copy

SECOND AMENDED AND RESTATED
STRATEGIC COLLABORATION AND
LICENSE AGREEMENT
 
This Second Amended and Restated Strategic Collaboration and License Agreement
(the “Agreement”) is executed this January 8, 2015 (the “Second Restatement
Date”), between Isis Pharmaceuticals, Inc., a Delaware corporation having an
address at 2855 Gazelle Court, Carlsbad, CA 92010 (“Isis”) and Alnylam
Pharmaceuticals, Inc., a Delaware corporation having an address at 300 Third
Street, Cambridge, MA 02142 (“Alnylam”). Isis and Alnylam may be referred to
herein as the “Parties,” or each individually as a “Party.”
 
GUIDING PRINCIPLES
 
Isis is the leader in RNA-based drug discovery, has created technology,
intellectual property, expertise, facilities and resources to discover and
develop oligonucleotide drugs;
 
Alnylam is the leader in RNAi therapeutics, has developed and acquired
intellectual property, expertise and technology in RNAi therapeutics, and is
conducting research, drug discovery and development focused on Double Stranded
RNA drugs;
 
Isis and Alnylam desire to create a long-term strategic relationship that will
enhance the positions of both companies in RNA-based drug discovery;
 
Isis will continue to pursue RNA-based drug discovery technology very broadly
including all potential mechanisms of action. Isis will work with Alnylam as
Isis’ primary means of participating in the potential value of Double Stranded
RNA Products, and will not enter into any collaborations with Third Parties the
primary purpose of which is to discover Double Stranded RNA Products;
 
Alnylam will continue to pursue RNAi therapeutics and the use of Double Stranded
RNA.  Alnylam has no present plans to pursue Single Stranded Products;
 
Isis and Alnylam are parties to the Amended and Restated Strategic Collaboration
and License Agreement dated April 28, 2009 (as amended to date, the “First
Restated Agreement”), which amended and restated the Strategic Collaboration and
License Agreement dated March 11, 2004 (as amended through April 28, 2009 (the
“First Restatement Date”), the “Original Agreement”) to, among other things,
provide each Party with certain exclusive licenses to research, develop and
commercialize Single Stranded RNAi Products for a limited pool of gene targets,
and co-exclusivity in the field of Single Stranded RNAi Compounds; and
 

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Isis and Alnylam now wish to amend and restate the First Restated Agreement to
(i) reflect the termination of the Research Program and certain rights of
Alnylam with respect to Single Stranded RNAi Compounds and Single Stranded RNAi
Products, (ii) expand the First Restated Agreement by providing each other (x)
non-exclusive licenses to certain additional Patents of the respective Parties
and (y) exclusive licenses to research, develop and commercialize oligomeric
compounds directed to certain RNA Targets in the Field.
 
The objectives of the strategic relationship are to:

§ Enhance the leadership of Alnylam in RNAi therapeutics.

§ Enhance the potential of Alnylam to develop Double Stranded RNA drugs.

§ Enhance the patent positions of each Party with respect to certain Double
Stranded RNA drugs.

§ Provide Isis with a means for participating in the success of RNAi
therapeutics.

§ Enhance the potential of Isis to develop Single Stranded Compound drugs.

§ Provide Alnylam with exclusive rights to research, develop and commercialize
oligomeric compounds for certain  RNA Targets in the Field.

§ Provide Isis with exclusive rights to research, develop and commercialize
oligomeric compounds for certain RNA Targets in the Field.

 
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ARTICLE 1
 
DEFINITIONS; AMENDMENT AND RESTATEMENT
 
1.1               Capitalized terms used herein and not defined elsewhere herein
have the meanings set forth in Exhibit 1.1.
 
1.2               Effective as of the Second Restatement Date, this Agreement
restates and supersedes the First Restated Agreement as amended through the
Second Restatement Date. The terms and conditions of the First Restated
Agreement shall apply for the period from the First Restatement Date until the
Second Restatement Date unless otherwise provided by this Agreement.
 
ARTICLE 2
 
EQUITY INVESTMENT
 
2.1               In connection with the Original Agreement, Isis purchased from
Alnylam 1,666,667 shares of Series D Preferred Stock, at $6.00 per share (i.e.,
at an aggregate purchase price of $10,000,002).
 
ARTICLE 3
 
MANUFACTURING SERVICES RELATIONSHIP
 
3.1               [Intentionally Deleted]
 
ARTICLE 4
 
COLLABORATIVE RESEARCH EFFORTS; PROTECTED TARGETS
 
4.1               [Intentionally Deleted]
 
4.2               [Intentionally Deleted]
 
4.3               Isis Enabled Targets for Single Stranded RNAi.
 
(a)                                        Enabled Targets. Isis will have a
pool (the “Enabled Target Pool”) containing [***] slots for which Isis can
designate certain RNA Targets against which Isis intends to research, develop
and commercialize a Single-Stranded RNAi Product (each such slot, an “Enabled
Target Slot” and any RNA Target occupying such a slot, an “Enabled Target”);
provided, however, that, each time Isis designates as a Development Candidate a
Single Stranded RNAi Product Designed for one of Isis’ Enabled Targets, then (i)
such Enabled Target will be considered to have graduated from Isis’ Enabled
Target Pool (a “Graduated Enabled Target”), (ii) Isis will be permitted to
designate a new Enabled Target to fill the open Enabled Target Slot in Isis’
Enabled Target Pool, and (iii) so long as Isis continues to maintain an Active
Program for the applicable Single Stranded RNAi Product Designed for the
Graduated Enabled Target, such Graduated Enabled Target will remain an Enabled
Target of Isis hereunder. For purposes of clarity, except as set forth in
6.1(h)(i) and 6.1(l), as applicable, Isis may not practice the Alnylam Patent
Rights to research, develop or commercialize a Single Stranded RNAi Product
other than a Single Stranded RNAi Product Designed for one of Isis’ Enabled
Targets.
 
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(b)                                         [Intentionally Deleted]
 
(c)                                         Designating Enabled Targets. From
time to time after the Second Restatement Date Isis may designate an RNA Target
as an Enabled Target upon written notice to Alnylam; provided, that there is an
open Enabled Target Slot in the Enabled Target Pool. At no time during the
period commencing with the Second Restatement Date and ending upon the
expiration of the Alnylam Exclusive Target Royalty Term may Isis designate an
Alnylam Exclusive Target as an Enabled Target.
 
(d)                                         Removing Enabled Targets. From time
to time after the Second Restatement Date Isis may remove an RNA Target from the
Enabled Target Pool upon written notice to Alnylam (which removal will create an
open Enabled Target Slot). In addition, on an Enabled Target-by-Enabled Target
basis, if Isis has not designated a Development Candidate comprising a Single
Stranded RNAi Product Designed for the applicable Enabled Target before the
[***]-year anniversary of the date Isis added the applicable Enabled Target to
the Enabled Target Pool, then such RNA Target will be automatically removed from
the Enabled Target Pool. Once Isis removes an RNA Target from its Enabled Target
Pool (whether voluntarily or by operation of this Section 4.3(d)), such RNA
Target shall no longer be deemed an Enabled Target hereunder and Isis will be
prevented from later adding such RNA Target to its Enabled Target Pool until
[***] months have passed from the date such RNA Target was removed.
 
(e)                                         [Intentionally Deleted]
 
(f)                                          Confidentiality. The fact that Isis
has designated or removed a particular RNA Target within the Enabled Target Pool
is Confidential Information of Isis, subject to the provisions of Article 12.
Alnylam shall not disclose such Confidential Information of Isis to any Third
Party, including its Third Party collaborators, or use such Confidential
Information to guide its own (or its Third Party collaborators’) decisions to
pursue particular RNA Targets, but Alnylam can use such Confidential Information
to decline a Third Party’s request for a license to such RNA Target.
 
ARTICLE 5
 
LICENSES GRANTED BY ISIS TO ALNYLAM
 
5.1               License Grants. Subject to the terms and conditions of this
Agreement, including, but not limited to, the restrictions set forth in Section
5.3, Isis grants Alnylam the following licenses:
 
(a)                                         Subject to the terms of Section
11.8, under Isis Current Motif and Mechanism Patents and Isis Current Chemistry
Patents, a license to research, develop, make, have made, use, import, offer to
sell and sell Double Stranded RNA and Double Stranded RNA Products.
 
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(b)                                         [Intentionally Deleted].
 
(c)                                         Subject to the terms of Section
11.8, under the Isis Current Motif and Mechanism Patents and Isis Current
Chemistry Patents, a license to research, develop, make, have made, use, import,
offer to sell and sell MicroRNA Products.
 
(d)                                         [Intentionally Deleted].
 
(e)                                         A royalty-free, fully paid, license
to practice any Know-How disclosed to Alnylam during the performance of this
Agreement, subject to the non-disclosure but not the non-use provisions
contained in Article 12.
 
(f)                                          A fully paid, royalty-free license
under Isis Manufacturing Patents to research, develop, make, have made, use and
import Alnylam Products for Research Use.
 
(g)                                         Subject to the terms of Section
11.8, under Isis Extended Field Patents, a license to research, develop, make,
have made, use, import, offer to sell and sell Double Stranded RNA and Double
Stranded RNA Products, other than Alnylam Exclusive Target Products in the
Field.
 
(h)                                         Subject to the terms of Section
11.8, under Isis Exclusive Target Patents, a license to research, develop, make,
have made, use, import, offer to sell and sell Alnylam Exclusive Target Products
in the Field.
 
5.2               License Exclusivity, Territory and Sublicenses.
 
(a)                                         Subject to the terms and conditions
of this Agreement, including the restrictions set forth in Section 5.3, the
license from Isis to Alnylam granted in Section 5.1(a) is worldwide and
co-exclusive (with Isis), with the exclusive right to grant Naked Sublicenses;
the licenses from Isis to Alnylam granted in Sections 5.1(c), (e), (f), and (g)
are worldwide and nonexclusive; and the license from Isis to Alnylam granted in
Section 5.1(h) is worldwide and exclusive. Alnylam is not permitted to grant
sublicenses under the licenses granted in Sections 5.1(a) through 5.1(e), except
that Alnylam is permitted to grant (i) sublicenses in connection with a Bona
Fide Discovery Collaboration, (ii) sublicenses in connection with a Development
Collaboration, (iii) Naked Sublicenses and (iv) sublicenses under the license
granted in Section 5.1(e) in connection with the discovery, development or
commercialization of any product. Alnylam is not permitted to grant sublicenses
under the licenses granted in Section 5.1(f).  Alnylam is not permitted to grant
sublicenses under the license granted in Section 5.1(g) except that Alnylam is
permitted to grant sublicenses in connection with a Bona Fide Third Party
Collaboration.  Alnylam is permitted to grant sublicenses under the license
granted in Sections 5.1(h) except only that any such sublicense granted with
respect to a Single Stranded Compound, Single Stranded Product, Single Stranded
RNAi Compound or Single Stranded RNAi Product is subject to Isis’ prior written
consent, which consent may be withheld in Isis’ sole discretion. Notwithstanding
anything to the contrary in the foregoing, Alnylam is permitted to grant
sublicenses under its licenses in Section 5.1 to its Affiliates.
 
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(b)                                         [Intentionally deleted]
 
(c)                                         Alnylam cannot sublicense its right
to grant Naked Sublicenses under this Agreement except that Alnylam may permit
its sublicensees to grant further sublicenses in connection with a sublicense to
further the research, development or commercialization of an Alnylam Product.
 
(d)                                         Notwithstanding the foregoing, (i)
Alnylam acknowledged and permits the license Isis granted [***], as amended
through the First Restatement Date, that granted [***] a nonexclusive license
under Isis Current Motif and Mechanism Patents and Isis Current Chemistry
Patents for the manufacture and sale of chemically modified oligonucleotides for
[***] only and (ii) subject to the exclusive license grant to Alnylam in Section
5.1(h), Isis may continue to grant licenses to Third Parties under the Isis
Patent Rights for the purpose of manufacturing and selling oligonucleotides;
provided that, to the extent such licenses cover Double Stranded RNA Isis will
restrict such licenses to [***] and will exclude Agricultural Field Products
from such licenses granted after August 27, 2012.
 
5.3               Limitations on Licenses.
 
(a)                                         The licenses granted under Section
5.1(a) through (g) above do not grant any rights to Alnylam to practice the Isis
Excluded Technology. The licenses granted under Section 5.1(h) above do not
grant any rights to Alnylam to practice the Isis Exclusive Target Excluded
Technology. If Alnylam wishes to license any Isis Excluded Technology or Isis
Exclusive Target Excluded Technology for which Isis has the right to grant a
license or sublicense, Isis will negotiate in good faith an appropriate license.
 
(b)                                         Notwithstanding the licenses granted
to Alnylam under Section 5.1, Isis retains its rights in the Isis Patent Rights,
in the Joint Patents, and in the Isis Extended Field Patents (i) exclusively for
the Isis Reserved DS-Targets, (ii) exclusively for the Isis Encumbered Targets,
and (iii) exclusively for the Isis Exclusive Targets. Once a particular
contractual restriction expires on an Isis Encumbered Target, Alnylam’s licenses
under Section 5.1 will no longer be limited under this Section 5.3(b) for such
target and such target shall no longer be an Isis Encumbered Target. Isis will
update the [***] (as defined in the letter agreement dated March 9, 2004 between
Alnylam and Isis) provided to Alnylam prior to the Effective Date and subsequent
[***] provided to Alnylam from time to time, to remove targets that are no
longer Isis Encumbered Targets promptly upon receipt of a written request from
Alnylam to update such [***], but will not be required to update such [***] more
frequently than [***] a Calendar Quarter.
 
(c)                                         Licenses to Isis Patent Rights, Isis
Extended Field Patents and Isis Exclusive Target Patents that are joint patents
with Third Parties (i.e., invented by one or more Isis inventors and one or more
non-Isis inventors) are licensed subject to the retained rights of any non-Isis
inventors and their assignees and licensees. Any such retained rights of
non-Isis inventors and their assignees and licensees existing as of the Second
Restatement Date are set forth in Exhibit 5.3(c) attached hereto.
 
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(d)                                         Licenses to Isis Patent Rights, Isis
Extended Field Patents and Isis Exclusive Target Patents that are subject to
contractual obligations between Isis and Third Parties in effect as of the
Second Restatement Date are licensed (i) subject to the restrictions and other
terms described in the Isis Third Party Agreements, and (ii) with respect to
Agricultural Field Products, to the extent Isis has the right under such Third
Party Agreements to grant such a license for Agricultural Field Products.  Prior
to the Second Restatement Date, Isis has provided Alnylam with copies of the
Isis Third Party Agreements, provided, that Isis may redact copies of
out-licenses Isis has granted Third Parties so long as the redacted terms do not
limit Alnylam’s rights hereunder or create obligations for Alnylam.  Alnylam
hereby agrees to comply, and to cause its sublicensees to comply, with such
restrictions and other terms.
 
(e)                                         Notwithstanding the exclusive nature
of the license granted by Isis to Alnylam under Section 5.1(h), Isis may grant
Permitted Licenses.
 
(f)                                          The license to Isis Extended Field
Patents granted in Section 5.1(g) does not include any rights with respect to
Double Stranded RNA or Double Stranded RNA Products that are designed to
modulate any Isis Retained Targets.  Isis will endeavor in good faith and use
commercially reasonable and diligent efforts to take all actions reasonably
necessary, without any obligation on the part of Isis to compensate any Person,
to enable Isis to grant a license to Alnylam pursuant to Section 5.1(g) with
respect to Double Stranded RNA and Double Stranded RNA Products that are
designed to modulate each Isis Retained Target other than the Isis Retained
Special Target(s), within [***] days after the Second Restatement Date, and will
continue to do so until such ability to license Alnylam is obtained with respect
to each Isis Retained Target other than the Isis Retained Special Target(s).
Isis will promptly notify Alnylam when such ability to license Alnylam is
obtained, and effective upon delivery of such notice to Alnylam, the applicable
RNA Target will automatically no longer be an Isis Retained Target, and the
Parties will update Schedule 1-69 accordingly as promptly as feasible.
 
5.4              Alnylam Covenant Regarding Sublicensing of Isis Patent Rights.
Alnylam shall use good faith efforts to include sublicenses under the licenses
under the Isis Patent Rights granted to Alnylam in Sections 5.1(a) in any Third
Party collaboration or license agreement in which Alnylam grants rights to
develop and commercialize Double Stranded RNA Products, unless the technology
covered by such licensed Isis Patent Rights would not reasonably be expected to
advance the goals of such Third Party collaboration or license relationship.
 
5.5               Diligence on Alnylam Exclusive Targets. For each Alnylam
Exclusive Target, Alnylam will use Commercially Reasonable Efforts (either on
its own, with an Affiliate or in a Bona Fide Third Party Collaboration) to
develop and commercialize [***].
 
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ARTICLE 6
 
LICENSES GRANTED BY ALNYLAM TO ISIS; AND
EXCLUSIVITY COVENANT
 
6.1              License Grants. Subject to the terms and conditions of this
Agreement, including, but not limited to, the restrictions set forth in Section
6.5, Alnylam grants Isis the following licenses:
 
(a)                                         Subject to the terms of Section
11.8, a fully-paid, royalty-free, nonexclusive license under Alnylam Current
Motif and Mechanism Patents and Alnylam Current Chemistry Patents to research,
develop, make, have made, use and import Isis Products other than Isis Single
Stranded RNAi Products for Research Use.
 
(b)                                         [Intentionally Deleted].
 
(c)                                         Subject to the terms of Section
11.8, a nonexclusive license under Alnylam Current Motif and Mechanism Patents
and Alnylam Current Chemistry Patents to research, develop, make, have made,
use, import, offer to sell and sell Isis Single Stranded Products.
 
(d)                                         [Intentionally Deleted].
 
(e)                                         Subject to the terms of Section
11.8, under the Alnylam Current Motif and Mechanism Patents and Alnylam Current
Chemistry Patents, a nonexclusive license to research, develop, make, have made,
use, import, offer to sell and sell MicroRNA Products.
 
(f)                                          [Intentionally Deleted].
 
(g)                                         A worldwide, royalty-free, fully
paid, nonexclusive license to practice any Know-How disclosed to Isis during the
performance of this Agreement, subject to the non-disclosure but not the non-use
provisions contained in Article 12.
 
(h)                                         Subject to the terms of Section
11.8, a worldwide license under the Alnylam Current Motif and Mechanism Patents
and Alnylam Current Chemistry Patents to (i) research, develop, make, have made,
use and import Single Stranded RNAi Compounds and Single Stranded RNAi Products
for Research Use, and (ii) research, develop, make, have made, use, import,
offer to sell and sell Isis Single Stranded RNAi Products. The license granted
to Isis under the foregoing clause (i) shall be non-exclusive, and the license
granted to Isis under the foregoing clause (ii) shall be exclusive.
 
(i)                                          [Intentionally Deleted].
 
(j)                                          Under Alnylam’s rights in Research
Program Patents, a royalty-free license for any and all purposes, except to
research, develop, make, have made, use, import, offer to sell or sell any (1)
oligonucleotides (or chemically modified oligonucleotide analogs) designed to
work via the RNase H 1 or 2 mechanism (including any oligonucleotide which has
[***]), (2) Double Stranded RNA Products, (3) MicroRNA Products, (4) Single
Stranded RNAi Products, or (5) Isis Single Stranded Product.
 
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(k)                                        Subject to the terms of Section 11.8,
a nonexclusive license under Alnylam Extended Field Patents to research,
develop, make, have made, use, import, offer to sell and sell Single Stranded
Products, other than Isis Exclusive Target Products in the Field.
 
(l)                                          Subject to the terms of Section
11.8, an exclusive license under Alnylam Exclusive Target Patents to research,
develop, make, have made, use, import, offer to sell and sell Isis Exclusive
Target Products in the Field.
 
6.2               License Option. For each RNA Target in the Isis DS-Target Pool
(as further described below) Alnylam grants Isis an option to obtain (on a
Reserved DS-Target-by-Reserved DS-Target basis), subject to the terms and
conditions of this Agreement, including, but not limited to, the restrictions
set forth in Section 6.5, a non-exclusive license under, subject to the terms of
Section 11.8, Alnylam Current Motif and Mechanism Patents, Alnylam Current
Chemistry Patents and Alnylam’s rights in Joint Patents, to research, develop,
make, have made, use, import, offer for sale and sell Double Stranded RNA
Products that are Isis Products.
 
(a)                                          This option will expire on a
Reserved DS-Target-by-Reserved DS-Target basis if Isis has not paid Alnylam the
option fee set forth in Section 8.1 below before the earlier of (i) [***] with
respect to such Reserved DS-Target, (ii) the [***] anniversary of the date such
Reserved DS-Target [***] or the [***] anniversary of the date such Reserved
DS-Target [***] with a Third Party and Isis is contractually able to revoke such
Third Party’s rights or (iii) the date Isis [***] with respect to such Reserved
DS-Target.
 
(b)                                         For any Reserved DS-Target for which
Isis obtains a license from Alnylam under this Section 6.2, Isis will use
Commercially Reasonable Efforts (either on its own or in an Antisense Drug
Discovery Program or Development Collaboration) to develop and commercialize
Double Stranded RNA Products that modulate such Reserved DS-Target.
 
6.3               Sublicenses.
 
(a)                                         With respect to any license granted
by Alnylam pursuant to Section 6.1(a), or 6.2, Isis may only grant a sublicense
to a Third Party solely for (i) the purpose of enabling such Third Party to
collaborate with Isis in an Antisense Drug Discovery Program, or (ii) to develop
and commercialize an Isis Product in a Development Collaboration. With respect
to any license granted by Alnylam pursuant to Section 6.1(c), 6.1(e), 6.1(g),
Isis may grant a sublicense to a Third Party in connection with the discovery,
development or commercialization of any product. Isis may grant sublicenses
under Section 6.1(j). With respect to the licenses granted by Alnylam pursuant
to Section 6.1(h), Isis may only grant a sublicense to a Third Party to further
the research, development or commercialization of an Isis Single Stranded RNAi
Product that Isis has performed on its own (or with Alnylam under the Research
Program) and [***] at least [***]% of the work to discover and develop the Isis
Single Stranded RNAi Product through the [***] (or a date that is earlier than
[***] if requested by Isis and approved in writing by Alnylam, such approval not
to be unreasonably withheld). Isis is not permitted to grant sublicenses under
the license granted in Section 6.1(k), except that Isis is permitted to grant
sublicenses in connection with a Bona Fide Third Party Collaboration. Isis is
permitted to grant sublicenses under the license granted in Section 6.1(l),
except only that any such sublicense granted with respect to a Double Stranded
RNA or a Double Stranded RNA Product is subject to Alnylam’s prior written
consent, which consent may be withheld in Alnylam’s sole discretion. 
Notwithstanding anything to the contrary in the foregoing, Isis is permitted to
grant sublicenses under its licenses in Sections 6.1 and 6.2 to its Affiliates.
 
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(b)                                         Notwithstanding anything in this
Agreement to the contrary, Isis may not enter into any drug discovery
collaboration the primary purpose of which is to discover Double Stranded RNA
Products and/or to develop Double Stranded RNA Products to any point up to the
[***].
 
6.4               DS-Target Pool.
 
(a)                                         Reserved DS-Target Slots. On the
Effective Date, Isis will have a pool (the “Isis DS-Target Pool”) containing up
to [***] slots for which Isis can designate certain RNA Targets other than the
Alnylam Exclusive Targets solely for Antisense Drug Discovery Programs (each
such slot, a “DS-Target Slot” and any RNA Target occupying such a slot, a
“Reserved DS-Target”); provided, however, that on January 1 of each year
starting with January 1, 2007, Isis will gain the right to purchase one
additional DS-Target Slot by paying Alnylam [***] per each additional DS-Target
Slot. These rights are cumulative and, subject to Section 17.2(c) do not expire
during the License Term. Furthermore, in the event that Isis pays the [***]
license option fee for a Reserved DS-Target pursuant to Section 8.1, such
Reserved DS-Target will be considered to have graduated from the Isis DS-Target
Pool, and, subject to Section 6.4(e), Isis will be permitted to designate a new
Reserved DS-Target to fill the open DS-Target Slot in the Isis DS-Target Pool.
For purposes of clarity, except as permitted under Sections 6.1(h)(i), Isis may
not practice the Alnylam Patent Rights to research, develop or commercialize
Single Stranded RNAi Products for a Reserved DS-Target unless such Reserved
DS-Target is designated as an Enabled Target by Isis pursuant to Section 4.3(a)
above.
 
(b)                                         Initial Designations. The letter
delivered by Isis to Alnylam on the Second Restatement Date sets forth the
Reserved DS-Targets as of the Second Restatement Date.
 
(c)                                         Removing/Adding DS-Targets. After
the Second Restatement Date and no more than once in any [***] month period (a
“Target Reallocation Period”), Isis may do any of the following:
 
(i)                 Remove an RNA Target from the Isis DS-Target Pool (which,
following such removal will create an open DS-Target Slot); or
 
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(ii)               Add a new RNA Target to any open DS-Target Slot (subject to
the procedures and provisions of Section 6.4(e).
 
Notwithstanding the foregoing provisions of this Section 6.4(c), in any Target
Reallocation Period, Isis cannot remove a number of Reserved DS-Targets that
exceeds the number calculated by dividing the then current number of DS-Target
Slots by [***] and rounding down to the nearest whole number. For the purpose of
the limitation described in the immediately preceding sentence, removing an RNA
Target from the Isis DS-Target Pool and then filling the open DS-Target Slot
created by such removal shall count as a single removal. Once Isis removes an
RNA Target from the Isis DS-Target Pool, Isis will be prevented from later
adding such RNA Target to the Isis DS-Target Pool until [***] months have passed
from the date Isis removed such RNA Target.
 
(d)                                         New Target Request. When Isis wishes
to add a new RNA Target to occupy a vacant DS-Target Slot, it will provide
Alnylam with written notice (the “Request Notice”) of the RNA Target it wishes
to add (the “Proposed Reserved DS-Target”). The Request Notice will include the
gene name, and the NCBI accession number or nucleic acid sequence for the
Proposed Reserved DS-Target.
 
(e)                                         New Target Rejection/Approval.
Within [***] days of receipt of the Request Notice, Alnylam will give Isis
written notice if any of the criteria set forth below applied to such Proposed
Reserved DS-Target at the time of Alnylam’s receipt of the Request Notice. If,
at such time, the Proposed Reserved DS-Target is (i) subject to Alnylam’s own
Active Program [***], (ii) encumbered by a contractual obligation between
Alnylam and a Third Party that would preclude Alnylam from granting a license
under Section 6.2 with respect to the Proposed Reserved DS-Target, (iii) the
subject of Alnylam’s good faith negotiations to enter into a contractual
obligation within the [***] months following receipt of the Request Notice with
a Third Party (as supported by a written request from such Third Party) that
would preclude Alnylam from granting a license under Section 6.2 with respect to
the Proposed Reserved DS-Target, or (iv) an Alnylam Exclusive Target, then the
Proposed Reserved DS-Target will be rejected and will not become a Reserved
DS-Target. If the Proposed Reserved DS-Target is not rejected under this
subsection (e), the Proposed Reserved DS-Target will become an Isis Reserved
DS-Target. Alnylam will promptly notify Isis in writing if a rejected Proposed
Reserved DS-Target later becomes available to be designated as a Reserved
DS-Target.
 
(f)                                          [Intentionally Deleted]
 
(g)                                        Diligence on Rejected Targets. If (i)
Alnylam rejects a Proposed Reserved DS-Target under Section 6.4(e) above and
(ii) Alnylam has [***] with respect to such rejected Proposed Reserved DS-Target
by the [***] anniversary of the date Alnylam rejected such Proposed Reserved
DS-Target if Alnylam is working on such target alone, or the [***] anniversary
of the date Alnylam rejected such Proposed Reserved DS-Target if such rejected
Proposed Reserved DS-Target is subject to a contractual obligation between
Alnylam and a Third Party that would preclude Alnylam from granting a license
under Section 6.2 with respect to the rejected Proposed Reserved DS-Target but
Alnylam [***], then [***] such rejected Proposed Reserved DS-Target [***].
 
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(h)                                         Diligence Obligations in Third Party
Contractual Obligations. With the goal of minimizing contractual encumbrances on
Alnylam Patent Rights with respect to RNA Targets in the absence of a reasonable
intent to discover and develop products that modulate such RNA Targets by Third
Parties with which Alnylam enters into such contractual obligations, Alnylam
intends to seek reasonable diligence obligations from Third Parties in
negotiating contracts between Alnylam and such Third Parties that would
constitute contractual obligations of Alnylam that would preclude Alnylam from
granting licenses to Isis under Section 6.2 with respect to Proposed Reserved
DS-Targets; or that would prevent Alnylam from granting Isis licenses with
respect to Proposed Reserved DS-Targets; provided that Isis hereby acknowledges
that such diligence obligations are often heavily negotiated in biotechnology
license and collaboration agreements and that this Section 6.4(h) shall not
prevent Alnylam from entering into contracts between Alnylam and Third Parties
in accordance with Alnylam’s reasonable business judgment.
 
(i)                                          Confidentiality. The fact that Isis
has designated or removed a particular RNA Target within the Isis DS-Target Pool
is Confidential Information of Isis, or that Alnylam has rejected a particular
RNA Target proposed for a DS-Target Slot or disallowed the redesignation of a
particular RNA Target is Confidential Information of Alnylam, subject to the
provisions of Article 12. Neither Party shall disclose such Confidential
Information of the other Party to any Third Party, including its Third Party
collaborators, or use such Confidential Information of the other Party to guide
its own (or its Third Party collaborators’) decisions to pursue particular RNA
Targets, but Alnylam can use such Confidential Information of Isis to decline a
Third Party’s request for a license to such RNA Target.
 
6.5               Limitations on Licenses.
 
(a)                                         The licenses granted under Sections
6.1(a) through (k) and 6.2 above do not grant any rights to Isis to practice the
Alnylam Excluded Technology. The license granted under Section 6.1(l) above does
not grant any rights to Isis to practice the Alnylam Exclusive Target Excluded
Technology. The licenses granted under Sections 6.1 and 6.2 above do not grant
any rights to Isis to practice the Alnylam Extended Field Patents or the Alnylam
Exclusive Target Patents with respect to Agricultural Products in the
Agricultural Field.  If Isis wishes to license any Alnylam Excluded Technology
or Alnylam Exclusive Target Excluded Technology for which Alnylam has the right
to grant a sublicense, Alnylam will negotiate in good faith an appropriate
license.
 
(b)                                         Licenses to Alnylam Patent Rights,
Alnylam Extended Field Patents or Alnylam Exclusive Target Patents that are
joint patents with Third Parties (i.e., invented by one or more Alnylam
inventors and one or more non-Alnylam inventors) are licensed subject to the
retained rights of any non-Alnylam inventors and their assignees and licensees.
There are no Alnylam Current Chemistry Patents or Alnylam Current Motif and
Mechanism Patents subject to such retained rights. To Alnylam’s knowledge, as of
the Second Restatement Date, there are no Alnylam Extended Field Patents or
Alnylam Exclusive Target Patents subject to such retained rights.
 
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(c)                                         Licenses to Alnylam Patent Rights,
Alnylam Extended Field Patents and Alnylam Exclusive Target Patents that are
subject to contractual obligations between Alnylam and Third Parties in effect
as of the Second Restatement Date are licensed subject to the restrictions and
other terms of the Alnylam Third Party Agreements. Prior to the Second
Restatement Date, Alnylam has provided Isis with copies of the Alnylam Third
Party Agreements, the Stanford Agreement and the CRT Agreement, provided in each
case Alnylam may redact copies of out-licenses Alnylam has granted Third Parties
so long as the redacted terms do not limit Isis’ rights hereunder or create
obligations for Isis. Isis hereby agrees to comply, and to cause its
sublicensees to comply, with such restrictions and other terms.
 
(d)                                         Notwithstanding anything to the
contrary herein, the licenses to Alnylam Patent Rights hereunder initially shall
not include licenses to Patents:
 
(i)                   licensed by Alnylam under the Agreement effective as of
September 17, 2003 between The Board of Trustees of the Leland Stanford Junior
University (“Stanford University”) and Alnylam Pharmaceuticals, Inc. (as
amended, the “Stanford Agreement”); provided that with respect to any such
licensed Patents that are or become issued Patents, Isis shall have the option
of expanding its licenses to Alnylam Patent Rights, Alnylam Extended Field
Patents and/or Alnylam Exclusive Target Patents (as applicable) hereunder to
include such issued Patents by notifying Alnylam of such election and paying to
Alnylam, in addition to all amounts otherwise payable to Alnylam hereunder (and
without any right under Section 8.2 to reduce such otherwise payable amounts as
a consequence of such additional payment amounts), all amounts that become
payable by Alnylam to Stanford University pursuant to the Stanford Agreement as
a result of such expansion of Isis’ licenses and Isis’ (and its Affiliates’ and
sublicensees’) exercise of its rights thereunder.  Upon exercise of such option,
the Stanford Agreement will be an Alnylam Third Party Agreement and Exhibit
6.5(c) updated accordingly, such Patents will be licensed to Isis subject to the
restrictions and other terms of the Stanford Agreement and Isis hereby agrees to
comply, and to cause its sublicensees to comply, with such restrictions and
other terms;
 
(ii)                licensed by Alnylam under the License Agreement effective
July 18, 2003 between Cancer Research Technology Limited (“CRT”) and Alnylam
Pharmaceuticals, Inc. (as amended, the “CRT Agreement”); provided that with
respect to any such licensed Patents that are or become issued Patents, Isis
shall have the option of expanding its licenses to Alnylam Patent Rights,
Alnylam Extended Field Patents and/or Alnylam Exclusive Target Patents (as
applicable) hereunder to include such issued Patents by notifying Alnylam of
such election and paying to Alnylam, in addition to all amounts otherwise
payable to Alnylam hereunder (and without any right under Section 8.2 to reduce
such otherwise payable amounts as a consequence of such additional payment
amounts), all amounts that become payable by Alnylam to CRT pursuant to the CRT
Agreement as a result of such expansion of Isis’ licenses and Isis’ (and its
Affiliates’ and sublicensees’) exercise of its rights thereunder. Upon exercise
of such option, the CRT Agreement will be an Alnylam Third Party Agreement and
Exhibit 6.5(c) updated accordingly, such Patents will be licensed to Isis
subject to the restrictions and other terms of the CRT Agreement and Isis hereby
agrees to comply, and to cause its sublicensees to comply, with such
restrictions and other terms;
 
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(iii)             that are Additional Rights (as defined in Section 11.8)
Controlled by Alnylam’s wholly-owned subsidiary Sirna Therapeutics, Inc. as of
the Second Restatement Date. If during the License Term Isis wishes to include
such Additional Rights under the licenses granted to it by Alnylam pursuant to
Article 6, Isis will notify Alnylam of its desire to do so and will assume all
financial and other obligations to the licensors and/or sellers of such
Additional Rights to Alnylam arising from the grant to Isis of such licenses.
The Parties will negotiate in good faith regarding sharing any upfront payments
or similar acquisition costs incurred by Alnylam to acquire such Additional
Rights.
 
(e)                                        Notwithstanding the licenses and
other rights granted to Isis under Sections 6.1 and 6.2, Alnylam retains its
rights in the Alnylam Patent Rights, the Joint Patents and the Alnylam Extended
Field Patents exclusively for Alnylam Exclusive Targets.  Notwithstanding the
exclusive nature of the license granted by Alnylam to Isis under Section 6.1(l),
Alnylam may grant Permitted Licenses.
 
(f)                                          The license to Alnylam Extended
Field Patents granted in Section 6.1(k) does not include any rights with respect
to Single Stranded Products that are designed to modulate any Isis Retained
Targets.
 
6.6               Alnylam Covenant to Isis Regarding Exclusivity for Single
Stranded RNAi Products. Alnylam hereby covenants to Isis, that, after the Second
Restatement Date, Alnylam will not itself, and will not grant to a Third Party a
license under the Alnylam Current Motif and Mechanism Patents, Alnylam Current
Chemistry Patents, and/or Alnylam’s rights in any Joint Patents or Research
Program Patents to, research, develop, make, have made, use, import, offer to
sell and sell Single Stranded RNAi Compounds or Single Stranded RNAi Products,
except Alnylam may (i) research, develop, make, have made, use and/or import
Single Stranded RNAi Compounds or Single Stranded RNAi Products that are not
Isis Exclusive Target Products for [***]; (ii) and may grant licenses to Third
Parties to, research, develop, make, have made, use and/or import Alnylam
Exclusive Target Products; and (iii) continue to grant licenses to Third Parties
for the purpose of manufacturing and selling oligonucleotides; provided that, to
the extent such licenses cover Single Stranded RNAi Compounds, Alnylam will
restrict such licenses to [***]. For purposes of clarity, this Section 6.6 will
not preclude Alnylam from (A) itself using [***], or (B) granting any Third
Party a license under the [***].
 
6.7               Diligence on Isis Exclusive Targets. For each Isis Exclusive
Target, Isis will use Commercially Reasonable Efforts (either on its own, with
an Affiliate or in a Bona Fide Third Party Collaboration) [***].
 
ARTICLE 7
 
LICENSE FEES AND ROYALTIES PAYABLE TO ISIS
 
7.1               License Fees.
 
(a)                                          In connection with the Original
Agreement, Alnylam paid Isis an initial, irrevocable, noncreditable and
non-refundable license fee of $5,000,000.
 
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(b)                                         In connection with the First
Restated Agreement, Alnylam paid Isis an additional, irrevocable, noncreditable
and non-refundable license fee of $11,000,000.
 
7.2               Royalties.
 
(a)                                         Subject to the terms and conditions
of, and during the term of, this Agreement, Alnylam will pay to Isis royalties
on sales of Alnylam Double Stranded RNA Products (other than Agricultural Field
Products) by Alnylam, its Affiliates or sublicensees (except Naked Sublicensees)
equal to [***]% of Net Sales of such Products.  Alnylam may reduce the royalty
due under this section by [***]% of any additional royalties that Alnylam owes
to Third Parties on such Alnylam Double Stranded RNA Product (other than an
Agricultural Field Product) that arise from Alnylam acquiring access to new
technologies after the Effective Date; provided, however that (x) the royalty
due under this section can never be less than a floor of [***]% and (y)
additional royalties arising as the result of the addition, pursuant to Section
11.8, of Isis Current Chemistry Patents, Isis Current Motif and Mechanism
Patents to the Isis Patent Rights licensed to Alnylam cannot be used to reduce
the royalty.
 
(b)                                         Subject to the terms and conditions
of this Agreement, and during the Alnylam Extended Field Royalty Term, Alnylam
will pay to Isis royalties on sales of Alnylam Extended Field Products (other
than Agricultural Field Products) by Alnylam, its Affiliates or sublicensees
equal to [***]% of Net Sales of such Products.
 
(c)                                         Subject to the terms and conditions
of this Agreement, and during the Alnylam Exclusive Target Royalty Term, Alnylam
will pay to Isis royalties on sales of Alnylam Exclusive Target Products (other
than Agricultural Field Products) by Alnylam, its Affiliates or sublicensees
equal to [***]% of Net Sales of such Products.  Upon expiration of the Alnylam
Exclusive Target Royalty Term, the license granted under Section 5.1(h) will
terminate.
 
(d)                                         Subject to the terms and conditions
of, and during the term of, this Agreement, Alnylam will pay to Isis royalties
on sales of Agricultural Field Products by Alnylam, its Affiliates or
sublicensees equal to [***]% of Agricultural Field Product Net Sales. Alnylam
may not reduce the royalty due under this subsection (d) for any additional
royalties that Alnylam owes to Third Parties on such Agricultural Field
Products.
 
(e)                                         The royalties payable to Isis
pursuant to Section 7.2(c) are in addition to, and not in lieu of, the royalties
payable to Isis pursuant to Section 7.2(a).  Specifically, if an Alnylam
Exclusive Target Product (other than an Agricultural Field Product) is subject
to the payment of royalties to Isis pursuant to Section 7.2(c) during the
applicable Alnylam Exclusive Target Royalty Term and is also an Alnylam Double
Stranded RNA Product, then the royalty calculated pursuant to Section 7.2(a)
above will also be payable to Isis with respect to such Alnylam Exclusive Target
Product for so long as such Alnylam Exclusive Target Product is an Alnylam
Double Stranded RNA Product. However, if an Alnylam Exclusive Target Product
that is subject to the payment of royalties to Isis pursuant to Section 7.2(c)
is also an Alnylam Extended Field Product, it will not be subject to additional
royalties under Section 7.2(b). Otherwise, only one royalty shall be due under
this Section 7.2 with respect to the same unit of Product and if during any
period the application of Sections 7.2(a), (b) and/or (c) to such Product in a
country would result in different royalty rates being applied in order to
calculate the royalty due with respect to Net Sales of such Product in such
country in such period, then the greatest applicable royalty rate shall be
applied.
 
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7.3              Research and Development Milestones.
 
(a)                                          [Intentionally Deleted]
 
(b)                                         [Intentionally Deleted]
 
(c)                                          Double Stranded Development
Milestones. Alnylam, its Affiliates or sublicensees (except Naked Sublicensees)
will pay to Isis the following milestone payments for each Alnylam Double
Stranded RNA Product within [***]days after the first achievement of each of the
following events:

Milestone Event
Milestone Payment
Initiation of Phase I Trial
US$375,000
Initiation of Phase III Trial
US$750,000
Filing NDA
US$[***]
Marketing Approval
US$[***]

 
Each milestone payment under this Section 7.3(c) will only be due on the [***]
Alnylam Double Stranded RNA Product that modulates a particular RNA Target to
trigger such milestone payment, whether such milestone is achieved by Alnylam or
an Affiliate or sublicensee of Alnylam.
 
Notwithstanding the foregoing, the provisions of this Section 7.3(c) shall not
apply to any Agricultural Field Product.
 
(d)                                         MicroRNA Milestone. Alnylam, its
Affiliates or sublicensees will pay to Isis a milestone payment of US$[***] for
the [***] MicroRNA Product that is an Alnylam Product that modulates a
particular RNA Target within [***] days after such MicroRNA Product reaches the
initiation of [***], and not for any other MicroRNA Product that is an Alnylam
Product that modulates the particular RNA Target.
 
7.4              Sublicensing Revenue on Naked Sublicenses. With respect to
Sublicense Revenue from each Naked Sublicense granted by Alnylam and its
Affiliates under this Agreement, Alnylam will pay Isis within [***] days
following receipt by Alnylam of such Sublicense Revenue (a) fifty percent (50%)
of all such Sublicense Revenue that does not constitute royalty payments, and
(b) [***] percent ([***]%) of the amount that remains of the total royalties
received under such Naked Sublicense after Alnylam has paid the royalties that
are due from Alnylam to any Third Parties in connection with such Naked
Sublicense.
 
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7.5               Technology Access Fees from Certain Collaborations.
 
(a)                                         Alnylam will pay Isis a percentage
of Technology Access Fees received by Alnylam and its Affiliates pursuant to
Bona Fide Discovery Collaborations and Development Collaborations entered into
between Alnylam and a Third Party. Alnylam shall make such payment to Isis
within [***] days following receipt by Alnylam of such Technology Access Fees.
Such percentage will be calculated based on the year in which Alnylam executes
such Bona Fide Discovery Collaboration or Development Collaboration agreement
using the following table:

Year
   
2004/2005
   
2006
   
2007
   
2008+
 
Applicable Percentage
   
[***]%
   
[***]%
   
[***]%
   
[***]%
 

However, Alnylam may credit any milestone payments made by Alnylam under Section
7.3(c) above with respect to an Alnylam Double Stranded RNA Product against any
Technology Access Fees that are later due under a Bona Fide Discovery
Collaboration or Development Collaboration that involves the same Alnylam Double
Stranded RNA Product that triggered such milestone payment.
 
If Alnylam grants a sublicense under the Isis Exclusive Target Patents where the
Patents sublicensed thereunder include Patents that are also Isis Patent Rights,
then such sublicense will be treated as a Bona Fide Discovery Collaboration for
purposes of this Section 7.5(a) and Alnylam will pay Isis a percentage of
Technology Access Fees received by Alnylam and its Affiliates in connection with
such sublicense.  However, if Alnylam grants a sublicense under the Isis
Exclusive Target Patents and/or the Isis Extended Field Patents and the Patents
sublicensed thereunder do not include Isis Patent Rights (and do not include
Isis Exclusive Target Patents that are also Isis Patent Rights), then no
payments are due under this Section 7.5(a).
 
(b)                                         Notwithstanding the foregoing, for
any Bona Fide Discovery Collaboration or Development Collaboration agreement,
Alnylam will pay Isis a minimum fee, payable upon the first Alnylam Product
other than a Single Stranded RNAi Product developed pursuant to such Bona Fide
Discovery Collaboration agreement reaching [***] (in which event Alnylam shall
pay Isis such minimum fee within [***] days following such initiation of [***])
or within [***] days after the execution of such Development Collaboration
agreement, equal to the lesser of (i) $[***] or (ii) [***]% of the Technology
Access Fees from such collaboration; provided, however that Alnylam may credit
any amounts paid Isis pursuant to Section 7.5(a) above as the result of the same
Bona Fide Discovery Collaboration or Development Collaboration agreement against
this minimum fee with such amounts credited only once, and provided further that
if following such payment, additional Technology Access Fees are owed to Isis
for such Bona Fide Discovery Collaboration or Development Collaboration, the
amounts paid under this Section 7.5(b) (after crediting of any previous
Technology Access Fees paid under Section 7.5(a) in accordance with the
immediately preceding proviso) will be creditable against such future Technology
Access Fees.  Notwithstanding the foregoing, the provisions of this Section
7.5(b) shall not apply to any Bona Fide Discovery Collaboration involving solely
Agricultural Field Products.
 
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7.6              Allocation of Sublicense Income.  Each time Alnylam enters into
a collaboration or license agreement pursuant to which Alnylam grants a
sublicense under the Isis Patent Rights to a Third Party that only relates to
Double Stranded RNA (an “Isis IP Sublicense”), the CEO of Isis and the CEO of
Alnylam will mutually discuss and agree in writing upon a good faith
determination as to whether such Isis IP Sublicense is a Naked Sublicense or a
Bona Fide Discovery Collaboration or Development Collaboration or Bona Fide
Third Party Collaboration. Within [***] days following the execution of each
Isis IP Sublicense, Alnylam, through its CEO, will provide Isis’ CEO a
reasonably detailed and accurate description of such Isis IP Sublicense for the
purpose of enabling the CEOs to perform the determination and allocation
described in this Section 7.6.
 
7.7               Revenue Sharing for Research Program Patents. Alnylam will pay
Isis 50% of any payments received by Alnylam and its Affiliates pursuant to
licenses granted by Alnylam to a Third Party under the Research Program Patents
for any and all purposes, except to research, develop, make, have made, use,
import, offer to sell or sell any (1) oligonucleotides (or chemically modified
oligonucleotide analogs) designed to work via the RNase H 1 or 2 mechanism
(including any oligonucleotide which has [***]), (2) Double Stranded RNA
Products, (3) MicroRNA Products, (4) Single Stranded RNAi Products, (5) Isis
Single Stranded Product, or (6) Alnylam Exclusive Target Products. Alnylam shall
make such payment to Isis within [***] days following receipt by Alnylam of such
payments.
 
ARTICLE 8
 
LICENSE FEES, SUBLICENSE REVENUE AND
ROYALTIES PAYABLE TO ALNYLAM

8.1               Option Fee. For each Isis Reserved DS-Target for which Isis
exercises its option granted pursuant to Section 6.2, Isis will pay Alnylam an
irrevocable, noncreditable and non-refundable option fee of $[***] due upon the
date of exercise. Isis may credit any $[***] payment made under Section 6.4(a)
for the DS-Target Slot occupied by such Reserved DS-Target against this option
fee. The option fee is only payable once per RNA Target.
 
8.2               Royalties.
 
(a)                                         Subject to the terms and conditions
of, and during the term of, this Agreement, Isis will pay to Alnylam royalties
on sales of Double Stranded RNA Products that are Isis Products by Isis, its
Affiliates or sublicensees equal to [***]% of Net Sales. Isis may reduce the
royalty due under this section by [***]% of any additional royalties that Isis
owes to Third Parties on such Double Stranded RNA Products that are Isis
Products that arise from Isis acquiring access to new technologies after the
Effective Date; provided, however, that (i) the royalty due under this section
can never be less than a floor of [***]%, (ii) additional royalties arising as
the result of the addition, pursuant to Section 11.8, of Alnylam Current
Chemistry Patents or Alnylam Current Motif and Mechanism Patents to the Alnylam
Patent Rights licensed to Isis, or as the result of an expansion of Isis’
licenses pursuant to Section 6.5(d), cannot be used to reduce the royalty and
(iii) Isis shall not be entitled to reduce, pursuant to this sentence, its
royalty obligation to Alnylam below a royalty obligation equal to the lesser of
(y) Alnylam’s aggregate royalty obligations [***] existing as of the Effective
Date [***] and (z) Alnylam’s aggregate royalty obligations to [***] as such
obligations may be reduced from time to time after the Effective Date.
 
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(b)                                         Subject to the terms and conditions
of, and during the term of, this Agreement, Isis will pay to Alnylam royalties
on Net Sales of Isis Single Stranded RNAi Products by Isis, its Affiliates or
sublicensees equal to [***]% of Net Sales; provided, however, that if Isis is
the subject of an Acquisition, the royalty payable under this Section 8.2(b) on
the Net Sales of Isis Single Stranded RNAi Products following such Acquisition
will be [***]%.
 
(c)                                         Subject to the terms and conditions
of this Agreement, and during the Isis Extended Field Royalty Term, Isis will
pay to Alnylam royalties on sales of Isis Extended Field Products by Isis, its
Affiliates or sublicensees equal to [***]% of Net Sales of such Products.
 
(d)                                         Subject to the terms and conditions
of this Agreement, and during the Isis Exclusive Target Royalty Term, Isis will
pay to Alnylam royalties on sales of Isis Exclusive Target Products by Isis, its
Affiliates or sublicensees equal to [***]% of Net Sales of such Products.  Upon
expiration of the Isis Exclusive Target Royalty Term, the license granted under
Section 6.1(l) will terminate.
 
(e)                                         The royalties payable to Alnylam
pursuant to Section 8.2(d) are in addition to, and not in lieu of, the royalties
payable to Alnylam pursuant to Sections 8.2(a) and (b), as applicable. 
Specifically, if an Isis Exclusive Target Product is subject to the payment of
royalties to Alnylam pursuant to Section 8.2(d) during the applicable Isis
Exclusive Target Royalty Term and is also a Double Stranded RNA Product that is
an Isis Product or an Isis Single Stranded RNAi Product, as the case may be,
then the royalty calculated pursuant to Section 8.2(a) or (b), as applicable,
will also be payable to Alnylam with respect to such Isis Exclusive Target
Product for so long as such Isis Exclusive Target Product is a Double Stranded
RNA Product that is an Isis Product or an Isis Single Stranded RNAi Product, as
the case may be.  However, if an Isis Exclusive Target Product that is subject
to the payment of royalties to Alnylam pursuant to Section 8.2(d) is also an
Isis Extended Field Product, it will not be subject to additional royalties
under Section 8.2(c).
 
8.3               Development Milestones.
 
(a)                                         Subject to Section 8.4, Isis, its
Affiliates or sublicensees will pay to Alnylam the following milestone payments
for each Double Stranded RNA Product that is an Isis Product within [***] days
after the first achievement of each of the following events:
 
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Milestone Event
Milestone Payment
Initiation of Phase I Trial
US$[***]
Initiation of Phase III Trial
US$[***]
Filing NDA
US$[***]
Marketing Approval
US$[***]

Each milestone payment under this Section 8.3(a) will only be due on [***]
Double Stranded RNA Product that is an Isis Product that modulates a particular
RNA Target to trigger such milestone payment, whether such milestone is achieved
by Isis or an Affiliate or sublicensee of Isis.
 
(b)                                         Isis, its Affiliates or sublicensees
will pay to Alnylam a milestone payment of US$[***] for the [***] Isis Single
Stranded Product that is an Isis Product that modulates a particular RNA Target
within [***] days after such Isis Single Stranded Product reaches the initiation
of IND-Enabling Studies, and not for any other Isis Single Stranded Product that
modulates that particular RNA Target.
 
(c)                                         Isis, its Affiliates or sublicensees
will pay to Alnylam a milestone payment of US$[***] for the [***] MicroRNA
Product that is an Isis Product that modulates a particular RNA Target within
[***] days after such MicroRNA Product reaches the initiation of [***], and not
for any other MicroRNA Product that is an Isis Product that modulates the
particular RNA Target.
 
8.4               Sublicense Income on Single Stranded RNAi Sublicenses.
 
(a)                                         With respect to Sublicense Revenue
from each sublicense (or right to obtain a sublicense) related to an Isis Single
Stranded RNAi Product granted by Isis and its Affiliates under this Agreement
after the Second Restatement Date, Isis will pay Alnylam, within [***]days
following receipt by Isis of such Sublicense Revenue, [***]percent ([***]%) of
all such Sublicense Revenue that does not constitute royalty payments.
 
(b)                                         In the event that Isis enters into
an Antisense Drug Discovery Program pursuant to which Isis (i) grants a
sublicense under the Alnylam Patent Rights to further develop and/or
commercialize an Isis Single Stranded RNAi Product, (ii) commits to discover
and/or develop Double Stranded RNA Products or single stranded oligonucleotides
that are not Single Stranded RNAi Compounds, or (iii) grants a license or
sublicense to intellectual property which would not otherwise result in any
amounts becoming payable to Alnylam hereunder (an “Other Isis Sublicense”), then
in determining the applicable payment due from Isis to Alnylam in connection
with such Antisense Drug Discovery Program, the CEO of Isis and the CEO of
Alnylam will mutually agree in writing upon a good faith allocation of the
consideration received by Isis under such Antisense Drug Discovery Program
between and among the consideration attributable to the components of such
Antisense Drug Discovery Program that qualify as (x) a sublicense to further
develop and/or commercialize an Isis Single Stranded RNAi Product, (y) a
collaboration to discover and/or develop Double Stranded RNA Products or single
stranded oligonucleotides that are not Single Stranded RNAi Compounds, and (z)
an Other Isis Sublicense; and Isis will pay Alnylam Sublicense Income Fees under
Section 8.4(a) in accordance with such allocation. Within [***] days following
the execution of each such transaction, Isis, through its CEO, will provide
Alnylam’s CEO a reasonably detailed and accurate description of such transaction
for the purpose of enabling Alnylam’s CEO to perform the allocation described in
this Section 8.4(b).
 
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8.5               [Intentionally Deleted]
 
ARTICLE 9
 
OTHER PAYMENT TERMS
 
9.1              Payments. All payments by a Party under this Agreement will be
made in United States dollars by bank wire transfer in next day available funds
to such bank account in the United States designated in writing by Alnylam or
Isis, from time to time. Royalties payable under Sections 7.2 and 8.2 shall be
payable on a quarterly basis within 45 days after the end of each Calendar
Quarter. The Party with such royalty obligation (the “Royalty-Paying Party”)
shall provide the other Party with a report setting forth (i) gross sales of
Products, as applicable, by the Royalty-Paying Party, its Affiliates and
sublicensees, (ii) all deductions from such gross sales taken in calculating Net
Sales, (iii) Net Sales of Products, as applicable, by the Royalty-Paying Party,
its Affiliates and sublicensees, (iv) royalties payable based on such Net Sales
and (v) all other information relevant to the calculation of such royalties, on
a Product-by-Product and country-by-country basis, for each Calendar Quarter
within [***] days after the end of such Calendar Quarter.
 
9.2              Late Payments; Collections. In the event that any payment,
including royalty, milestone, Sublicense Revenue or Technology Access Fee
payments, due hereunder is not made when due, the payment will bear interest
from the date due at the lesser of (i) 1.5% per month, compounded monthly, or
(ii) the highest rate permitted by law; provided, however, that in no event will
such rate exceed the maximum legal annual interest rate. If a Party disputes in
writing the amount of an invoice presented by the other Party within [***] days
of receipt of such invoice, interest will only be due on the correct amount as
later determined or agreed. The payment of such interest will not limit a Party
from exercising any other rights it may have as a consequence of the lateness of
any payment. In addition, each Party agrees to pay all external costs of
collection, including reasonable attorneys’ fees, incurred by the other Party in
enforcing the payment obligations after a due date has passed under this
Agreement.
 
9.3               Audit Rights.
 
(a)                                         Upon the written request of Isis or
Alnylam, as the case may be, and not more than once in each calendar year, Isis
or Alnylam will permit the other Party’s independent certified public accountant
to have access upon reasonable advance notice and during normal business hours
to its records as may be reasonably necessary to verify the accuracy of the
royalty reports hereunder for the current year and the preceding 2 years prior
to the date of such request. The accounting firm will disclose to the auditing
Party only whether the royalty reports are correct or incorrect, the specific
details concerning any discrepancies, and the corrected amount of Net Sales and
royalty payments. No other information will be provided to the auditing Party.
Once a Party has audited a particular calendar year under this section, the
Party will be precluded from subsequently auditing such calendar year. In any
sublicense granted by a Party under this Agreement, such Party will endeavor to
secure a similar audit right and if reasonably requested by the other Party will
enforce such audit right.
 
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(b)                                         If such accounting firm concludes
that additional royalties were owed during such period, the delinquent Party
will pay the additional royalties within 90 days of the date such Party receives
the accounting firm’s written report. The fees charged by such accounting firm
will be paid by the auditing Party unless the additional royalties, milestones
or other payments owed by the audited Party exceed 5% of the royalties,
milestones or other payments paid for the time period subject to the audit, in
which case the audited Party will pay the reasonable fees and expenses charged
by the accounting firm.
 
(c)                                        Each Party will treat all financial
information subject to review under this Section 9.3 or under any sublicense
agreement in accordance with the confidentiality provisions of Article 12, and
will cause its accounting firm to enter into an acceptable confidentiality
agreement obligating such firm to retain all such financial information in
confidence pursuant to such confidentiality agreement.
 
9.4               Taxes. If laws, rules or regulations require withholding of
income taxes or other taxes imposed upon payments set forth in Article 7 or 8,
each Party will make such withholding payments as required and subtract such
withholding payments from the payments set forth in Article 7 or 8. Each Party
will submit appropriate proof of payment of the withholding taxes to the other
Party within a reasonable period of time. The Parties will cooperate to obtain
the appropriate tax clearance and/or recover any such withholdings if possible.
 
ARTICLE 10
 
ALNYLAM RIGHTS OF FIRST NEGOTIATION; PREFERRED LICENSEE
 
10.1            Right of First Negotiation. Isis will notify Alnylam in writing
once (i) Isis, on its own with no subsequent rights to Third Parties, intends to
initiate [***] for an Isis Product that is a Double Stranded RNA Product or (ii)
if a Third Party with which Isis has a Development Collaboration or a
collaboration on an [***] an Isis Double Stranded RNA Product before or during
clinical development or commercialization with no subsequent rights to Third
Parties. Alnylam will have [***] days from the receipt of such notice to notify
Isis in writing whether or not Alnylam wishes to negotiate with Isis regarding
the development and/or commercialization of such Isis Product. If Alnylam fails
to respond to Isis’ notice within the [***] days or if Alnylam declines in
writing to exercise its right of first negotiation, then Isis will be free to
develop and commercialize (either on its own or with a Third Party) the Isis
Product. If Alnylam wishes to negotiate a license or development or
commercialization rights in such Isis Product, the Parties will negotiate in
good faith the terms of the license or collaboration agreement. If, despite good
faith negotiations, Alnylam and Isis do not reach agreement within [***] days
from Alnylam’s exercise of its right of first negotiation, then Isis will be
free to develop and commercialize (either on its own or with a Third Party) the
Isis Product; provided that during the period prior to the latest of (x) the
initiation of [***] the Isis Product, (y) the [***] anniversary of the
commencement of [***] for the Isis Product or (z) in the case of an Isis Product
[***] after the commencement of [***], the [***] anniversary of Isis’ notice to
Alnylam [***], Isis shall not enter into a license or collaboration agreement
with a Third Party for such Isis Product on terms (the “More Favorable Terms”)
that are in the aggregate materially more favorable to the Third Party than the
terms on which Isis most recently offered in writing to grant such rights to
Alnylam without first offering the More Favorable Terms to Alnylam.
 
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10.2            Preferred Licensee. If, after the Effective Date, Alnylam grants
to any Third Party that is not a Major Pharmaceutical Company a license under
the Alnylam Patent Rights to develop and commercialize Double Stranded RNA
Products, then if (a) either (i) the [***] terms of such license are more
favorable to the Third Party than the [***] terms hereunder with respect to Isis
Products are to Isis or (ii) the [***] covered by such license exceeds the [***]
potentially licensed to Isis hereunder for development and commercialization of
Double Stranded RNA Products, and (b) the roles to be played by Alnylam and such
Third Party in the development and commercialization of Double-Stranded RNA
Products under such Third Party license, the nature of the RNA Targets covered
by such Third Party license and any other relevant terms of such Third Party
license do not collectively justify the conditions described in the preceding
clauses (a)(i) and/or (a)(ii), then Alnylam shall modify the terms of its
licenses to Isis hereunder with respect to such conditions so that they are
reasonably equivalent to those granted to the Third Party.  The Parties agree
that the provisions of this Section 10.2 shall not apply to licenses involving
solely Agricultural Field Products.
 
ARTICLE 11
 
INTELLECTUAL PROPERTY
 
11.1           Ownership of Inventions.
 
(a)                                         Each Party will solely own all
inventions, technology, discoveries, or other proprietary property
(collectively, “Inventions”) that are made (as determined by U.S. rules of
inventorship) solely by employees of or consultants to that Party under this
Agreement.
 
(b)                                         Isis and Alnylam will jointly hold
title to all Inventions, whether or not patentable, that are made (as determined
by the U.S. rules of inventorship) jointly by employees of or consultants to
Isis and Alnylam, as well as to Patents filed thereon. Such Inventions will be
“Joint Inventions,” and Patents claiming such Joint Inventions will be “Joint
Patents.” Isis and Alnylam will promptly provide each other with notice whenever
a Joint Invention is made. The Parties agree and acknowledge that, except
insofar as this Agreement provides otherwise, the default rights conferred on
joint owners under US patent law, including the right of each Party to
independently practice, license and use a Joint Patent, will apply in relation
to the Joint Patents throughout the world as though US patent law applied
worldwide.
 
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(c)                                         The Parties agree, upon reasonable
request, to execute any documents reasonably necessary to effect and perfect
each other’s ownership of any Invention.
 
11.2            Filing and Prosecution of Patent Rights.
 
(a)                                         [Intentionally Deleted]
 
(b)                                         Except as set forth in Sections
11.2(f) and 11.2(h) below, Isis will be responsible for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Isis Patent Rights, the Isis
Extended Field Patents and the Isis Exclusive Target Patents.
 
(c)                                         Except as set forth in Section
11.2(g) and 11.2(h) below, Alnylam will be responsible for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Alnylam Patent Rights, the Alnylam
Extended Field Patents and the Alnylam Exclusive Target Patents.
 
(d)                                         Each Party will endeavor in good
faith to coordinate its efforts with those of the other Party to minimize or
avoid interference with the prosecution of the Patents that are licensed under
this Agreement. Neither Party will initiate or participate in any opposition,
reexamination, interference, litigation, inter partes review, post grant review
or other proceeding for the purpose of narrowing or invalidating any claim in a
Patent of the other Party; provided, however, that either Party may assert
invalidity or non-infringement as a defense in any court proceeding bought by
the other Party asserting infringement of a granted Patent that is not a Patent
then licensed under this Agreement. Notwithstanding the above, if an
interference is declared by the Patent and Trademark Office between two or more
of the Parties respective Patents, the Parties agree to use good faith diligent
efforts to resolve matters of priority and patentability and reach agreement or
understanding as to patentable claims enjoying priority. In the event the
Parties do not reach such agreement or understanding within [***] months after
declaration of the interference by the Patent and Trademark Office (or such
shorter period as necessary to comply with the Patent and Trademark Office
calendar), then the Parties agree to submit such matter to arbitration under
Section 17.6 and that the Party determined not to have priority of invention
with request and agree to adverse judgment either by way of concession of
priority or unpatentability or by disclaimer or abandonment of the contest
according to the rules of interference practice in existence at the time.  The
Parties agree to file with the Patent and Trademark Office all agreements
pertaining to settlement of the interference in accordance with the rules of
interference practice in existence at the time.
 
(e)                                         At the non-prosecuting Party’s
request, the other Party will keep the requesting Party reasonably informed, and
provide documentation, of all material matters relating to the preparation,
filing, prosecution and maintenance of any designated Patent licensed to the
non-prosecuting Party under this Agreement.
 
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(f)                                          Alnylam will be responsible for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to the (i) Isis Exclusive
Target Patents that (1) claim (x) an oligomeric compound that hybridizes to and
modulates an Alnylam Exclusive Target or (y) a method of using such oligomeric
compound in the Field and (2) cover the manufacture, sale or use of an Alnylam
Exclusive Target Product that is comprised of a Double Stranded RNA or Double
Stranded RNA Product (“Isis Special Target Patent”) and (ii) Isis Special
Patents. If Alnylam elects not to file for or continue the prosecution
(including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of an Isis Special Patent or an Isis Special
Target Patent in any country, then, Alnylam will notify Isis promptly in writing
of its intention in sufficient time to enable Isis to meet any deadlines by
which an action must be taken to establish or preserve any such rights in such
Patent in such country and Isis will have the right, but not the obligation, to
file for or continue the prosecution or maintenance of such Patent in such
country, and Alnylam will cooperate with Isis in regard thereto.   If elections
with respect to obtaining patent term extension or supplemental protection
certificates or their equivalents in any country with respect to Isis Special
Target Patents are available, Alnylam shall have the right (but not the
obligation), in its sole discretion, to make any such election and make such
filing as necessary to effect such election.  Alnylam shall, in its sole
discretion, seek and maintain all applicable data exclusivity periods (such as
those periods listed in the FDA’s Orange Book (including any available pediatric
extensions) or foreign equivalents) that are available for Alnylam Exclusive
Target Products.  Alnylam shall have sole authority with respect to the listing
of any Isis Special Target Patents with respect to the Alnylam Exclusive Target
Products in the Orange Book.
 
(g)                                        Isis will be responsible for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to the Patents that (1) claim
(x) an oligomeric compound that hybridizes to and modulates an Isis Exclusive
Target or (y) a method of using such oligomeric compound in the Field and (2)
cover the manufacture, sale or use of an Isis Exclusive Target Product that is
comprised of a Single Stranded Compound or Single Stranded Product (“Alnylam
Special Target Patent”). If Isis elects not to file for or continue the
prosecution (including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of an Alnylam Special Target Patent in any
country, then, Isis will notify Isis promptly in writing of its intention in
sufficient time to enable Alnylam to meet any deadlines by which an action must
be taken to establish or preserve any such rights in such Patent in such country
and Alnylam will have the right, but not the obligation, to file for or continue
the prosecution or maintenance of such Patent in such country, and Isis will
cooperate with Isis in regard thereto.  If elections with respect to obtaining
patent term extension or supplemental protection certificates or their
equivalents in any country with respect to Alnylam Special Target Patents are
available, Isis shall have the right (but not the obligation), in its sole
discretion, to make any such election and make such filing as necessary to
effect such election.  Isis shall, in its sole discretion, seek and maintain all
applicable data exclusivity periods (such as those periods listed in the FDA’s
Orange Book (including any available pediatric extensions) or foreign
equivalents) that are available for Isis Exclusive Target Products.  Isis shall
have sole authority with respect to the listing of any Alnylam Special Target
Patents with respect to the Isis Exclusive Target Products in the Orange Book.
 
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(h)                                        Solely with respect to (i) Research
Program Patents, or (ii) Patents licensed under this Agreement that claim
Inventions that primarily relate to Single Stranded RNAi Compounds, in each case
that are Controlled by Alnylam but excluding Joint Patents, Alnylam will be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to such
Patent. If Alnylam decides to discontinue the preparation, filing, prosecution
or maintenance of such a Patent, Alnylam will notify Isis at least [***] days
prior to any deadline that, if missed, would materially prejudice the Patent,
and Isis will have the right, at Isis’ own expense, to prepare, file, prosecute
and maintain such Patent.
 
11.3            Filing and Prosecution of Jointly Owned Patents.
 
(a)                                          The Parties will mutually agree on
which of the Parties will be designated as being the responsible Party for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to each Joint Patent.
 
(b)                                         Each Party will keep the other Party
continuously informed of all significant matters relating to the preparation,
filing, prosecution and maintenance of Joint Patents, and shall provide the
other Party with copies of any substantial prosecution papers within thirty days
of receipt.
 
11.4            Costs and Expenses.
 
(a)                                         Except as set forth in Section
11.4(c) and (d) below, each Party will bear its own costs and expenses in
filing, prosecuting, maintaining and extending the Alnylam Patent Rights,
Alnylam Extended Field Patents, Alnylam Exclusive Target Patents, Isis Patent
Rights, Isis Extended Field Patents and Isis Exclusive Target Patents,
respectively.
 
(b)                                         Except as set forth in Section
11.4(c) and (d) below, the Parties will pay equal shares of all costs and
expenses in filing, prosecuting, maintaining and extending the Joint Patents.
 
(c)                                        Alnylam will bear [***]% of its own
costs and expenses in filing, prosecuting, maintaining and extending the Isis
Special Patents and the Isis Special Target Patents. If Alnylam elects not to
file for or continue the prosecution (including any interferences, oppositions,
reissue proceedings and re-examinations) or maintenance of an Isis Special
Patent or an Isis Special Target Patent in any country, and Isis assumes the
continued prosecution of such Isis Special Patent or Isis Special Target Patent
(as permitted by Section 11.2(f)) in such country, then the Parties will [***]
all of Isis’ costs and expenses in filing, prosecuting, maintaining and
extending the Isis Special Patent or Isis Special Target Patent for which Isis
assumed prosecution.
 
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(d)                                         Isis will bear [***]% of its own
costs and expenses in filing, prosecuting, maintaining and extending the Alnylam
Special Target Patents. If Isis elects not to file for or continue the
prosecution (including any interferences, oppositions, reissue proceedings and
re-examinations) or maintenance of an Alnylam Special Target Patent in any
country, and Alnylam assumes the continued prosecution of such Alnylam Special
Target Patent (as permitted by Section 11.2(g)) in such country, then the
Parties will [***] all of Alnylam’s costs and expenses in filing, prosecuting,
maintaining and extending the Alnylam Special Target Patent for which Alnylam
assumed prosecution.
 
11.5            Enforcement.
 
(a)                                         Each Party will promptly advise the
other of any suspected or actual infringement of the Isis Patent Rights, Alnylam
Patent Rights, Joint Patents, Alnylam Extended Field Patents, Alnylam Exclusive
Target Patents, Isis Extended Field Patents or Isis Exclusive Target Patents by
any person that reasonably affects the other Party’s business and of which it
becomes aware. The notice shall set forth the facts of such infringement or
misappropriation in reasonable detail.
 
(b)                                         Subject to subsections (c)(i) and
(h) below, Alnylam will have the sole and exclusive right, in its sole
discretion and at its expense, to assert and enforce (i) any Isis Patent Rights,
Alnylam Patent Rights, Joint Patents, Alnylam Extended Field Patents, or Alnylam
Exclusive Target Patents against any party engaging in an unlicensed or
unauthorized making, having made, using, selling, offering for sale or importing
of any allegedly infringing Double Stranded RNA and (ii) any Isis Exclusive
Target Patents against any party engaging in an unlicensed or unauthorized
making, having made, using, selling, offering for sale or importing of any
allegedly infringing oligomeric compound that hybridizes to and modulates an
Alnylam Exclusive Target but only if such Isis Exclusive Target Patent is the
only Patent Controlled by Alnylam that covers such allegedly infringing
oligomeric compound.
 
(c)
 
(i)                For any enforcement by Alnylam under subsection (b) above
that includes Isis Patent Rights or Isis Exclusive Target Patents covering a
[***] chemical modification, Isis will actively participate in the planning and
conduct of such enforcement and will take the lead of such enforcement to the
extent that the scope or validity of any such Isis Patent Rights, Isis Extended
Field Patents or Isis Exclusive Target Patents covering a [***] chemical
modification is at risk.
 
(ii)              Subject to subsection (b) above and subsection (h) below, Isis
will have the sole and exclusive right, in its sole discretion and at its
expense, to assert and enforce Alnylam Exclusive Target Patents against any
party engaging in an unlicensed or unauthorized making, having made, using,
selling, offering for sale or importing of any allegedly infringing oligomeric
compound that hybridizes to and modulates an Isis Exclusive Target but only if
such Alnylam Exclusive Target Patent is the only Patent Controlled by Isis that
covers such allegedly infringing oligomeric compound.
 
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(d)                                         Except as set forth in Sections
11.5(b), (c) and (h),
 
(i)                Isis will have the sole and exclusive right, in its sole
discretion and at its expense, to assert and enforce any (i) Isis Patent Rights,
(ii) Isis Extended Field Patents, and (iii) Isis Exclusive Target Patents;
 
(ii)              Alnylam will have the sole and exclusive right, in its sole
discretion and at its expense, to assert and enforce any (i) Alnylam Patent
Rights, (ii) Alnylam Extended Field Patents, (iii) Alnylam Exclusive Target
Patents, and (iv) the Isis Special Patents; and
 
(iii)            The Parties will agree in advance on the enforcement of any
Joint Patent and will apportion enforcement responsibilities and recoveries
amongst the Parties.
 
(e)                                         The rights granted hereunder to
Alnylam to enforce certain licensed in or jointly owned Isis Patent Rights are
further limited by the terms of the Isis Third Party Agreements. The rights
granted hereunder to Isis to enforce certain licensed in or jointly owned
Alnylam Patent Rights are further limited as described in the Alnylam Third
Party Agreements.
 
(f)                                          The nonenforcing Party will have
the right, at its own expense, to participate in the conduct of the enforcement
action and to be represented in such action by its own counsel.
 
(g)                                         The enforcing Party will not enter
into any settlement that impacts the validity, scope or interpretation of any
claim of any Joint Patent or of any Patent of the nonenforcing Party licensed to
the nonenforcing Party under this Agreement without prior written authorization
of the nonenforcing Party.
 
(h)                                         If the Party with enforcement rights
under subsection (b), (c) or (d) above (the “Primary Party”) fails to initiate
proceedings against any actual or suspected infringement within [***] days of
receipt of written request for enforcement from the other Party (the “Step-in
Party”) and if the infringer is directly competing with a Product (the “Affected
Product”) of such Step-in Party, then (i) if the license granted in this
Agreement under which the Step-in Party is selling the Affected Product is
exclusive or co-exclusive, the Step-in Party will have the right to assert and
enforce the patents that are allegedly being infringed, or (ii) if the license
granted in this Agreement under which the Step-in Party is selling the Affected
Product is non-exclusive, the Step-in Party will have no obligation to pay
royalties during the period for which the Primary Party fails to initiate
proceedings or take other action (including without limitation entering into a
licensing arrangement) to eliminate such infringement; provided that the
provisions of the immediately preceding clause (ii) shall not apply if the
Primary Party elects to grant the Step-in Party enforcement rights with respect
to such infringement. The Primary Party will not grant a license to any such
infringing Third Party with respect to any directly competitive infringing
product on terms materially more favorable (milestones and royalties) than the
terms of the license granted hereunder to the Step-in Party or, solely with
respect to the Affected Product, will adjust the terms of such license so that
they are not materially less favorable than the terms of the license granted to
the infringing Third Party. In addition, as a condition to the Step-in Party’s
right (under clause (i) of this Section 11.5(h)) to assert and enforce a Patent
Controlled by the Primary Party that is allegedly being infringed, the Step-in
Party must also assert and enforce any relevant Patents Controlled by such
Step-in Party against the alleged infringer who is competing with the Affected
Product.
 
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(i)                                          Except as otherwise agreed to by
the Parties as part of a cost-sharing arrangement, any recovery realized as a
result of such litigation, after reimbursement of any reasonable litigation
expenses of Isis and Alnylam, shall be retained by the Party or Parties that
brought and controlled such litigation for purposes of this Agreement, except
that any recovery realized as a result of such litigation shall be treated as
Net Sales of the applicable Products and distributed as such Net Sales would
have been distributed.
 
11.6            If any Person asserts in writing or in any legal proceeding that
any of the Isis Exclusive Target Patents or Alnylam Exclusive Target Patents are
unenforceable based on any term or condition of this Agreement, the Parties
shall amend this Agreement as may reasonably be required to effect the original
intent of the Parties, including to preserve the enforceability of such Patents
and the intended economic and non-economic effects of this Agreement.
 
11.7            [Intentionally Deleted]
 
11.8            Future Licenses. If after the First Restatement Date, a Party
(the “Controlling Party”) invents or acquires rights or title to an invention
claimed by a Patent that (i) would be included in the Isis Current Chemistry
Patents, Isis Current Motif and Mechanism Patents, Isis Extended Field Patents
or Isis Exclusive Target Patents if such Party is Isis or in the Alnylam Current
Chemistry Patents, Alnylam Current Motif and Mechanism Patents, Alnylam Extended
Field Patents or Alnylam Exclusive Target Patents if such Party is Alnylam (the
“Additional Rights”) and (ii) carry financial or other obligations, then the
Controlling Party must promptly notify the non-Controlling Party of such
acquisition or invention. If the non-Controlling Party wishes to include such
Additional Rights under the licenses granted pursuant to Article 5 or 6, as
applicable, the non-Controlling Party will notify the Controlling Party of its
desire to do so and will assume all financial and other obligations to the
Controlling Party’s licensors or collaborators, if any, arising from the grant
to the non-Controlling Party of such license. Any Additional Rights that do not
carry financial or other obligations shall be automatically included under the
licenses granted pursuant to Article 5 or 6, as applicable. If a Party pays any
upfront payments or similar acquisition costs to access Additional Rights, the
Parties will negotiate in good faith regarding sharing such acquisition costs
and payments. When acquiring or creating such Additional Rights, each Party will
endeavor in good faith to secure the right to sublicense such Additional Rights
to the other Party.
 
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ARTICLE 12
 
CONFIDENTIALITY
 
12.1            Nondisclosure Obligation. All Confidential Information disclosed
by one Party to the other Party hereunder will be maintained in confidence by
the receiving Party and will not be disclosed to a Third Party or Affiliate or
used for any purpose except as set forth below.
 
12.2            Permitted Disclosures. Except as otherwise provided herein, a
Party may disclose Confidential Information received from the other Party:
 
(a)                                         to governmental or other regulatory
agencies in order to obtain Patents or approval to conduct clinical trials, or
to gain Marketing Approval; provided that such disclosure may be made only to
the extent reasonably necessary to obtain such Patents or approvals;
 
(b)                                         to any adjudicative body as required
by law, provided that prior to such disclosure, the Party subject to such
disclosure obligation (the “Notifying Party”) promptly notifies the other Party
of such requirement so that such other Party can seek a protective order,
confidential treatment or other appropriate remedy; and provided, further, that
in the event that no such protective order, confidential treatment or other
remedy is obtained, or that such other Party waives compliance with this
section, the Notifying Party will furnish only that portion of the other Party’s
Confidential Information that it is advised by counsel it is legally required to
furnish;
 
(c)                                          to Affiliates, sublicensees,
agents, consultants, and/or other Third Parties for the development,
manufacturing and/or marketing of Products (or for such parties to determine
their interest in performing such activities) in accordance with this Agreement
on the condition that such Affiliates, sublicensees and Third Parties agree to
be bound by the confidentiality obligations contained in this Agreement;
 
(d)                                          if such disclosure is required by
law or regulation (including without limitation by rules or regulations of any
securities exchange or NASDAQ), provided that prior to such disclosure, the
Notifying Party promptly notifies the other Party of such requirement so that
such other Party can seek a protective order, confidential treatment or other
appropriate remedy; and provided, further, that in the event that no such
protective order, confidential treatment or other remedy is obtained, or that
such other Party waives compliance with this section, the Notifying Party will
furnish only that portion of the other Party’s Confidential Information that it
is advised by counsel it is legally required to furnish; or
 
(e)                                          as necessary if embodied in
products to develop and commercialize such products.
 
Either Party may disclose (i) a copy of this Agreement on a confidential basis
to prospective lenders and investors, (ii) a mutually agreed upon redacted copy
of this Agreement on a confidential basis to prospective collaborators and (iii)
the terms of this Agreement as required under applicable securities laws or
regulations (including without limitation under rules or regulations of any
securities exchange or NASDAQ); provided, however, that, subject to Section
6.4(i), Alnylam shall not disclose Isis’ past or current Reserved DS-Targets or
past or current Isis Protected Targets (as defined in the First Restated
Agreement) without the express prior written consent of Isis, and, subject to
Section 4.3(f), neither Party shall disclose the other Party’s past or current
Enabled Targets without the express prior written consent of the other Party.
 
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12.3            Announcements; Publicity.
 
(a)                                         Each Party understands that this
Agreement is likely to be of significant interest to investors, analysts and
others, and that either Party therefore may make public announcements with
respect to this Agreement. The Parties agree that any such announcement will not
contain confidential business or technical information unless disclosure of
confidential business or technical information is required by law or regulation,
in which case they will make reasonable efforts to minimize such disclosure of
confidential business or technical information to that required by law or
regulation. Each Party agrees to provide to the other Party a copy of any such
public announcement as soon as reasonably practicable under the circumstances
prior to its scheduled release. Except under extraordinary circumstances, each
Party shall provide the other with an advance copy of any press release at least
two (2) Business Days prior to the scheduled disclosure. The other Party shall
have the right to expeditiously review and recommend changes to any announcement
regarding this Agreement or the subject matter of this Agreement, provided that
such right of review and recommendation shall only apply for the first time that
specific information is to be disclosed, and shall not apply to the subsequent
disclosure of information that (i) is substantially similar to a previously
reviewed disclosure and (ii) in the context of the subsequent disclosure, does
not carry a substantially different qualitative message than that carried by the
previously reviewed disclosure. The Party whose press release has been reviewed
shall in good faith consider any changes that are timely recommended by the
reviewing Party.
 
(b)                                         Each Party will (i) use reasonable,
good faith efforts to provide the other Party with at least 5 Business Days’
prior notice (which notice may be given orally to a senior executive officer of
the other Party) before such Party publicly announces the execution of a Naked
Sublicense, Bona Fide Discovery Collaboration agreement, or Development
Collaboration agreement or Bona Fide Third Party Collaboration agreement (or any
material amendments thereto) that could reasonably be expected to be of
strategic or financial importance to the other Party’s business and (ii)
cooperate with the other Party to enable the other Party to develop appropriate
mutually beneficial public announcements regarding such transactions.
 
ARTICLE 13
 
INDEMNIFICATION
 
13.1            Indemnification by Alnylam. Alnylam will indemnify, defend and
hold Isis and its agents, employees, officers and directors (the “Isis
Indemnitees”) harmless from and against any and all liability, damage, loss,
cost or expense (including reasonable attorneys’ fees) arising out of Third
Party claims or suits related to (a) Alnylam’s performance of its obligations
under this Agreement; (b) breach by Alnylam of its representations and
warranties set forth in Article 15; or (c) the discovery, development,
manufacture, use, importation or commercialization (including marketing and
sale) of Alnylam Products, Alnylam Extended Field Products or Alnylam Exclusive
Target Products.
 
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13.2            Indemnification by Isis. Isis will indemnify, defend and hold
Alnylam and its Affiliates and each of their respective agents, employees,
officers and directors (the “Alnylam Indemnitees”) harmless from and against any
and all liability, damage, loss, cost or expense (including reasonable
attorneys’ fees) arising out of Third Party claims or suits related to (a) Isis’
performance of its obligations under this Agreement; (b) breach by Isis of its
representations and warranties set forth in Article 15; or (c) the discovery,
development, manufacture, use, importation or commercialization (including
marketing and sale) of Isis Products, Isis Extended Field Products or Isis
Exclusive Target Products.
 
13.3            Notification of Claims; Conditions to Indemnification
Obligations. A Party entitled to indemnification under this Article 13 shall (a)
promptly notify the other Party as soon as it becomes aware of a claim or action
for which indemnification may be sought pursuant hereto, (b) cooperate with the
indemnifying Party in the defense of such claim or suit, and (c) permit the
indemnifying Party to control the defense of such claim or suit, including
without limitation the right to select defense counsel; provided that if the
Party entitled to indemnification fails to promptly notify the indemnifying
Party pursuant to the foregoing clause (a), the indemnifying Party shall only be
relieved of its indemnification obligation to the extent prejudiced by such
failure. In no event, however, may the indemnifying Party compromise or settle
any claim or suit in a manner which admits fault or negligence on the part of
the indemnified Party, or which imposes obligations on the indemnified Party
other than financial obligations that are covered by the indemnifying Party’s
indemnification obligation, without the prior written consent of the indemnified
Party. The indemnifying Party will have no liability under this Article 13 with
respect to claims or suits settled or compromised without its prior written
consent.
 
ARTICLE 14
 
TERM AND TERMINATION OF AGREEMENT
 
14.1            Term and Termination of Agreement. This Agreement will be
effective as of the Second Restatement Date (unless otherwise expressly stated)
and unless terminated earlier pursuant to Sections 14.2 or 14.3 below, the term
of this Agreement will continue in effect until expiration of the License Term.
 
14.2            Termination upon Material Breach. This Agreement may be
terminated upon written notice by either Party to the other at any time during
the term of this Agreement if the other Party is in material breach of its
obligations hereunder and has not cured such breach within 90 days after written
notice requesting cure of the breach; provided, however, that (a) in the event
of a good faith dispute with respect to the existence of such a material breach,
the 90-day cure period will be stayed until such time as the dispute is resolved
pursuant to Section 17.6 hereof, (b) so long as the breaching Party takes
substantial steps to cure the breach promptly after receiving notice of the
breach from the non-breaching Party and thereafter diligently prosecutes the
cure to completion as soon as is practicable, the non-breaching Party may not
terminate this Agreement, and (c) any license granted under this Agreement with
respect to a Product that has at least reached IND-Enabling Studies may not be
terminated for a material breach under this Section 14.2 (except for an uncured
failure to make any undisputed portion of any payment obligation under Article 7
or 8 with respect to such Product) to the extent such license is necessary to
develop, make and have made, sell and import such Product.
 
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14.3            Termination upon Bankruptcy; Rights in Bankruptcy.
 
(a)                                          This Agreement may be terminated
with written notice by either Party at any time during the term of this
Agreement upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings by or against the other Party or upon an
assignment of a substantial portion of its assets for the benefit of creditors
by the other Party; provided, however, in the case of any involuntary bankruptcy
proceeding such right to terminate will only become effective if the Party
consents to the involuntary bankruptcy or such proceeding is not dismissed
within 90 days of the filing thereof.
 
(b)                                         All rights and licenses granted
under or pursuant to this Agreement by Isis or Alnylam are, and will otherwise
be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of right to “intellectual property” as defined under Section 101 of the
U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such
rights under this Agreement, will retain and may fully exercise all of their
rights and elections under the U.S. Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding-by or against
either Party under the U.S. Bankruptcy Code, the Party hereto which is not a
Party to such proceeding will be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in their
possession, will be promptly delivered to them (i) upon any such commencement of
a bankruptcy proceeding upon their written request therefore, unless the Party
subject to such proceeding elects to continue to perform all of its obligations
under this Agreement, or (ii) if not delivered under (i) above, following the
rejection of this Agreement by or on behalf of the Party subject to such
proceeding upon written request therefore by the non-subject Party.
 
14.4            [Intentionally Deleted]
 
14.5            Accrued Rights and Surviving Obligations.
 
(a)                                         Expiration or termination of the
Agreement will not relieve the Parties of any obligation accruing prior to such
expiration or termination, including, but not limited to, financial obligations
under Article 7 or 8. Sections 4.3(f), 6.4(i), and 11.1, and Articles 1, 9, 12,
13, 14 and 17 will survive expiration or termination of the Agreement.
Provisions concerning reporting requirements will continue in effect in
accordance with any applicable timetables set forth herein. Any expiration or
early termination of this Agreement will be without prejudice to the rights of
either Party against the other accrued or accruing under this Agreement prior to
termination. No expiration of this Agreement will relieve a Party of its
obligation to pay milestones, royalties, or a percentage of Technology Access
Fees or Sublicense Revenue to the extent accrued prior to such expiration.
 
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(b)                                          The rights of any sublicensee under
any permitted sublicense granted in accordance with Section 5.2 or 6.3 will
survive the termination of this Agreement.
 
ARTICLE 15
 
REPRESENTATIONS AND WARRANTIES; DISCLAIMER
 
15.1            Representations and Warranties of the Parties. Each Party
represents and warrants to the other Party that, as of the Effective Date, the
First Restatement Date and the Second Restatement Date:
 
(a)                                         Such Party is duly organized and
validly existing under the laws of the state of its incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof;
 
(b)                                         Such Party has taken all corporate
action necessary to authorize the execution and delivery of this Agreement and
the performance of its obligations under this Agreement;
 
(c)                                         This Agreement is a legal and valid
obligation of such Party, binding upon such Party and enforceable against such
Party in accordance with the terms of this Agreement. The execution, delivery
and performance of this Agreement by such Party does not conflict with any
agreement, instrument or understanding, oral or written, to which such Party is
a Party or by which such Party may be bound, and does not violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over such Party. All consents, approvals and authorizations
from all governmental authorities or other Third Parties required to be obtained
by such Party in connection with this Agreement have been obtained;
 
(d)                                         Such Party has sufficient right,
power and authority to enter into this Agreement, to perform its obligations
under this Agreement and to grant the licenses granted hereunder.
 
15.2            Alnylam Representation and Warranty. Alnylam hereby represents
and warrants to Isis that as of the effective date of the Agbio License
Agreement, the Agbio License Agreement included a collaboration involving the
discovery and/or development of Double Stranded RNA Products, in which Alnylam
played an integral role in the experimentation and an important, though not
necessarily dominant or co-equal, role in the decision-making, relating to the
discovery and/or development of such Double Stranded RNA Products.
 
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15.3            Disclaimers. THE PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS,
UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.
 
ARTICLE 16
 
NOTICE
 
16.1            Notice. All notices which are required or permitted hereunder
will be in writing and sufficient if delivered personally, sent by facsimile
(and confirmed by telephone), sent by nationally-recognized overnight courier or
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
 

if to Isis, to: Isis Pharmaceuticals, Inc.

2855 Gazelle Court
Carlsbad, CA 92010
Attention: Chief Operating Officer
Fax No.: +1 (760) 603-4652

with a copy to: Attention: General Counsel

Fax No.: +1 (760) 268-4922

if to Alnylam, to: Alnylam Pharmaceuticals, Inc.

300 Third Street
Cambridge, MA 02142
Attention: SVP and General Counsel
Fax No.: +1 (617) 812-0353

with a copy to: Faber Daeufer & Itrato PC

950 Winter Street, Suite 4500
Waltham, Massachusetts 02451
Attention: Sumy C. Daeufer, Esq.
Fax No.: +1 (781) 795-4747
 
or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such notice
will be deemed to have been given when delivered if personally delivered or sent
by facsimile on a Business Day, on the Business Day after dispatch if sent by
nationally-recognized overnight courier and on the third Business Day following
the date of mailing if sent by mail.
 
ARTICLE 17
 
MISCELLANEOUS PROVISIONS
 
17.1            Relationship of the Parties. It is expressly agreed that Isis
and Alnylam will be independent contractors and that the relationship between
the two Parties will not constitute a partnership, joint venture or agency.
Neither Isis nor Alnylam will have the authority to make any statements,
representations or commitments of any kind, or to take any action, which will be
binding on the other, without the prior consent of the other Party.
 
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17.2            Successors and Assigns. Neither this Agreement nor any interest
hereunder may be assigned or otherwise transferred (whether by sale of stock,
sale of assets or merger), nor, except as expressly provided hereunder, may any
right or obligations hereunder be assigned or transferred by either Party
without the prior written consent of the other Party; provided, however, that a
Party may, without such consent, assign this Agreement and its rights and
obligations hereunder to an Affiliate or in connection with an Acquisition.
Notwithstanding the provisions of this Section 17.2:
 
(a)                                         If Alnylam is the subject of an
Acquisition and the entity surviving such Acquisition does not maintain [***]
that is substantially similar or greater [***] after the time of the
Acquisition, then (i) the limit on the [***] that Isis can [***] pursuant to
Section 6.4(a) will [***], and (ii) the exclusive right to grant Naked
Sublicenses under Section 5.2 will [***].
 
(b)                                         [Intentionally Deleted].
 
(c)                                         If Isis is the subject of an
Acquisition, (i) the entity surviving such Acquisition will no longer [***]
under Section 6.4(a), (ii) the [***] such Acquisition will be permitted to [***]
pursuant to Section 6.4(a) shall be limited to [***] per calendar year, and
(iii) the royalties payable by Isis with respect to Isis Single Stranded RNAi
Products will be adjusted in accordance with Section 8.2(b).
 
(d)                                         Notwithstanding anything in this
Agreement to the contrary, following the closing of an Acquisition of a Party
(the “Acquired Party”), the Parties agree that the other Party (the
“Non-Acquired Party”) shall not obtain rights or access to the Patents
controlled by the Acquirer (as defined below) or any of the Affiliates of such
Acquirer (other than the Acquired Party and its Affiliates which exist
immediately prior to the closing of such Acquisition (such Affiliates, the
“Pre-Existing Affiliates”)); and the Acquirer and its Affiliates (other than the
Acquired Party and its Pre-Existing Affiliates) shall not obtain rights or
access to the Patents controlled by the Non-Acquired Party or any of its
Affiliates pursuant to this Agreement, or be bound by the restrictions set forth
in Section 6.6.  For clarity but without limitation, the Non-Acquired Party’s
rights in all Patents Controlled by the Acquired Party or any of its
Pre-Existing Affiliates, which Patents exist as of the date of the closing of
such Acquisition and are then licensed hereunder to the Non-Acquired Party,
shall remain licensed to such Non-Acquired Party after the date of the closing
of such Acquisition in accordance with and subject to the terms and conditions
of this Agreement and shall not be affected in any manner by virtue of such
Acquisition. “Acquirer” means, with respect to the Acquired Party, the Third
Party that acquires such Acquired Party or its direct or indirect controlling
Affiliate, or that acquires all or substantially all of the assets of the
Acquired Party or its direct or indirect controlling Affiliate, in any case via
an Acquisition.
 
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(e)                                         Any permitted assignee will assume
all obligations of its assignor under this Agreement. Any attempted assignment
not in accordance with this Section 17.2 will be void.
 
17.3            Entire Agreement; Amendments. This Agreement contains the entire
understanding of the Parties with respect to the license, development and
commercialization of Products hereunder. All express or implied agreements and
understandings, either oral or written, heretofore made by the Parties on the
same subject matter are expressly superseded by this Agreement.  For clarity,
however, the letter agreement between the Parties dated January 18, 2012 is not
superseded by this Agreement and continues in full force and effect.  This
Agreement may be amended, or any term hereof modified, only by a written
instrument duly executed by both Parties hereto.
 
17.4            Force Majeure. Neither Party will be held liable or responsible
to the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected Party including, without limitation,
embargoes, acts of war (whether war be declared or not), insurrections, riots,
civil commotions, acts of terrorism, strikes, lockouts or other labor
disturbances, or acts of God. The affected Party will notify the other Party of
such force majeure circumstances as soon as reasonably practical and will make
every reasonable effort to mitigate the effects of such force majeure
circumstances.
 
17.5            Applicable Law. The Agreement will be governed by and construed
in accordance with the laws of the State of Delaware without reference to any
rules of conflict of laws.
 
17.6            Dispute Resolution.
 
(a)                          The Parties recognize that disputes may from time
to time arise between the Parties during the term of this Agreement. In the
event of such a dispute, either Party, by written notice to the other Party, may
have such dispute referred to the Parties’ respective executive officers
designated below or their successors, for attempted resolution by good faith
negotiations within 30 days after such notice is received. Said designated
officers are as follows:
 

For Isis: Chief Operating Officer

For Alnylam: President and Chief Operating Officer

 
If the dispute is not resolved as provided above, the CEO of Isis and the CEO of
Alnylam will meet for attempted resolution by good faith negotiations within 15
days after the expiration of the preceding 30 day period.
 
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(b)                                          In the event the designated
executive officers are not able to resolve such dispute during such 15-day
period, then any such dispute shall be resolved through binding arbitration
under the Commercial Arbitration Rules of the American Arbitration Association
by a panel of three arbitrators appointed in accordance with such rules. The
Parties shall be entitled to the same discovery as permitted under the U.S.
Federal Rules of Civil Procedure; provided that the panel shall be entitled in
its discretion to grant a request from a Party for expanded or more limited
discovery. The award of the arbitrators shall be the sole and exclusive remedy
between the Parties regarding any such dispute. An award rendered in connection
with an arbitration pursuant to this Section 17.6 shall be final and binding
upon the Parties and any judgment upon such award may be entered and enforced in
any court of competent jurisdiction. Any arbitration pursuant to this Section
17.6 shall be conducted in San Diego, California if Alnylam initiates the
arbitration or in Boston, Massachusetts if Isis initiates the arbitration.
Nothing in this Section 17.6 shall be construed as limiting in any way the right
of a Party to seek an injunction or other equitable relief with respect to any
actual or threatened breach of this Agreement or to bring an action in aid of
arbitration. Should any Party seek an injunction or other equitable relief, or
bring an action in aid of arbitration, then for purposes of determining whether
to grant such injunction or other equitable relief, or whether to issue any
order in aid of arbitration, the dispute underlying the request for such
injunction or other equitable relief, or action in aid of arbitration, may be
heard by the court in which such action or proceeding is brought.
 
17.7            No Consequential Damages. IN NO EVENT WILL EITHER PARTY OR ANY
OF ITS RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER
IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE,
INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE, OR CLAIMS OF
CUSTOMERS OF ANY OF THEM OR OTHER THIRD PARTIES FOR SUCH OR OTHER DAMAGES.
 
17.8            Captions. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely a convenience to assist
in locating and reading the several Articles and Sections hereof.
 
17.9            Waiver. The waiver by either Party hereto of any right
hereunder, or the failure to perform, or a breach by the other Party will not be
deemed a waiver of any other right hereunder or of any other breach or failure
by said other Party whether of a similar nature or otherwise.
 
17.10        Compliance with Law. Nothing in this Agreement will be deemed to
permit a Party to export, re-export or otherwise transfer any Product sold under
this Agreement without compliance with applicable laws.
 
17.11        Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby,
unless the absence of the invalidated provision(s) adversely affect the
substantive rights of the Parties. The Parties will in such an instance use
their best efforts to replace the invalid, illegal or unenforceable provision(s)
with valid, legal and enforceable provision(s) which, insofar as practical,
maintains the balance of the rights and obligations of the Parties under this
Agreement.
 
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17.12            Waiver of Rule of Construction. Each Party has had the
opportunity to consult with counsel in connection with the review, drafting and
negotiation of this Agreement. Accordingly, the rule of construction that any
ambiguity in this Agreement will be construed against the drafting Party will
not apply.
 
17.13            Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
 
17.14            Performance by Affiliates. To the extent that this Agreement
imposes obligations on Affiliates of a Party, such Party agrees to cause its
Affiliates to perform such obligations.
 
17.15            No Implied License. Except as expressly provided in Sections
5.1, 6.1 and 6.2 of this Agreement, no Party will be deemed by estoppel or
implication to have granted the other Party any license or other right with
respect to any intellectual property of such Party.
 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Second
Restatement Date.

Isis Pharmaceuticals, Inc.
 
Alnylam Pharmaceuticals, Inc.
                   
By:
/s/ B. Lynne Parshall
 
By:
/s/ John Maraganore
         
Name: 
B. Lynne Parshall
 
Name: 
John Maraganore
         
Title:
Chief Operating Officer
 
Title:
Chief Executive Officer

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EXHIBIT 1.1

DEFINITIONS

1. “Acquisition” means any of the following events: (a) the acquisition by any
Person or group, other than a Person or group controlling such Party as of the
Second Restatement Date, of “beneficial ownership” (as defined in Rule 13d-3
under the United States Securities Exchange Act of 1934, as amended), directly
or indirectly, of fifty percent (50%) or more of the shares of such Party’s
voting stock; (b) the approval by the shareholders of such Party of a merger,
share exchange, reorganization, consolidation or similar transaction of such
Party (a “Transaction”), other than a Transaction which would result in the
voting stock of such Party outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the voting
stock of such Party or such surviving entity immediately after such Transaction;
or (c) approval by the shareholders of such Party of a complete liquidation of
such Party or a sale or disposition of all or substantially all of the assets of
such Party.

 

2. “Active Program” means with respect to an RNA Target and a Party, any ongoing
drug discovery, development, or commercialization of a compound directed to such
RNA Target being conducted by such Party (whether on its own or through a
sublicensee).

 

3. “Affiliate” with respect to a Person means any other Person controlling,
controlled by, or under common control with such Person. For purposes of this
definition, “control” refers to the possession, directly or indirectly, of the
power to direct the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, of a Person.
Notwithstanding the foregoing, Regulus Therapeutics Inc. will not be considered
an Affiliate of either Party.

 

4. “Agbio License Agreement” shall mean that certain License and Collaboration
Agreement with Monsanto Company dated as of August 27, 2012, as amended through
the Second Restatement Date, and from time to time after the Second Restatement
Date; provided Isis has approved by prior written consent any such amendment
after the Second Restatement Date that would diminish Isis’ rights under this
Agreement or increase Isis’ obligations under this Agreement; and provided
further in each case Alnylam has provided Isis a copy of such amendment before,
or promptly after executing such amendment.

 

5. “Agricultural Field” shall mean applications in agriculture, horticulture,
forestry, aquaculture and/or the residential markets relating to plants, fish,
arthropods and/or pests and pathogens thereof (e.g., home, lawn, and/or
garden).  The Agricultural Field excludes, without limitation, (a) all human and
animal (other than fish and arthropods) therapeutic, prophylactic or diagnostic
applications; (b) the development, sale and use of research reagent products for
any purpose; and (c) modification of any cells, tissues or organisms for the
purpose of manufacturing heterologous proteins, peptides or viruses for any
purpose other than the modification of plants, plant cells, or plant tissues for
the purpose of manufacturing heterologous proteins, peptides or viruses for
application to plants, fish, arthropods and/or pests or pathogens thereof.

 
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6. “Agricultural Field Product” meansa product that contains a Double Stranded
RNA (including transgenic applications thereof) for application in the
Agricultural Field that either (a) modulates the viability and/or biological
processes (including expression of genes and/or proteins) of (i) plants, (ii)
fish, (iii) arthropods, and/or (iv) pests or pathogens thereof; or (b) modifies
plants, plant cells or plant tissues for the purpose of manufacturing
heterologous proteins, peptides or viruses for application to (i) plants, (ii)
fish, (iii) arthropods, and/or (iv) pests or pathogens thereof.

 

7. “Agricultural Field Product Net Sales” will mean (a) the gross invoice price
of Agricultural Field Products sold by Alnylam, its Affiliates and sublicensees
(but with respect to Alnylam does not include Naked Sublicensees) to a Third
Party; provided, that such Third Party is an end-user of such Licensed Product
or a Third Party which purchases Agricultural Field Product(s) (whether in
packaged form or bulk form) from Alnylam, its Affiliate or sublicensee and
resells such Agricultural Field Product(s) to third parties in a manner
consistent with normal trade practices in the Agricultural Field; less (b) the
following items:  (i) deductions actually incurred, allowed, paid, accrued or
specifically allocated in financial statements in accordance with generally
accepted accounting principles, in preparing and utilizing distribution channels
for an Agricultural Field Product (including product returns, customer rebates,
dealer incentives, volume discounts, seed service fees, cash discounts (pre-pay
discounts), (ii) local competitive response, transportation or cargo insurance,
taxes, duties or other governmental tariffs (other than income taxes), (iii)
government-mandated rebates, and (iv) a reasonable reserve for bad debts, (and
some of which items, by way of example, are currently identified as “crop loss
and replant” and “seed action pack”) in all cases allocated to such Agricultural
Field Products in accordance with generally accepted accounting principles and
methodologies established by Alnylam, its Affiliates or sublicensee, as the case
may be, and that are consistently applied by such party across all of such
party’s products in the Agricultural Field; provided, that such methodologies
may be amended from time to time, upon notice to Isis to reflect general changes
to such party’s methodologies, which changes are consistently applied by such
selling party across such party’s products in the Agricultural Field and which
changes are made in the ordinary course of such party’s business.

 
Isis and Alnylam agree that any reasonable definition of “net sales” customarily
used in agricultural industry technology licensing or collaboration contracts
that is agreed to under the Agbio License Agreement or subsequently agreed to by
Alnylam (or a Third Party acquirer or assignee) and a sublicensee with respect
to royalties payable to Alnylam from such sublicensee in an arms-length
transaction under a particular sublicense will replace the definition of
Agricultural Field Product Net Sales in this Agreement and will be used in
calculating the royalty payment to Isis on sales of Agricultural Field Products
(including, but not limited to, products that consist of an Agricultural Field
Product and other technologies and/or materials (i.e., combination products))
sold pursuant to such sublicense and due under this Agreement.
 
42

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8. “Alnylam Current Chemistry Patents” means all Chemistry Patents (i)
Controlled by Alnylam as of the First Restatement Date or any time thereafter
until the Second Restatement Date and (ii) having an earliest priority date of
no later than April 30, 2014, provided, however that (a) for any such Chemistry
Patents that are acquired, licensed or invented after the First Restatement Date
that include financial or other obligations to a Third Party, the provisions of
Section 11.8 will govern whether such Patent will be included as an Alnylam
Current Chemistry Patent; and (b) Alnylam Current Chemistry Patents do not
include Patents that constitute Alnylam Excluded Technology.  Without limitation
the Patents listed on Schedule 1-8 attached hereto are Alnylam Current Chemistry
Patents, except to the extent such Patents claim Alnylam Excluded Technology.

 

9. “Alnylam Current Motif and Mechanism Patents” means all Motif and Mechanism
Patents (i) Controlled by Alnylam as of the First Restatement Date or any time
thereafter until the Second Restatement Date and (ii) having an earliest
priority date of no later than April 30, 2014, provided, however that (a) for
any such Motif and Mechanism Patents that are acquired, licensed or invented
after the First Restatement Date that include financial or other obligations to
a Third Party, the provisions of Section 11.8 will govern whether such Patent
will be included as an Alnylam Motif and Mechanism Patent; and (b) Alnylam Motif
and Mechanism Patents do not include Patents that constitute Alnylam Excluded
Technology.  Without limitation the Patents listed on Schedule 1-9 attached
hereto are Alnylam Current Motif and Mechanism Patents, except to the extent
such Patents claim Alnylam Excluded Technology.

 

10. “Alnylam Double Stranded RNA Product” means a Double Stranded RNA Product
discovered or developed by Alnylam, its Affiliates or sublicensees, the
manufacture, sale or use of which is covered by a Valid Claim within the Isis
Patent Rights.

 

11. “Alnylam Excluded Technology” means (a) inhibitors to specific genes or gene
families, (b) Manufacturing Patents, (c) analytical technologies, kits and
assays, including without limitation methods, systems and compositions of matter
for amplifying, quantifying, detecting, characterizing or identifying nucleic
acids or nonoligomeric ligands thereto, (d) formulation and delivery
technologies and (e) the specific technology listed on Schedule 1-11 attached
hereto.

 

12. “Alnylam Exclusive Target” means an RNA Target or protein product of (a) the
antithrombin gene (AT, also known as AT3) or (b) the aminolevulinate synthase
gene 1 (AS1), which genes are further identified and described on Exhibit B.

 
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13. “Alnylam Exclusive Target Excluded Technology” means (a) Manufacturing
Patents, (b) analytical technologies, kits and assays, including without
limitation methods, systems and compositions of matter for amplifying,
quantifying, detecting, characterizing or identifying nucleic acids or
nonoligomeric ligands thereto, (c) formulation and delivery technologies, and
(d) the specific technology listed on Schedule 1-13 attached hereto.

 

14. “Alnylam Exclusive Target Patents” means all Patents that are Controlled by
Alnylam on or prior to the [***] anniversary of the Second Restatement Date that
(a) claim (x) an oligomeric compound that hybridizes to and modulates an Isis
Exclusive Target or (y) a method of using such oligomeric compound in the Field;
or (b) are Chemistry Patents or Motif and Mechanism Patents other than those
described in clause (a) above; provided, however that (A) for any such Patents
that are acquired, licensed or invented after the First Restatement Date that
include financial or other obligations to a Third Party, the provisions of
Section 11.8 will govern whether such Patent will be included as an Alnylam
Exclusive Target Patent; and (B) Alnylam Exclusive Target Patents do not include
(I) Patents that constitute Alnylam Exclusive Target Excluded Technology, or
(II) Patents Controlled by Alnylam that specifically claim an oligomeric
compound that hybridizes to and modulates an Alnylam Exclusive Target (or method
of using such oligomeric compound in the Field). Alnylam Exclusive Target
Patents include, without limitation, the Patents listed on Schedule 1-14
attached hereto.

 

15. “Alnylam Exclusive Target Product” means an oligomeric compound (a) that
hybridizes to and modulates an Alnylam Exclusive Target, and (b) the
manufacture, sale or use of which is covered by a Valid Claim within the Isis
Exclusive Target Patents. For purposes of determining whether a royalty is
payable by Alnylam under Section 7.2(c), an oligomeric compound that hybridizes
to and modulates an Alnylam Exclusive Target will continue to be considered an
Alnylam Exclusive Target Product during the applicable Alnylam Exclusive Target
Royalty Term for such compound in a country if the manufacture, sale or use of
such compound in such country is covered by a Valid Claim within the Isis
Exclusive Target Patents at the time of First Commercial Sale of such compound
in such country.

 

16. “Alnylam Exclusive Target Royalty Term” means, on a Product-by-Product and
country-by-country basis, the period commencing with the First Commercial Sale
of an Alnylam Exclusive Target Product and ending on the later of the expiration
of (i) the last-to-expire Valid Claim of an Isis Exclusive Target Patent that
covers the manufacture, use, or sale of such Alnylam Exclusive Target Product in
such country, and (ii) any period of regulatory data protection or market
exclusivity or similar regulatory protection afforded by the Regulatory
Authorities in such country, including any such periods listed in the FDA’s
Orange Book, and all international equivalents.

 

17. “Alnylam Extended Field Patents” means all Chemistry Patents and Motif and
Mechanism Patents Controlled by Alnylam on and after the Second Restatement Date
and having any earliest priority date between May 1, 2014 and April 30, 2019,
inclusive; provided, however that (a) for any such Chemistry Patents or Motif
and Mechanism Patents that are acquired, licensed or invented that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Patent will be included as an Alnylam Extended Field
Patent; and (b) Alnylam Extended Field Patents do not include Patents that
constitute Alnylam Excluded Technology. Alnylam Extended Field Patents include,
without limitation, the Patents listed on Schedule 1-17 attached hereto.

 
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18. “Alnylam Extended Field Product” means a Double Stranded RNA Product the
manufacture, sale or use of which is covered by a Valid Claim within the Isis
Extended Field Patents.

 

19. “Alnylam Extended Field Royalty Term” means, on a Product-by-Product and
country-by-country basis, the period commencing with the First Commercial Sale
of an Alnylam Extended Field Product and ending on the expiration of the
last-to-expire Valid Claim of an Isis Extended Field Patent that covers the
manufacture, use or sale of such Alnylam Extended Field Product in such country.

 

20. “Alnylam Patent Rights” means Alnylam Current Motif and Mechanism Patents
and Alnylam Current Chemistry Patents. For purposes of determining whether a
royalty is payable by Isis under Section 8.2 in connection with the sale of an
Isis Single Stranded RNAi Product, any Joint Patent, a Valid Claim of which
covers the manufacture, use or sale of such Isis Single Stranded RNAi Product,
will be considered an Alnylam Patent Right.

 

21. “Alnylam Product” means an Alnylam Double Stranded RNA Product or MicroRNA
Product discovered or developed by Alnylam, its Affiliates or sublicensees, the
manufacture, sale or use of which is covered by a Valid Claim within the Isis
Patent Rights.

 

22. “Alnylam Special Target Patent” has the meaning set forth in Section
11.2(g).

 

23. “Alnylam Third Party Agreements” means the in-license and other agreements
between Alnylam and a Third Party listed on Exhibit 6.5(c).

 

24. “Antisense Drug Discovery Program” means an antisense drug discovery program
that investigates multiple different mechanisms of modulating an RNA Target to
identify a drug candidate, with a predominant emphasis on potential drug
candidates that are single-stranded.

 

25. “Applicable Laws” means all laws, statutes, rules, regulations, orders,
judgments, or ordinances having the effect of law of any federal, national,
multinational, state, provincial, county, city or other political subdivision.

 
45

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26. “Bona Fide Discovery Collaboration” means (a) with respect to Double
Stranded RNA Products that are not Agricultural Field Products, a collaboration
involving the discovery and development of Double Stranded RNA Products, in
which a Party plays an integral role in the experimentation and an important,
though not necessarily dominant or co-equal, role in the decision-making,
relating to the discovery and development of such Double Stranded RNA Products
from the point in time at which the relevant RNA Target has been designated
through the initiation [***]; and (b) with respect to Agricultural Field
Products, a collaboration involving the discovery and/or development of Double
Stranded RNA Products, in which a Party plays an integral role in the
experimentation and an important, though not necessarily dominant or co-equal,
role in the decision-making, relating to the discovery and/or development of
such Double Stranded RNA Products.  A Bona Fide Discovery Collaboration for
Double Stranded RNA Products that are not Agricultural Field Products may
continue beyond the initiation of such [***].  For Isis Products that are Double
Stranded RNA Products, a Bona Fide Discovery Collaboration must be an Antisense
Drug Discovery Program.  For Alnylam, collaborations that do not include or
involve Isis Patent Rights licensed from Isis under Section 5.1(a) (and do not
include Isis Exclusive Target Patent Rights that are also Isis Patent Rights),
shall not constitute Bona Fide Discovery Collaborations. For Isis,
collaborations that do not include or involve Alnylam Patent Rights licensed
from Alnylam pursuant to Section 6.2, shall not constitute Bona Fide Discovery
Collaborations.  A Party’s experimentation relating to the discovery and
development of Double Stranded RNA Products that modulate a relevant RNA Target
prior to the commencement of a collaboration shall be deemed to have been
conducted in the course of the collaboration for purposes of determining whether
the collaboration is a Bona Fide Discovery Collaboration.  A series of related
collaborations and/or license agreements involving the discovery and development
of Double Stranded RNA Products with the same sublicensee or related
sublicensees that includes a Bona Fide Discovery Collaboration agreement will be
aggregated to constitute a single Bona Fide Discovery Collaboration.   The Agbio
License Agreement is deemed a Bona Fide Discovery Collaboration for purposes of
this Agreement.

 

27. “Bona Fide Third Party Collaboration” means, with respect to a Party a
collaboration between such Party and a Third Party involving the discovery,
development and/or commercialization of, (a) in the case of Alnylam, an Alnylam
Extended Field Product or an Alnylam Exclusive Target Product, as the case may
be or (b) in the case of Isis, an Isis Extended Field Product or an Isis
Exclusive Target Product, as the case may be. For Alnylam, such collaborations
that do not include or involve Isis Extended Field Patents or Isis Exclusive
Target Patents licensed from Isis hereunder shall not constitute Bona Fide Third
Party Collaborations. For Isis, such collaborations that do not include or
involve Alnylam Extended Field Patents or Alnylam Exclusive Target Patents
licensed from Alnylam hereunder shall not constitute Bona Fide Third Party
Collaborations.

 

28. “Business Day” means a weekday on which banking institutions in Boston,
Massachusetts are open for business. For purposes of clarity, a Business Day
shall not include any Saturday or Sunday or federal or Commonwealth of
Massachusetts holiday.

 

29. “Calendar Quarter” means the respective periods of three (3) consecutive
calendar months ending on March 31, June 30, September 30 and December 31.

 
46

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30. “Chemistry Patent” means any Patent that covers (a) an oligomeric compound
having a chemical composition that differs from a native oligonucleotide
composition or (b) any modification to the base, sugar or internucleoside
linkage of the oligomeric compound, and specifically, but without limitation,
includes covalently linked conjugates and other such moieties

 

31. “Commercially Reasonable Efforts” means the diligent efforts, expertise and
resources normally used by a Party to develop, manufacture and commercialize a
product or compound owned by it or to which it has rights, which is of similar
market potential at a similar stage in its development or product life, taking
into account issues of safety, and efficacy, product profile, difficulty in
developing the product or compound, competitiveness of the marketplace for the
product, the proprietary position of the compound or product, the regulatory
structure involved, the potential total profitability of the applicable
product(s) marketed or to be marketed and other relevant factors affecting the
cost, risk and timing of development and the total potential reward to be
obtained if a product is commercialized, but not less than reasonably diligent
efforts. In determining whether Commercially Reasonable Efforts have been
satisfied, the fact that a Party is required to pay the other Party a royalty or
milestones shall not be a factor weighed (i.e., a Party may not apply lesser
resources or effort to a Product because it must pay a royalty or milestones to
the other Party).

 

32. “Control” or “Controlled” means, with respect to any Patent or other
intellectual property right, possession of the right by a Party or its
Affiliates (whether by ownership, license or otherwise, other than pursuant to a
license granted under this Agreement), to assign, or grant a license, sublicense
or other right to or under, such Patent or right as provided for herein without
violating the terms of any agreement or other arrangement with any Third Party.

 

33. “Confidential Information” means information which is (a) of a confidential
and proprietary nature; and (b) not readily available to that Party’s
competitors and which, if known by a competitor of that Party, might lessen any
competitive advantage of that Party or give such competitor a competitive
advantage.

 
Confidential Information includes, without limitation, (x) information that is
proprietary or confidential or which is treated by that Party as confidential
and which relates either directly or indirectly to the business of that Party
regardless of the form in which that information is constituted, and which is
not lawfully in the public domain; and (y) any confidential information in
relation to Patents, technology, know-how, or any improvements owned or
Controlled by a Party hereto.
 
Confidential Information will not include any information that the receiving
Party can establish by written records:

 
(i)
was known by it prior to the receipt of Confidential Information from the
disclosing Party;

 
47

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(ii)
was disclosed to the receiving Party by a Third Party having the right to do so;

(iii) was, or subsequently became, in the public domain through no fault of the
receiving Party, its officers, directors, employees or agents; or

 

(iv) was concurrently or subsequently developed by personnel of the receiving
Party without having had access to the disclosing Party’s Confidential
Information.

 

34. “CRT” has the meaning set forth in Section 6.5(d)(ii).

 

35. “CRT Agreement” has the meaning set forth in Section 6.5(d)(ii).

 

36. “Designed for” means, when used in relation to a specified RNA Target, a
Single Stranded RNAi Compound that is [***] to [***] of the specified [***] via
[***].

 

37. “Development Candidate” means a Single Stranded RNAi Product for which [***]
have commenced.

 

38. “Development Collaboration” means a collaboration by either Party with a
Third Party whose purpose is the further development and/or commercialization of
a Double Stranded RNA Product or Single Stranded RNAi Product, as applicable,
and that begins at or after the initiation of IND-Enabling Studies for such
Product.  For Alnylam, collaborations that do not include or involve Isis Patent
Rights licensed from Isis under Sections 5.1(a) (and do not include Isis
Exclusive Target Patent Rights that are also Isis Patent Rights), shall not
constitute Development Collaborations. For Isis, collaborations that do not
include or involve Alnylam Patent Rights licensed from Alnylam pursuant to
Sections 6.1(a), (h), (i) or Section 6.2, shall not constitute Development
Collaborations.

 

39. “Double Stranded RNA” means a composition designed to act primarily through
an RNAi mechanism that is not a MicroRNA Construct and which consists of either
(a) two separate oligomers of native or chemically modified RNA that are
hybridized to one another along a substantial portion (greater than or equal to
[***]%) of their lengths, or (b) a single oligomer of native or chemically
modified RNA that is hybridized to itself by self-complementary base-pairing
along a substantial portion (greater than or equal to [***]%) of its length to
form a hairpin.

 

40. “Double Stranded RNA Product” means (a) a pharmaceutical composition that
contains a Double Stranded RNA or (b) an Agricultural Field Product.

 

41. “Effective Date” means March 11, 2004.

 

42. “Enabled Target” has the meaning set forth in Section 4.3(a).

 

43. “Enabled Target Pool” has the meaning set forth in Section 4.3(a).

 
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44. “Enabled Target Slot” has the meaning set forth in Section 4.3(a).

 

45. “Field” means the treatment and/or prevention of all human or animal
diseases.

 

46. “First Commercial Sale” means, with respect to a country and a Product, the
first sale for end use or consumption of such Product in such country after all
required Marketing Approvals in such country have been obtained.

 

47. “Graduated Enabled Target” has the meaning set forth in Section 4.3(a).

 

48. “IND” means an Investigational New Drug Application or similar foreign
application or submission for approval to conduct human clinical investigations.

 

49. “IND-Enabling Studies” means the pharmacokinetic and toxicology studies
required to meet the regulations for filing an IND.

 

50. “Initiation of Phase I Trial” means the dosing of at least ten human
subjects in the first human clinical trial conducted and designed to evaluate
safety of a product.

 

51. “Initiation of Phase III Trial” means the dosing of the first patient in the
first pivotal human clinical trial the results of which could be used to
establish safety and efficacy of a Product as a basis for an application for
marketing approval or that would otherwise satisfy the requirements of 21 CFR 3
12.21I or its foreign equivalent.

 

52. “Isis Current Chemistry Patents” means all Chemistry Patents (i) Controlled
by Isis as of the First Restatement Date or any time thereafter until the Second
Restatement Date and (ii) having an earliest priority date of no later than
April 30, 2014; provided, however that (a) for any such Chemistry Patents that
are acquired, licensed or invented after the First Restatement Date that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Patent will be included as an Isis Current Chemistry
Patent; and (b) Isis Current Chemistry Patents do not include Patents that
constitute Isis Excluded Technology.  Without limitation the Patents listed on
Schedule 1-52 attached hereto are Isis Current Chemistry Patents, except to the
extent such Patents claim Isis Excluded Technology.

 

53. “Isis Current Motif and Mechanism Patents” means all Motif and Mechanism
Patents (i) Controlled by Isis as of the First Restatement Date or any time
thereafter until the Second Restatement Date and (ii) having an earliest
priority date of no later than April 30, 2014; provided, however that (a) for
any such Motif and Mechanism Patents that are acquired, licensed or invented
after the First Restatement Date that include financial or other obligations to
a Third Party, the provisions of Section 11.8 will govern whether such Patent
will be included as an Isis Motif and Mechanism Patent; and (b) Isis Current
Motif and Mechanism Patents do not include Patents that constitute Isis Excluded
Technology.  Without limitation the Patents listed on Schedule 1-53 attached
hereto are Isis Current Motif and Mechanism Patents, except to the extent such
Patents claim Isis Excluded Technology.

 
49

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54. “Isis DS-Target Pool” has the meaning set forth in Section 6.4(a).

 

55. “Isis Enabled Target Pool” has the meaning set forth in Section 4.3(a).

 

56. “Isis Encumbered Target” means an RNA Target (a) to which Isis has a
contractual obligation to a Third Party existing as of the Second Restatement
Date that precludes Isis from granting a license under Section 5 with respect to
such RNA Target and (b) that is identified and described on a [***] (as defined
in the letter agreement dated March 9, 2004 between Alnylam and Isis). When and
if such restrictions lapse an RNA Target will cease to be an Isis Encumbered
Target.

 

57. “Isis Excluded Technology” means (a) RNase H mechanisms, RNase H motifs and
RNase H oligonucleotides when utilized in an RNase H mechanism, assays and
methods thereof; (b) modulators of specific genes, gene families or proteins;
(c) Manufacturing Patents; (d) analytical technologies, kits and assays,
including without limitation methods, systems and compositions of matter for
amplifying, quantifying, detecting, characterizing or identifying nucleic acids
or nonoligomeric ligands thereto; (e) formulation and delivery technologies; and
(f) the specific technology listed on Schedule 1-57 attached hereto.

 

58. “Isis Exclusive Target” means an RNA Target or protein product of (a) the
Factor X1 gene (FX1) or (b) the Apo(a) gene (Apoa1), which genes are further
identified and described on Exhibit A.

 

59. “Isis Exclusive Target Excluded Technology” means (a) Manufacturing Patents,
(b) analytical technologies, kits and assays, including without limitation
methods, systems and compositions of matter for amplifying, quantifying,
detecting, characterizing or identifying nucleic acids or non-oligomeric ligands
thereto, (c) formulation and delivery technologies, and (d) the specific
technology listed on Schedule 1-59 attached hereto.

 

60. “Isis Exclusive Target Patents” means all Patents Controlled by Isis on or
prior to the [***] anniversary of the Second Restatement Date that (a) claim (x)
an oligomeric compound that hybridizes to and modulates an Alnylam Exclusive
Target or (y) a method of using such oligomeric compound in the Field; or (b)
are Chemistry Patents or Motif and Mechanism Patents other than Patents
described in clause (a) above; provided, however that (A) for any such Patents
that are acquired, licensed or invented after the Restatement Date that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Patent will be included as an Isis Exclusive Target
Patent; and (B) Isis Exclusive Target Patents do not include (I) Patents that
constitute Isis Exclusive Target Excluded Technology, (II) Patents Controlled by
Isis that specifically claim an oligomeric compound that hybridizes to and
modulates an Isis Exclusive Target (or method of using such oligomeric compound
in the Field). Isis Exclusive Target Patents include, without limitation, the
Patents listed on Schedule 1-60 attached hereto, except to the extent such
Patents claim Isis Exclusive Target Excluded Technology.

 
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61. “Isis Exclusive Target Product” means an oligomeric compound that (a)
hybridizes to and modulates an Isis Exclusive Target, and (b) the manufacture
sale or use of which is covered by a Valid Claim within the Alnylam Exclusive
Target Patents. For purposes of determining whether a royalty is payable by Isis
under Section 8.2(d), an oligomeric compound that hybridizes to and modulates an
Isis Exclusive Target will continue to be considered an Isis Exclusive Target
Product during the applicable Isis Exclusive Target Royalty Term for such
compound in a country if the manufacture, sale or use of such compound in such
country is covered by a Valid Claim within the Alnylam Exclusive Target Patents
at the time of First Commercial Sale of such compound in such country.

 

62. “Isis Exclusive Target Royalty Term” means, on a Product-by-Product and
country-by-country basis, the period commencing with the First Commercial Sale
of an Isis Exclusive Target Product and ending on the later of the expiration of
(i) the last-to-expire Valid Claim of an Alnylam Exclusive Target Patent that
covers the manufacture, use or sale of such Isis Exclusive Target Product in
such country, and (ii) any period of regulatory data protection or market
exclusivity or similar regulatory protection afforded by the Regulatory
Authorities in such country, including any such periods listed in the FDA’s
Orange Book, and all international equivalents.

 

63. “Isis Extended Field Patents” means all Chemistry Patents and Motif and
Mechanism Patents Controlled by Isis on and after the Second Restatement Date
and having any earliest priority date between May 1, 2014 and April 30, 2019,
inclusive; provided, however that (a) for any such Chemistry Patents or Motif
and Mechanism Patents that are acquired, licensed or invented that include
financial or other obligations to a Third Party, the provisions of Section 11.8
will govern whether such Patent will be included as an Isis Extended Field
Patent; and (b) Isis Extended Field Patents do not include Patents that
constitute Isis Excluded Technology.  Isis Extended Field Patents include,
without limitation, the Patents listed on Schedule 1-63 attached hereto, except
to the extent such Patents claim Isis Excluded Technology.

 

64. “Isis Extended Field Product” means any Single Stranded Product the
manufacture sale or use of which is covered by a Valid Claim within the Alnylam
Extended Field Patents.

 

65. “Isis Extended Field Royalty Term” means, on a Product-by-Product and
country-by-country basis, the period commencing with the First Commercial Sale
of an Isis Extended Field Product and ending on the expiration of the
last-to-expire Valid Claim of an Alnylam Extended Field Patent that covers the
manufacture, use or sale of such Isis Extended Field Product in such country.

 

66. “Isis Manufacturing Patents” means the Patents specifically listed on
Schedule 1-66 attached hereto. The Parties may agree in writing from time to
time to add additional Patents to Schedule 1-66 attached hereto.

 
51

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67. “Isis Patent Rights” means Isis Current Motif and Mechanism Patents, and
Isis Current Chemistry Patents.

 

68. “Isis Product” means any Isis Single Stranded Product, MicroRNA Product,
Double Stranded RNA Product or Isis Single Stranded RNAi Product, discovered or
developed by Isis, its Affiliates or sublicensees, the manufacture, sale or use
of which is covered by a Valid Claim within the Alnylam Patent Rights.

 

69. “Isis Retained Target” means each RNA Target that is subject to certain
Third Party obligations of Isis and described on Schedule 1-69 attached hereto,
as such schedule is updated from time to time pursuant to Section 5.3(f).

 

70. “Isis Retained Special Target” means each RNA Target designated as such on
Schedule 1-69 attached hereto.

 

71. “Isis Single Stranded Product” means any single stranded oligomeric compound
(a) that hybridizes in whole or in part to, and modulates the amount or activity
of, an RNA Target, (b) is not a Double Stranded RNA or Double Stranded RNA
Product, (c) is not a Single Stranded RNAi Compound, Single Stranded RNAi
Product or Isis Single Stranded RNAi Product, and (d) the manufacture, sale or
use of which is covered by a Valid Claim within the Alnylam Patent Rights.

 

72. “Isis Single Stranded RNAi Product” means any Single Stranded RNAi Product
Designed for an Isis Enabled Target, the manufacture, sale or use of which is
covered by a Valid Claim within the Alnylam Patent Rights.

 

73. “Isis Special Patents” means the Patents specifically listed on Schedule
1-73 attached hereto. The Parties may mutually agree in writing from time to
time to add additional Patents to Schedule 1-73 attached hereto.

 

74. “Isis Special Target Patent” has the meaning set forth in Section 11.2(f).

 

75. “Isis Third Party Agreements” means the agreements between Isis and a Third
Party listed on Exhibit 5.3(d).

 

76. “Joint Invention” has the meaning set forth in Section 11.1(b).

 

77. “Joint Patent” has the meaning set forth in Section 11.1(b).

 

78. “Know-How” means all tangible or intangible know-how, discoveries,
processes, formulas, data, clinical and preclinical results, non-Patented
Inventions, Inventions for which Patents are in preparation, trade secrets, and
any physical, chemical, or biological material or any replication of any such
material in whole or in part that are not otherwise covered by the Isis Patent
Rights or the Alnylam Patent Rights

 

79. “License Term” means the period from the Second Restatement Date until the
date of expiry of the last to expire of the Patents licensed hereunder.

 
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80. “Major Pharmaceutical Company” means a Person that, together with all of its
affiliated Persons, had annual pharmaceutical product sales during the most
recently completed calendar year in excess of $[***].

 

81. “Manufacturing Patents” means Patent claims claiming (1) a method of joining
together component pieces of an oligomeric compound; (2) an improved method of
making a component piece where such component piece is disclosed prior to the
first filing of the Patent claiming such improved method; (3) in the case of
concurrently-filed Patents claiming a new component piece and disclosing
multiple methods of making the new component piece in a separate
concurrently-filed Patent, the method(s) most suitable for making the new
component piece at large scale (provided at least one method must be treated
under this Agreement as claimed under a Chemistry Patent and not under a
Manufacturing Patent); or (4) compounds used in such methods of joining together
component pieces, other than the component pieces themselves and precursors of
such component pieces. Thus, for example, Manufacturing Patents include claims
to methods such as deprotection, capping, loading onto a solid support, and
cleaving from a solid support, all of which are methods used in the process of
assembling oligomeric compounds from component pieces; and reagents, such as
solid supports themselves, useful in such methods.

 

82. “Marketing Approval” means the act of a Regulatory Authority necessary for
the marketing and sale of the Product in a country or regulatory jurisdiction,
including, without limitation, the approval of the NDA by the FDA.

 

83. “MicroRNA Construct” is a construct having the chemical and physical
description of a Double Stranded RNA that is either (a) designed to target a
precursor microRNA or a microRNA, thereby to inhibit the production or function
of the microRNA, or (b) designed to function by mimicking the translational
repressor function of a naturally occurring microRNA, and which, in relation to
its target RNA, has been demonstrated in vitro and, to the extent reasonably
feasible, in vivo, to function solely as a translational repressor and not via
cleavage of such target RNA.

 

84. “MicroRNA Product” means a pharmaceutical product that contains a MicroRNA
Construct.

 

85. “Motif and Mechanism Patents” means any Patent that covers an oligomeric
structure or composition of matter, or any method of using or incorporating such
oligomeric structure or composition of matter in vitro or in vivo, including
without limitation for therapeutic use, in which target RNA levels are modulated
by any mechanism other than RNase H.

 
53

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86. “Naked Sublicense” means a license for Double Stranded RNA that includes
rights to the Isis Patent Rights that is not a license in connection with (a) a
Development Collaboration or (b) a Bona Fide Discovery Collaboration or (c) a
Bona Fide Third Party Collaboration. A series of Naked Sublicenses to the same
sublicensee or related sublicensees will be aggregated to constitute a single
Naked Sublicense. For the avoidance of doubt, where this Agreement grants
Alnylam exclusive rights to grant Naked Sublicenses, such exclusive rights
preclude Isis from granting licenses to the Isis Patent Rights to Third Parties
for Double Stranded RNA that are not Isis Products for which Isis has exercised
its option under Section 6.2 even though such license grants by Isis would
technically be license grants and not sublicense grants. Licenses that do not
include or involve rights to Isis Patent Rights shall not constitute Naked
Sublicenses.

 

87. “Naked Sublicensee” means a Third Party that obtains a Naked Sublicense from
Alnylam in accordance with the terms of this Agreement.

 

88. “NDA” means New Drug Application or similar application or submission for
approval to market and sell a new pharmaceutical product filed with or submitted
to a Regulatory Authority.

 

89. “Net Sales” will mean the gross invoice price of Products sold by Alnylam or
Isis (as applicable), their respective Affiliates and sublicensees (but with
respect to Alnylam does not include Naked Sublicensees) to a Third Party less
the following items: (i) trade discounts, credits or allowances, (ii) credits or
allowances additionally granted upon returns, rejections or recalls, (iii)
freight, shipping and insurance charges, (iv) taxes, duties or other
governmental tariffs (other than income taxes) and (v) government-mandated
rebates and (vi) a reasonable reserve for bad debts. Except in the cases of
Products used to conduct clinical trials, reasonable amounts of Products used as
marketing samples and Product provided without charge for compassionate or
similar uses, a Party, its Affiliates or sublicensees will be treated as having
sold Products for an amount equal to the fair market value of Products if: (a)
Products are used by such Party, its Affiliates or sublicensees without charge
or provision of invoice, or (b) Products are provided to a Third Party by such
Party, its Affiliates or sublicensees without charge or provision of invoice and
used by such third party.

 
Such amounts shall be determined from the books and records of Alnylam or Isis
(as applicable) and their respective Affiliates and sublicensees, maintained in
accordance with GAAP, consistently applied.
 
In the event the Product is sold as part of a Combination Product (as defined
below), the Net Sales from the Combination Product, for the purposes of
determining royalty payments, shall be determined by multiplying the Net Sales
(as determined without reference to this paragraph) of the Combination Product,
during the applicable royalty reporting period, by the fraction, A/A+B, where A
is the average sale price of the Product when sold separately in finished form
and B is the average sale price of the other product(s) included in the
Combination Product when sold separately in finished form, in each case during
the applicable royalty reporting period or, if sales of both the Product and the
other product(s) did not occur in such period, then in the most recent royalty
reporting period in which sales of both occurred. In the event that such average
sale price cannot be determined for both the Product and all other products(s)
included in the Combination Product, Net Sales for the purposes of determining
royalty payments shall be calculated by multiplying the Net Sales of the
Combination Product by the fraction of C/C+D where C is the fair market value of
the Product and D is the fair market value of all other product(s) included in
the Combination Product. As used above, the term “Combination Product” means any
pharmaceutical product which consists of a Product and other therapeutically
active pharmaceutical compound or any delivery technology that embodies
substantial intellectual property rights Controlled by the selling Party (e.g.,
a common syringe would not constitute a delivery technology that embodies
substantial intellectual property rights Controlled by the selling Party, but an
implantable delivery device such as a stent would constitute such a delivery
technology).
 
54

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Notwithstanding anything in this Agreement to the contrary, where the term “Net
Sales” is used in this Agreement to apply to Agriculture Field Products, in such
context the term “Net Sales” shall be replaced with “Agricultural Field Product
Net Sales”.
 
Isis and Alnylam agree that any reasonable definition of “net sales” customarily
used in drug discovery, development or commercialization licensing or
collaboration contracts that is agreed to by a Party (or a Third Party acquirer
or assignee) and a sublicensee with respect to royalties payable to such Party
from such sublicensee in an arms-length transaction under a particular
sublicense will replace the definition of Net Sales in this Agreement and will
be used in calculating the royalty payment to the other Party on sales of
Products (other than Agricultural Field Products) sold pursuant to such
sublicense and due under this Agreement, for so long as the same definition of
net sales is used to calculate the royalty payable from the applicable
sublicensee to such Party.
 

90. “Other Isis Sublicense” has the meaning set forth in Section 8.4(b).

 

91. “Patent” or “Patents” means (a) patent applications (including provisional
applications and applications for certificates of invention); (b) any patents
issuing from such patent applications (including certificates of invention); (c)
all patents and patent applications based on, corresponding to, or claiming the
priority date(s) of any of the foregoing; (d) any substitutions, extensions
(including supplemental protection certificates), registrations, confirmations,
reissues, divisionals, continuations, continuations-in-part, re-examinations,
renewals and foreign counterparts thereof; and (e) all patents claiming
overlapping priority therefrom.

 

92. “Permitted Licenses” means (1) licenses granted by Isis or Alnylam (as the
case may be) before or after the Second Restatement Date to any Third Party
under the Alnylam Exclusive Target Patents (where Alnylam is the granting Party)
or the Isis Exclusive Target Patents (where Isis is the granting Party) to (a)
use oligonucleotides (or supply oligonucleotides to end users) solely to conduct
pre-clinical research, or (b) enable such Third Party to manufacture or
formulate oligonucleotides, where (i) such Third Party is primarily engaged in
providing contract manufacturing or services and is not primarily engaged in
drug discovery, development or commercialization of therapeutics; and (ii) the
granting Party does not assist such Third Party to identify, discover or make an
Alnylam Exclusive Target Product (where Isis is the granting Party) or an Isis
Exclusive Target Product (where Alnylam is the granting Party); and (2) material
transfer, collaboration, sponsored research or similar agreements with academic
collaborators or non-profit institutions solely to conduct noncommercial
Research.

 
55

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93. “Person” means any person, organization, corporation or other business
entity.

 

94. “Product” means an Alnylam Product, an Isis Product, an Alnylam Extended
Field Product, an Isis Extended Field Product, an Alnylam Exclusive Target
Product, or an Isis Exclusive Target Product, as the case may be.

 

95. “Regulatory Authority” means any applicable government regulatory authority
involved in granting approvals for the marketing and/or pricing of a Product
worldwide including, without limitation, the United States Food and Drug
Administration (“FDA”) and any successor government authority having
substantially the same function, and foreign equivalents thereof.

 

96. “Research Program” means the Parties’ research collaboration focused on
Single Stranded RNAi Compounds and conducted pursuant to the First Restated
Agreement.

 

97. “Research Program Patent” means any Patents that claim Inventions that were
discovered by the employees of either Party in the performance of the Research
Program. The Research Program Patents are listed on Schedule 1-97 attached
hereto.

 

98. “Research Use” means discovering, developing and optimizing an Alnylam
Product or an Isis Product, as applicable, up to, but not including, [***],
and/or conducting pilot manufacturing studies of an Alnylam Product or an Isis
Product, as applicable. Research Use may include small pilot toxicology studies.
With respect to Isis, Research Use does not include studies [***] for potential
drug targets, but does include studies [***] for development of Double Stranded
RNA Products or Single Stranded RNAi Products, as applicable, from among
potential targets for which a reasonable scientific basis exists for believing
that such potential targets are associated with a particular disease or
condition.

 

99. “Reserved DS-Target” has the meaning set forth in Section 6.4(a).

 

100. “RNA Target” means a ribonucleic acid transcript with a defined sequence
and/or function, including all splice variants and mutant forms of such
transcript.

 

101. “Single Stranded Compound” means a single stranded oligomeric compound (a)
that hybridizes in whole or in part to, and modulates the amount or activity of,
an RNA Target, and (b) is not a Double Stranded RNA, a Double Stranded RNA
Product, a Single Stranded RNAi Compound, or a Single Stranded RNAi Product.

 
56

--------------------------------------------------------------------------------

102. “Single Stranded Product” means a pharmaceutical composition that contains
a Single Stranded Compound and is not a Double Stranded RNA, a Double Stranded
RNA Product, a Single Stranded RNAi Compound, or a Single Stranded RNAi Product.

 

103. “Single Stranded RNAi Compound” means a single stranded chemically modified
oligonucleotide and/or analog designed to cause target mRNA cleavage via the
RISC or RNAi mechanism. For purposes of clarity, an ssRNAi compound does not
include oligonucleotides (or chemically modified oligonucleotide analogs)
designed to work via other mechanisms such as (i) RNase H 1 or 2 (including any
oligonucleotide which has [***]); (ii) alteration of splicing; (iii) translation
arrest (excluding RNAi-mediated repression of translation); (iv) alteration of
processing; (v) polyadenylation; (vi) capping; (vii) modulation of pre-mRNA
processing of the target mRNA; or (viii) oligonucleotides (or chemically
modified oligonucleotide analogs) designed to mimic a known naturally occurring
microRNA.

 
Working via the RISC or RNAi mechanism means that the compound is capable of, in
an in vitro cell culture assay, causing cleavage of the target mRNA at the
[***], as evidenced for example by a [***] assay.
 

104. “Single Stranded RNAi Product” means a pharmaceutical composition that
contains a Single Stranded RNAi Compound.

 

105. “Stanford University” has the meaning set forth in Section 6.5(d)(i).

 

106. “Stanford Agreement” has the meaning set forth in Section 6.5(d)(i).

 

107. “Sublicense Revenue” means any payments that (1) with respect to Alnylam,
Alnylam receives from a sublicensee in consideration of a Naked Sublicense, or
(2) with respect to Isis, Isis receives from a sublicensee in consideration of a
sublicense to further the research, development or commercialization of an Isis
Single Stranded RNAi Product (other than sublicenses of rights under Sections
6.1(k) or (l)), in each case including, but not limited to, license fees,
royalties, milestone payments, and license maintenance fees, but excluding: (i)
payments made in consideration of equity or debt securities of the applicable
Party at fair market value and (ii) payments specifically committed to reimburse
the applicable Party for the fully-burdened cost of research and development. If
a Party receives any non-cash Sublicense Revenue, such Party will pay the other
Party, at the election of the Party who is entitled to receive Sublicense
Revenue payment, either (x) a cash payment equal to the fair market value of the
appropriate percentage of the Sublicense Revenue or (y) the in-kind portion, if
practicable, of the Sublicense Revenue.

 
57

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108. “Technology Access Fee” means any payments that Alnylam receives from
granting a Third Party access (through sublicense or otherwise) to the Isis
Patent Rights (including to Isis Exclusive Target Patent Rights that are also
Isis Patent Rights) as part of a Bona Fide Discovery Collaboration or
Development Collaboration agreement, including, but not limited to, (1) license
fees, (2) collaboration fees, (3) option fees, (4) payments made in
consideration for the issuance of equity or debt securities above fair market
value, (5) payments made for research and development support above Alnylam’s
fully-burdened cost, but excluding the following payments: (i) payments made in
consideration for equity or debt securities of Alnylam at fair market value,
(ii) payments made in consideration for thirty-five percent (35%) or more of
Alnylam’s equity securities at fair market value plus a reasonable control
premium, (iii) payments specifically committed to reimburse Alnylam for the
fully-burdened cost of research and development, including without limitation
the fully-burdened cost of products transferred by Alnylam in connection with
such research and development, and payments received by Alnylam pursuant to the
Agbio License Agreement that are specifically committed to reimburse Alnylam for
the cost of Patent prosecution, maintenance and/or defense of Patents covering
or claiming Agricultural Field Products; provided, however, that any payments
received by Alnylam but not applied to reimburse Alnylam for such expenses will
be Technology Access Fees, (iv) [***] (v) payments that are not milestones and
that are associated with the sale of commercial products, and (vi) payments that
count as Sublicense Revenue under a Naked Sublicense subject to Alnylam’s
payment obligations to Isis under Section 7.4.  If Alnylam receives any non-cash
Technology Access Fees, Alnylam will pay Isis, at Isis’ election, either (x) a
cash payment equal to the fair market value of Isis’ appropriate portion of the
Technology Access Fee or (y) the in-kind portion, if practicable, of the
Technology Access Fee.

 

109. “Third Party” means any party other than Isis or Alnylam and their
respective Affiliates.

 

110. “Valid Claim” means (i) an issued claim of an unexpired Patent that has not
been withdrawn, canceled or disclaimed, or held invalid or unenforceable by a
court of competent jurisdiction in an unappealed or unappealable decision, or
(ii) a claim of a patent application which has been pending for less than [***]
years from the earliest priority date for such application.

 
58

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Exhibit 5.3(c) Part I
 
Isis Third-Party Joint Patents Rights

The following schedule is provided by Isis Pharmaceuticals, Inc. to Alnylam
Pharmaceuticals, Inc., in connection with the Agreement.  Capitalized terms used
but not otherwise defined herein have the meanings given to such terms in the
Agreement.
 
This schedule and the information and disclosures contained in this schedule are
intended only to qualify and limit the licenses granted by Isis to Alnylam in
the Agreement and do not expand in any way the scope or effect of any such
licenses. With respect to any joint patents indicated on this schedule, the
licenses granted by Isis to Alnylam in the Agreement are limited to the extent
of the joint owner’s rights in such joint patents.

Isis has cases with joint inventorship with the [***] following entities:

[***]
 

--------------------------------------------------------------------------------

Exhibit 5.3(c) Part II, Joint Patent Rights

[***]
 

--------------------------------------------------------------------------------

Exhibit 5.3(d)
 
Isis Third Party Agreements

The following schedule of Isis Third Party Agreements is provided by Isis to
Alnylam, in connection with the Agreement.  Capitalized terms used but not
otherwise defined herein have the meanings given to such terms in the Agreement.
 
This schedule and the information and disclosures contained in this schedule are
intended only to qualify and limit the licenses granted by Isis to Alnylam in
the Agreement and do not expand in any way the scope or effect of any such
licenses.
 
Agreements Providing Rights to Third Parties in Certain Isis Patent Rights

[***]
 
Agreements Granting Third Parties Rights to Conduct Target Validation

[***]
 
Research License Agreements

[***]
 
Agreements Containing Cross-Licenses to New Technology Arising from Partner
Collaborations

[***]
 
Government Rights in Isis IP

1. Government Rights - Inventions claimed in US Patent Applications: [***] were
funded in part by a Small Business Innovation Research grant administered by the
National Institutes of Health.  Accordingly, the U.S. Federal Government retains
certain rights to those inventions.

 

--------------------------------------------------------------------------------

EXHIBIT 6.5(c)
 
ALNYLAM THIRD PARTY AGREEMENTS

In-License Agreements

1. Co-Exclusive License Agreement between Max-Planck-Innovation GmbH (formerly
Garching Innovation GmbH) and Alnylam Pharmaceuticals, Inc., dated December 20,
2002, as amended by Amendment dated July 2, 2003, the Requirements Amendment
effective June 15, 2005, the Waiver Amendment effective August 9, 2007 and the
Amendment to the Alnylam Co-Exclusive License Agreement dated as of March 14,
2011, by and between Alnylam Pharmaceuticals, Inc., on the one hand, and
Whitehead Institute for Biomedical Research, Massachusetts Institute of
Technology and Max-Planck-Innovation GmbH, on the other hand; and Co-Exclusive
License Agreement between Max Planck Innovation GmbH (formerly Garching
Innovation GmbH) and Alnylam Europe AG (formerly Ribopharma AG), dated July 30,
2003.

 
Other Third Party Agreements
 

1. Amended and Restated License and Collaboration Agreement among Alnylam, Isis
and Regulus Therapeutics Inc., dated January 1, 2009, as amended on June 7,
2010, October 25, 2011, and August 2, 2013.

 

2. License and Collaboration Agreement between Alnylam and Takeda Pharmaceutical
Company Limited dated May 27, 2008, as amended by letter agreements dated March
16, 2011 and August 18, 2009.

 

3. License and Collaboration Agreement between Alnylam and F. Hoffmann-La Roche
Ltd. and Hoffmann-La Roche Inc. dated July 8, 2007, as amended by that certain
letter amendment dated May 29, 2008.  This License and Collaboration Agreement
has been assigned to Arrowhead Research Corporation.

 

--------------------------------------------------------------------------------

EXHIBIT 8.2(c)

DESCRIPTION OF ALNYLAM ROYALTY OBLIGATIONS TO [***] EXISTING AS OF THE EFFECTIVE
DATE
 
As of the Effective Date, Alnylam has the following royalty obligations to
[***]:
 
Alnylam is obligated to pay [***] running royalties on NET SALES (as defined in
Alnylam’s agreements with [***]) of therapeutic and prophylactic LICENSED
PRODUCTS (as defined in Alnylam’s agreements with [***]) by Alnylam and its
SUBLICENSEES (as defined in Alnylam’s agreements with [***]) that range from
[***]% ([***] percent) to [***]% ([***] percent) of NET SALES, depending on the
level of NET SALES. Royalties payable by Alnylam to [***] are subject to the
following Royalty Stacking provision:
 
“5.3 Royalty Stacking
 
(a) Third Party Licenses
 
In the event COMPANY or a SUBLICENSEE takes, for objective commercial and/or
legal reasons, a license from any third party under any patent applications or
patents that dominate the PATENT RIGHTS or is dominated by the PATENT RIGHTS in
order to develop, make, use, sell or import any LICENSED PRODUCT (explicitly
excluding, without limitation, any third party patents and patent applications
for formulation, stabilization and delivery), then COMPANY is allowed to deduct
[***] of any additional running royalties to be paid to such third party up to
[***] of the running royalties stated in Section 5.2, from the date COMPANY has
to pay running royalties to such third party. However, the running royalties
stated in Section 5.2 shall not be reduced to less than a minimum of [***] of
NET SALES in any case.
 
For avoidance of doubt, if COMPANY or a SUBLICENSEE takes a license to a third
party target, COMPANY is in no event allowed to deduct any license fees for such
target from running royalties due to [***] under this Agreement.”
 
Because Alnylam’s right to reduce its royalty obligations to [***] pursuant to
the foregoing royalty stacking provision is not co-extensive with Isis’ right to
reduce its royalty obligations to Alnylam pursuant to Section 8.2 of this
Agreement, Isis’ right to reduce its royalty obligations to Alnylam pursuant to
Section 8.2 of this Agreement is limited, pursuant to Section 8.2(c) of this
Agreement, to the extent necessary to ensure that Isis’ royalty obligations to
Alnylam are never less than Alnylam’s royalty obligations to [***] with respect
to sales by Isis, its Affiliates and its sublicensees of any Isis Product.
 

--------------------------------------------------------------------------------

Schedule 1-8

Alnylam Current Chemistry Patents
 
[***]
 

--------------------------------------------------------------------------------

Schedule 1-9

Alnylam Current Motif and Mechanism Patents
 
[***]
 

--------------------------------------------------------------------------------

Schedule 1-11

Alnylam Excluded Technology

1. All patent rights licensed to Alnylam under the license agreement between the
[***] and Alnylam dated [***].

 

2. All patent rights licensed to Alnylam under the license agreement between
[***] dated [***].

 

--------------------------------------------------------------------------------

Schedule 1-13
 
Alnylam Exclusive Target Excluded Technology

[***]
 

--------------------------------------------------------------------------------

Schedule 1-14

Alnylam Exclusive Target Patents
 
[***]
 

--------------------------------------------------------------------------------

Schedule 1-17

Alnylam Extended Field Patents
 
[***]
 

--------------------------------------------------------------------------------

Isis Current Chemistry Patents Schedule 1-52

[***]
 

--------------------------------------------------------------------------------

Isis Current Motif and Mechanism Patents Schedule 1-53

[***]
 

--------------------------------------------------------------------------------

Isis Excluded Technology Schedule 1-57

The following schedule of Excluded Technology is provided by Isis
Pharmaceuticals, Inc. to Alnylam Pharmaceuticals, Inc., in connection with the
Agreement.  Capitalized terms used but not otherwise defined herein have the
meanings given to such terms in the Agreement.
 
This schedule and the information and disclosures contained in this schedule are
intended only to qualify and limit the licenses granted by Isis to Alnylam in
the Agreement and do not expand in any way the scope or effect of any such
licenses.
 
In the event of a conflict between this schedule of Excluded Technology and any
other schedule or terms of the Agreement, this schedule will govern.
 

 
1.
Intellectual property covering:

· RNA processing, including modulation of [***];

· PNA chemistry licensed or acquired from [***];

· [***] chemistry licensed or acquired from [***];

· [***] a Gene Target.

2. [***]/4’-Thio Chemistry.

4’-thio chemistries including patents licensed in from [***]

In addition, the following Patents in-licensed from [***] are excluded:

Isis Docket Number
Country
Status
Patent Number
Granted Date
Title
 
[***]
[***]
[***]
[***]
[***]
[***]
 
[***]
[***]
[***]
[***]
[***]
[***]

 
3.
McGill University (B)

In addition to certain manufacturing technology excluded by definition, the
following Patents in-licensed from McGill University are excluded:

Isis Docket
Number
Country
Status
Title
 
[***]
[***]
[***]
[***]

--------------------------------------------------------------------------------

 
4.
Walder Patents (B)

The Walder Patents are excluded.  “Walder Patents” means and includes [***].

 
5.
Merck Nucleoside

Single nucleosides, nucleotides or monomers claimed in Patents filed as of the
Effective Date which are prosecuted by Merck and Co. are excluded.  However if
such Patents are necessary for Alnylam to practice the licenses granted under
Section 5.1 with respect to a specific Alnylam Product, then Isis will include
such necessary Patents in the licenses granted under Section 5.1.

 
6.
Carnegie Institution of Washington.

Isis is not granting Alnylam any sublicense under the License Agreement dated
January 28, 2005 between Isis and Carnegie Institution of Washington.

 
7.
Garching Innovation GmbH.

Isis is not granting Alnylam any sublicense under the Co-Exclusive License
Agreement dated October 18, 2004 among Isis, Alnylam and Garching Innovation
GmbH.

 
8.
Max-Planck-Innovation GmbH.

Isis is not granting Alnylam any sublicense under the Co-Exclusive License
Agreement dated April 27, 2009 among Isis, Alnylam and Max-Planck-Innovation
GmbH.
 

--------------------------------------------------------------------------------

(A) Isis cannot sublicense the technologies marked with this footnote.

(B) Although, Isis can sublicense the technologies marked with this footnote,
such a sublicense carries additional financial and other obligations.  Isis is
willing to negotiate a separate sublicense agreement for these technologies.

 

--------------------------------------------------------------------------------

Isis Exclusive Target Excluded Technology Schedule 1-59

The following schedule of Isis Exclusive Target Excluded Technology is provided
by Isis Pharmaceuticals, Inc. to Alnylam Pharmaceuticals, Inc., in connection
with the Agreement.  Capitalized terms used but not otherwise defined herein
have the meanings given to such terms in the Agreement.
 
This schedule and the information and disclosures contained in this schedule are
intended only to qualify and limit the licenses granted by Isis to Alnylam in
the Agreement and do not expand in any way the scope or effect of any such
licenses.
 
In the event of a conflict between this schedule of Isis Exclusive Target
Excluded Technology and any other schedule or terms of the Agreement, this
schedule will govern.

 
9.
Intellectual property covering:

· RNA processing, including modulation of [***];

· PNA chemistry licensed or acquired from [***];

· [***] chemistry licensed or acquired from [***];

· [***] a Gene Target.

10. [***]/4’-Thio Chemistry.

4’-thio chemistries including patents licensed in from [***]

In addition, the following Patents in-licensed from [***] are excluded:

Isis Docket Number
Country
Status
Patent Number
Granted Date
Title
 
[***]
[***]
[***]
[***]
[***]
[***]
 
[***]
[***]
[***]
[***]
[***]
[***]

 
11.
McGill University (B)

In addition to certain manufacturing technology excluded by definition, the
following Patents in-licensed from McGill University are excluded:

Isis Docket Number
Country
Status
Title
 
[***]
[***]
[***]
[***]

--------------------------------------------------------------------------------

 
12.
Walder Patents (B)

The Walder Patents are excluded.  “Walder Patents” means and includes [***].

 
13.
Merck Nucleoside

Single nucleosides, nucleotides or monomers claimed in Patents filed as of the
Effective Date which are prosecuted by Merck and Co. are excluded.  However if
such Patents are necessary for Alnylam to practice the licenses granted under
Section 5.1 with respect to a specific Alnylam Product, then Isis will include
such necessary Patents in the licenses granted under Section 5.1.

 
14.
Carnegie Institution of Washington.

Isis is not granting Alnylam any sublicense under the License Agreement dated
January 28, 2005 between Isis and Carnegie Institution of Washington.

 
15.
Garching Innovation GmbH.

Isis is not granting Alnylam any sublicense under the Co-Exclusive License
Agreement dated October 18, 2004 among Isis, Alnylam and Garching Innovation
GmbH.

 
16.
Max-Planck-Innovation GmbH.

Isis is not granting Alnylam any sublicense under the Co-Exclusive License
Agreement dated April 27, 2009 among Isis, Alnylam and Max-Planck-Innovation
GmbH.
 

--------------------------------------------------------------------------------

(C) Isis cannot sublicense the technologies marked with this footnote.

(D) Although, Isis can sublicense the technologies marked with this footnote,
such a sublicense carries additional financial and other obligations.  Isis is
willing to negotiate a separate sublicense agreement for these technologies.

 

--------------------------------------------------------------------------------

Isis Exclusive Target Patents Schedule 1-60

[***]
 

--------------------------------------------------------------------------------

Isis Extended Field Patents Schedule 1-63

[***]
 

--------------------------------------------------------------------------------

Isis Manufacturing Patents Schedule 1-66

[***]
 

--------------------------------------------------------------------------------

Schedule 1-69

Isis Retained Targets
Isis Retained Special Targets:

[***]
 
Other Isis Retained Targets:
 
[***]
 

--------------------------------------------------------------------------------

Isis Special Patents Schedule 1-73

[***]

--------------------------------------------------------------------------------

Research Program Patents Schedule 1-97

[***]
 

--------------------------------------------------------------------------------

Exhibit A

Isis Exclusive Targets

1. The human Factor XI gene (also known as coagulation factor XI, plasma
thromboplastin antecedent, F11, FXI) and its protein product. As of the Second
Restatement Date, the gene has NCBI Gene ID 2160, an example of an identifier
for the Factor XI gene is NCBI RefSeq code NM_000128 and an example of an
identifier for the Factor XI protein product is NCBI RefSeq code NP_000119.

2. The human Apo(a) gene (also known as apolipoprotein(a); LPA; Lipoprotein,
Lp(a); Lp(a)) and its protein product. As of the Second Restatement Date, the
gene has NCBI Gene ID 4018, an example of an identifier for the Apo(a) gene is
NCBI RefSeq code NM_005577 and an example of an identifier for the Apo(a)
protein product is NCBI RefSeq code NP_005568.

 

--------------------------------------------------------------------------------

Exhibit B

Alnylam Exclusive Targets

1.                   The human antithrombin geneand its protein product,
antithrombin (also known as SERPINC1, antithrombin3, AT3 and ATIII). As of the
Second Restatement Date, an example of an identifier for the antithrombin gene
is NCBI RefSeq code NM_000488 and an example of an identifier for the
antithrombin protein product is NCBI RefSeq code NP_000479.

2.                   The human ALAS-1 gene and its protein product ALAS-1 (also
known as ALAS, ALAS3, ALASH, aminolevulinate delta-synthase, Delta-ALA synthase,
Delta-Aminolevulinate synthase 1, 5-aminolevulinic acid synthase 1, ALAS-H,
5-aminolevulinate synthase, MIG4, aminolevulinate synthase-1, AS1). As of the
Second Restatement Date, an example of an identifier for the ALAS-1 gene is NCBI
RefSeq code NM_000688 and an example of an identifier for the ALAS-1 protein
product is NCBI RefSeq code NP_000679.
 
 

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