exv10w6



 





EXECUTION
COPY




Exhibit 10.6




Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.




Limited Liability Company Agreement

of

Regulus Therapeutics LLC




 






a Delaware Limited Liability Company




 






Dated as of September 6, 2007





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 1 Definitions; Representations and Warranties	 	 	1	 
	ARTICLE 2 Organization and Description	 	 	2	 
	2.1
	 	Name	 	 	2	 
	2.2
	 	Term	 	 	2	 
	2.3
	 	Registered Office and Statutory Agent	 	 	2	 
	2.4
	 	Principal Executive Office	 	 	2	 
	2.5
	 	Business	 	 	2	 
	2.6
	 	Qualification in Other Jurisdictions	 	 	2	 
	2.7
	 	Filings, Reports and Formalities	 	 	2	 
	2.8
	 	Limited Liability	 	 	3	 
	ARTICLE 3 Members; Voting Rights; Meetings; Withdrawal	 	 	3	 
	3.1
	 	Members	 	 	3	 
	3.2
	 	Powers of Members	 	 	3	 
	3.3
	 	Member Voting Rights	 	 	3	 
	3.4
	 	Meetings of Members	 	 	3	 
	3.5
	 	Action by Members Without a Meeting	 	 	5	 
	3.6
	 	Corporate Opportunities	 	 	5	 
	3.7
	 	No Priority, Etc.	 	 	6	 
	3.8
	 	No Withdrawal	 	 	6	 
	3.9
	 	Additional Members	 	 	6	 
	ARTICLE 4 Management	 	 	6	 
	4.1
	 	Managing Board of Directors	 	 	6	 
	4.2
	 	Power and Authority of the Managing Board	 	 	7	 
	4.3
	 	Major Decisions	 	 	8	 
	4.4
	 	Meetings of the Managing Board	 	 	9	 
	4.5
	 	Compensation	 	 	11	 
	4.6
	 	Initial Designation	 	 	11	 
	4.7
	 	Directors Bound	 	 	11	 
	ARTICLE 5 Employees; Operating Plan and Budget; Scientific Advisory Board	 	 	12	 
	5.1
	 	Employees	 	 	12	 






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	 	 	 	 	Page	 
	5.2
	 	Operating Plan	 	 	14	 
	5.3
	 	Scientific Advisory Board	 	 	15	 
	ARTICLE 6 Capital Contributions and Percentage Interests	 	 	16	 
	6.1
	 	Capital Contributions	 	 	16	 
	6.2
	 	Withdrawal or Reduction of Capital Contributions	 	 	17	 
	6.3
	 	No Interest on Capital Contributions	 	 	17	 
	6.4
	 	Capital Accounts	 	 	17	 
	ARTICLE 7 Allocation of Profits and Losses; Distributions; Tax and Accounting Matters	 	 	19	 
	7.1
	 	Allocations	 	 	19	 
	7.2
	 	Distributions	 	 	21	 
	7.3
	 	Accounting Matters	 	 	22	 
	7.4
	 	Tax Status and Returns	 	 	23	 
	7.5
	 	754 Election	 	 	24	 
	7.6
	 	Tax Information	 	 	24	 
	7.7
	 	Tax Matters Partner	 	 	24	 
	ARTICLE 8 Restrictions on Transfer	 	 	25	 
	8.1
	 	Transfer of Interests	 	 	25	 
	8.2
	 	Exempt Transfers	 	 	25	 
	8.3
	 	Substitution of Members	 	 	26	 
	ARTICLE
	 	9 Buy-Out	 	 	27	 
	9.1
	 	Right to Initiate Buy-Out	 	 	27	 
	9.2
	 	Negotiated Resolution	 	 	27	 
	9.3
	 	Non-Negotiated Resolution	 	 	28	 
	ARTICLE 10 Dissolution	 	 	34	 
	10.1
	 	Dissolution	 	 	34	 
	10.2
	 	Liquidation	 	 	34	 
	10.3
	 	Liabilities	 	 	35	 
	10.4
	 	Settling of Accounts	 	 	35	 
	10.5
	 	Distribution of Proceeds	 	 	35	 
	10.6
	 	Certificate of Cancellation	 	 	35	 
	10.7
	 	Payment of Royalties	 	 	36	 
	10.8
	 	Treatment of Certain Assets	 	 	36	 






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	 	 	 	 	Page	 
	ARTICLE 11 Exculpation and Indemnification	 	 	38	 
	11.1
	 	Duties of Directors	 	 	38	 
	11.2
	 	Exculpation	 	 	38	 
	11.3
	 	Indemnification by the Company	 	 	39	 
	11.4
	 	Insurance	 	 	41	 
	11.5
	 	Notice of Indemnification and Advancement	 	 	41	 
	11.6
	 	Repeal or Modification	 	 	41	 
	11.7
	 	Indemnification by Members	 	 	41	 
	11.8
	 	Limitation on Damages	 	 	42	 
	11.9
	 	Contractual Limitation Period	 	 	43	 
	ARTICLE 12 Inspection of Records; Annual and Other Reports; Confidentiality	 	 	43	 
	12.1
	 	Records to be Kept	 	 	43	 
	12.2
	 	Inspection of Company Records	 	 	43	 
	12.3
	 	Reports	 	 	44	 
	12.4
	 	Confidentiality	 	 	44	 
	ARTICLE 13 Miscellaneous	 	 	46	 
	13.1
	 	Governing Law	 	 	46	 
	13.2
	 	Amendments	 	 	46	 
	13.3
	 	Nature of Membership Interest; Agreement Is Binding upon Successors	 	 	47	 
	13.4
	 	Seal	 	 	47	 
	13.5
	 	Entire Agreement	 	 	47	 
	13.6
	 	Further Actions	 	 	47	 
	13.7
	 	Power of Attorney	 	 	47	 
	13.8
	 	No Third Party Beneficiary	 	 	48	 
	13.9
	 	Notice	 	 	48	 
	13.10
	 	Limited Liability Company	 	 	49	 
	13.11
	 	Fees and Expenses	 	 	49	 
	13.12
	 	Counterparts	 	 	50	 
	13.13
	 	Precedence	 	 	50	 
	13.14
	 	Titles and Subtitles; Form of Pronouns; Construction and Definitions	 	 	50	 
	13.15
	 	Severability	 	 	50	 
	13.16
	 	Survival of Certain Provisions	 	 	51	 
	13.17
	 	Survival of Warranties	 	 	51	 






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	 	 	 	 	Page	 
	13.18
	 	Waiver of Partition	 	 	51	 
	13.19
	 	Delaware Limited Liability Company Act Prevails	 	 	51	 
	13.20
	 	Specific Performance	 	 	51	 






Schedules and Exhibits




	 	 	 	 	 
	Schedule 1

	 	-
	 	Definitions
	Schedule 2

	 	-
	 	Representations and Warranties
	Schedule 3.1

	 	-
	 	Names and Addresses, Initial Percentage Interests
and Capital Account Balances
	Schedule 4.5

	 	-
	 	Form of Consulting Agreement
	Schedule 4.6

	 	-
	 	Initial Directors of the Managing Board
	Schedule 5.3

	 	-
	 	Initial SAB Members and Chairperson
	Schedule 12.4

	 	-
	 	Press Release
	Exhibit A

	 	-
	 	Initial Approved Operating Plan






- iv -









 






Limited Liability Company Agreement

of

Regulus Therapeutics LLC




     This LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of
Regulus Therapeutics LLC, a Delaware limited liability company (the “Company”), is entered
into as of September 6, 2007 (the “Effective Date”) by and among the Company, Alnylam
Pharmaceuticals, Inc., a Delaware corporation (“Alnylam”), and Isis Pharmaceuticals, Inc., a
Delaware corporation (“Isis,” and together with Alnylam, the “Members”).



W I T N E S S E T H:




     WHEREAS, the Members desire to form a joint venture to discover, develop manufacture and
commercialize miRNA Therapeutics (the “Joint Venture”);



     WHEREAS, in connection therewith and on the Effective Date, the Members and the Company are
entering into the following agreements, in each case as more particularly and more fully set forth
therein: (a) the License Agreement; and (b) the Services Agreement;



     WHEREAS, a Certificate of Formation for the Company, a limited liability company organized
under the laws of the State of Delaware, was filed with the Delaware Secretary of State on
September 5, 2007 (the “Certificate”); and



     WHEREAS, the Members desire to enter into this Agreement to provide for their respective
rights, powers, duties and obligations as Members, as well as for the management, operations and
activities of the Company going forward;



     NOW, THEREFORE, the Members by this Agreement set forth the limited liability company
agreement for the Company under the Delaware Limited Liability Company Act (6 Del. C. § 18-101 et
seq. – as amended from time to time, the “Act”), upon the following terms and conditions:



ARTICLE 1




Definitions; Representations and Warranties




     Except as otherwise defined throughout this Agreement, as used herein the capitalized terms
appearing in Schedule 1 will have the meanings set forth therein. Each Member represents and
warrants to the other Member and the Company that the statements set forth in Schedule 2 with
respect to such Member are true and correct as of the Effective Date.



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ARTICLE 2




Organization and Description




     2.1 Name.



     The name of the Company will be “Regulus Therapeutics LLC.” The Company may from time to time
do business under any other name under which it is qualified to do business. The business of the
Company will be conducted in compliance with all applicable laws.



     2.2 Term.



     The term of the Company commenced on the date of the filing of the Certificate in the office
of the Secretary of State of the State of Delaware and will continue until dissolved in accordance
with Article 10.



     2.3 Registered Office and Statutory Agent. 



     The registered office and statutory agent in Delaware required by the Act will be as set forth
in the Certificate until such time as the registered office or statutory agent is changed in
accordance with the Act.



     2.4 Principal Executive Office. 



     The principal executive office for the transaction of the Company’s business initially will be
1896 Rutherford Road, Carlsbad, California 92008. At any time, the Managing Board may change its
location within the United States of America, whether within or without the State of Delaware.



     2.5 Business.



     The Company’s business (the “Business”) will be to (a) discover, develop, manufacture and
commercialize miRNA Therapeutics and undertake all activities necessary or incidental thereto, and
(b) subject to approval of the Managing Board, to conduct and carry on any other lawful business,
purpose or activity which is permitted to be carried on by a limited liability company under the
Act.



     2.6 Qualification in Other Jurisdictions.



     The Company will execute, deliver and file any certificates (and any amendments or
restatements thereof) necessary for the Company to qualify to do business in any jurisdiction in
which the Company conducts business and in which such qualification or registration is required by
law or deemed advisable by the Managing Board.



     2.7 Filings, Reports and Formalities. 



     The Company will make all filings and submit all reports required to be filed or submitted
under the Act with respect to the Company. Throughout the term of the Company, the



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Company will comply with all requirements necessary to maintain the limited liability status
of the Company and the limited liability status of the Members under the laws of the State of
Delaware and of each other jurisdiction in which the Company does business.




     2.8
Limited Liability.


     Except as otherwise required by the Act, the debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, will be solely the debts, obligations and
liabilities of the Company, and no Member, Director or Officer of the Company will be obligated
personally for any such debt, obligation or liability of the Company solely by reason of being a
member, director, manager or officer of the Company.



ARTICLE 3




Members; Voting Rights; Meetings; Withdrawal




     3.1 Members. 



     Each Person who is or becomes a Member will be and remain a member of the Company until such
Person ceases to be a member in accordance with the provisions of the Act, the Certificate or this
Agreement. The names and addresses of the Members, and their respective Percentage Interests and
Capital Accounts as of the Effective Date, are set forth on Schedule 3.1 hereto, as the same may be
amended (or, with respect to the addresses of Members, noticed under Section 13.9) or adjusted from
time to time pursuant to this Agreement.



     3.2 Powers of Members. 



     Except as otherwise provided herein and in the Ancillary Agreements, no Member will have any
power to transact any business in the Company’s name nor have the power to sign documents, act for
or on behalf of or otherwise bind the Company. Subject to the provisions of this Agreement and
unless otherwise required by the Act or the Certificate, the Members hereby delegate any and all
such powers to the Managing Board to carry out the business affairs of the Company on the Members’
behalf.



     3.3 Member Voting Rights.  



     The Members will have no voting rights except as to those matters which, pursuant to this
Agreement, the Certificate or non-waivable provisions of the Act, require the authorization or
approval of the Members. Any authorization or approval required pursuant to this Agreement, the
Certificate or non-waivable provisions of the Act will be effected by the unanimous affirmative
vote of the Members. Such vote may be by voice vote or by ballot.



     3.4 Meetings of Members.



     (a) Annual Meeting. The Members will convene at least one meeting every year during
the fourth quarter of the Fiscal Year of the Company at the same location (or by the same remote
communication) as the meeting of the Managing Board held during the fourth quarter of



- 3 -









 




the same Fiscal Year pursuant to Section 4.2(b) and on the same day of such Managing Board
meeting, or the immediately preceding or immediately following day.




     (b) Special Meetings. A special meeting of the Members may be called at any time by
any Director or the President by written request to the Chairperson, who will consult with the
Members to set a date approved by the Members (which approval will not be unreasonably withheld or
delayed).



     (c) Notice and Minutes.



          (i) Written notice of all meetings of the Members will be given to each Member not less than
five (5) nor more than thirty (30) days before the meeting. Such notices will state (A) the place,
date and hour of the meeting and (B) those matters which, at the time of the mailing of the notice,
are intended to be presented for action. Only Persons whose names are listed as Members on the
records of the Company at the close of business on the Business Day immediately preceding the day
on which notice of the meeting is given or, if such notice is waived, at the close of business on
the Business Day immediately preceding the day on which the meeting of Members is held will be
entitled to receive notice of and to vote at such meeting, and such day will be the record date for
such meeting (except that the record date for Members entitled to give consent to action without a
meeting will be determined in accordance with Section 3.5 hereof).




          (ii) The Members will appoint a representative to act as secretary for the meeting who will
keep minutes of all proceedings of the meeting, which minutes will be distributed to each of the
attending Members. The attending Members will consider the minutes for approval at or prior to the
next meeting of the Members. The acting secretary will sign the final minutes of Member meetings
and cause all such minutes and unanimous written consents of the Members executed pursuant to
Section 3.5 hereof to be entered into a minute book maintained for such purpose.




     (d) Place of Meetings. Annual meetings of the Members will be held at a place
determined in accordance with Section 3.4(a) hereof, and special meetings of the Members will be
held at such place as may be designated by the Chairperson or, if not so designated, at the
principal executive office of the Company.



     (e) Quorum. The presence at any meeting in person or by proxy of an authorized
representative of both Alnylam and Isis will constitute a quorum for the transaction of business
(without prejudice to the vote required for the approval of any particular action).



     (f) Waiver of Notice.



          (i) The actions of any meeting of Members, however called and noticed and wherever held, will
be as valid as if taken at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy and, if notice has not been given in compliance with Section
3.4(c), each Member entitled to vote has waived notice pursuant to Section 3.4(f)(ii) or, either
before or after the meeting, has signed a written waiver of notice or a written consent to a
holding of the meeting, or a written approval of the minutes thereof. The waiver of notice,
consent or approval need not specify either the business to be transacted or the purpose of any




- 4 -









 







meeting. All such waivers, consents or approvals will be filed with the Company records and
made a part of the minutes of the meeting.




          (ii) Attendance of a Member at a meeting, in person or by proxy, without protesting the lack
of notice of such meeting at the beginning of such meeting, will constitute a waiver of notice by
such Member, provided that such Member has been given an adequate opportunity at
the meeting to protest such lack of notice.




     (g) Attendance by Telephone Conference, Etc. The Members may participate in a meeting
of the Members by means of telephone conference or similar communications equipment by means of
which all Persons participating in the meeting can hear each other, and such participation will
constitute presence in person at such meeting, subject to a Member’s right to protest lack of
notice pursuant to Section 3.4(f)(ii) above.



     3.5 Action by Members Without a Meeting. 



     (a) Any action that under any provision of the Act, the Certificate or this Agreement may be
taken at a meeting of the Members may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is delivered to and signed by the Members
necessary to authorize or take such action at a meeting at which all Members entitled to vote
thereon were present and voted.



     (b) A telecopy, electronic mail, or other electronic transmission (each, an “electronic
transmission”) consenting to an action to be taken and transmitted by a Member or the Member’s
proxyholder will be deemed to be written, signed and dated for purposes of this Section 3.5,
provided that any such electronic transmission sets forth or is delivered with
information from which the Company can determine (A) that the electronic transmission was
transmitted by such Member or proxyholder, and (B) the date on which such Member or proxyholder
transmitted such electronic transmission. The date on which such electronic transmission was
transmitted will be deemed to be the date on which such consent was signed. No consent in the form
of an electronic transmission will be deemed to have been delivered until its receipt by the
Company at its principal executive office.



     (c) Unless a record date has been fixed for the determination of Members entitled to notice of
and to give such written consent, the record date for such determination will be the day on which
the first written consent is given. Any Member giving a written consent, or the Member’s
proxyholder, may revoke the consent by a writing (including electronic transmission) received by
the Company prior to the time that written consents of the Members required to authorize the
proposed action have been filed with the Company, but may not do so thereafter. Such revocation is
effective upon its receipt by the Company.



     3.6 Corporate Opportunities.



     (a) Except as otherwise set forth in any Ancillary Agreement, no Director or Member or its
Affiliates will be prohibited from engaging in, or carrying on, any business or activity that is
similar to or in competition with another Member or the Company or any of their respective
Affiliates. Except as otherwise set forth in any Ancillary Agreement, (i) neither the Company nor
any other Member will have any right in or to any such businesses or activities or the income



- 5 -









 




or profits derived therefrom as a result of entering into this Agreement, and (ii) no
Director, Officer or Member or its Affiliates will have any obligation to present, or disclose the
existence of, any such activities or businesses or the opportunity to participate in any of them to
the Company, any of its subsidiaries or to any other Member or any other Member’s Affiliates,
except as such information may be required to satisfy reporting obligations under law, including
without limitation, the rules and regulations of the SEC. Notwithstanding the foregoing, the
Parties acknowledge that the disclosure of such information may be required in connection with
obtaining and maintaining appropriate directors’ and officers’ insurance.




     (b) Except as otherwise set forth in any Ancillary Agreement, in the event that a Member or
Director acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for a Member and the Company, such Member or Director will have no duty to communicate
or present such corporate opportunity to the Company, and the Company hereby renounces any interest
or expectancy it may have in such corporate opportunity, with the result that such Member or
Director will not be liable to the Company or the other Members for breach of any fiduciary duty,
including for breach of any fiduciary duty as a Member or Director of the Company by reason of the
fact that such Member or Director pursues or acquires such corporate opportunity for itself,
directs such corporate opportunity to another Person, or does not present such corporate
opportunity to the Company.



     3.7 No Priority, Etc.



     Except as otherwise provided herein, no Member will have priority over any other Member either
as to the return of the amount of its Capital Contribution to the Company, as to any distribution
by the Company, or as to any other economic or other right comprising part of Membership Interests.



     3.8 No Withdrawal.



     No Member may withdraw or resign from the Company.

     3.9
Additional Members.




     No additional Persons may be admitted as Members, unless admitted pursuant to and in
accordance with Article 8 or Section 4.3, as applicable.



ARTICLE 4




Management




     4.1 Managing Board of Directors.



     The Members will establish a Managing Board of Directors of the Company (“Managing Board”) as
of the Effective Date.



     (a) Directors. The Managing Board will consist of up to [**] directors (each, a
“Director”). Alnylam will have the right to designate [**] Directors who need not be Independent
Directors (the “Alnylam Directors”) and [**] Director who must be an



- 6 -









 




Independent Director. Isis will have the right to designate [**] Directors who need not be
Independent Directors (the “Isis Directors”) and [**] Director who must be an Independent Director.
The President of the Company will, at all times while in office, be a Director. Other than the
President, each Director will serve at the pleasure of the designating Member until such Director’s
removal by the designating Member or such Director’s resignation. If there is a vacancy on the
Managing Board, the vacancy will be filled by the Member, if any, who initially designated the
Director. Any Member may remove, at any time and for any reason, any or all of the Directors
designated by such Member and, subject to the Independent Director requirements, designate in lieu
thereof any individual(s) to serve the remainder of the relevant term.




     (b) Chairperson. The Chairperson of the Managing Board (“Chairperson”) will be the
President, unless otherwise designated from among the Directors by the Directors.



     (c) Observers. The right to attend all or particular meetings of the Managing Board
(“Observer Rights”) may be granted to any Person designated by a Member upon the approval of the
other Member (such approval not to be unreasonably withheld or delayed); provided,
however, that any Person granted Observer Rights, and/or any representative of such Person
attending meetings of the Managing Board, will agree in writing to be subject to appropriate
confidentiality obligations if requested by a Director; provided, further, that
such holder of Observer Rights may be excluded from any meeting or any portion of a meeting for
which any Director believes (i) such meeting or portion will involve a discussion of information
that the Company or the Member designating such Director considers to be a trade secret or of a
confidential or proprietary nature, (ii) exclusion of such holder of Observer Rights is desirable
in order to preserve the attorney client-privilege or (iii) exclusion is otherwise merited.



     (d) Other Attendees. Any Director may invite a subject matter expert to attend any
meeting of the Managing Board; provided, however, that any Person granted
attendance rights will agree in writing to be subject to appropriate confidentiality obligations if
requested by a Director and provided further that no other Director objects to such expert’s
presence. Upon such objection, the expert will be excluded from any meeting or any portion of a
meeting.



     4.2 Power and Authority of the Managing Board.



     (a) The business and affairs of the Company will be managed by or under the direction of the
Managing Board, except as may otherwise be provided in this Agreement. The Managing Board is
hereby designated as a “manager” within the meaning of the Act and will have the power on behalf
and in the name of the Company to carry out any and all objectives and purposes of the Company
contemplated by this Agreement, the Act or the Certificate and to perform all acts which it may
deem necessary, advisable or appropriate in connection therewith. Notwithstanding any other
provision of this Agreement, the Act or the Certificate, the Managing Board will not have the power
or authority to do or perform, or cause the Company or any Member to do or perform, any act with
respect to a Major Decision unless such Major Decision has been approved in accordance with Section
4.3.



     (b) Except as otherwise provided in this Agreement, the Members agree that all determinations,
decisions and actions made or taken by the Managing Board will be conclusive and absolutely binding
upon the Company, the Members (but only in their capacity as such) and



- 7 -









 




their respective successors, assigns and personal representatives; provided,
however, that the foregoing will not affect the rights of the Company or any Member with
respect to any matter involving a breach by a Director of Section 10.1 of this Agreement.




     (c) The Managing Board may establish operating committees of the Managing Board to which the
Managing Board delegates various aspects of its authority. Each such operating committee will
consist of an equal number of Directors designated by each Member, and vacancies in the membership
of an operating committee will be filled by the Member that designated the Director whose seat is
vacated. No delegation of authority to an operating committee will be to the exclusion of the
authority of the Managing Board to act with respect to the matters for which authority is so
delegated. All requirements with respect to meetings of the Managing Board will apply, mutatis
mutandis, to meetings of operating committees thereof.



     4.3 Major Decisions.



     (a) Notwithstanding any other provision of this Agreement, the Act or the Certificate to the
contrary and in addition to any other requirement under this Agreement, the Act or the Certificate,
the Company may not do or perform any of the actions set forth below (each a “Major Decision”)
without first obtaining the approval of an authorized representative of both Alnylam and Isis:



          (i) appoint or remove any Officer;




          (ii) determine the compensation of the President and Chief Scientific Officer;




          (iii) appoint or remove any member of the Scientific Advisory Board or remove or appoint the
Chairperson of the Scientific Advisory Board




          (iv) amend any existing Operating Plan or approve any Proposed Operating Plan;




          (v) create, incur, guarantee or assume any indebtedness, except for trade payable, on behalf
of the Company (including obligations in respect of capital leases), in excess of $[**].




          (vi) make or obligate the Company to make any single or aggregate capital expenditure outside
of the Approved Operating Budget in excess of $[**];




          (vii) license, sublicense or otherwise transfer, grant a security interest in or otherwise
encumber, any of the Intellectual Property owned by or licensed to the Company, other than as
provided in the Ancillary Agreements;




          (viii) license, sublicense or otherwise obtain rights to Intellectual Property owned by a
Third Party or a Member or Member’s Affiliate, except as contemplated by Sections 2.2 and 2.4 of
the License Agreement;




- 8 -









 








          (ix) declare, set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof), other than tax distributions pursuant to Section 7.2(a) or as
provided in the Ancillary Agreements;




          (x) enter into any partnering activities and/or collaborations;




          (xi) repurchase any Membership Interests of the Company;




          (xii) admit a new Member to the Company, except as permitted by Article 8;




          (xiii) Transfer any Membership Interests of the Company, except in accordance with the
provisions of Article 8;




          (xiv) reclassify or reorganize the Membership Interests;




          (xv) cause or approve any (i) merger or consolidation of the Company, (ii) acquisition of any
other entity or assets of any other entity, if the value of the acquisition exceeds $[**] or
(iii) sale of the Company’s assets if the value of such assets exceeds $[**];




          (xvi) amend, modify, waive or avoid any provision of this Agreement or the Certificate, except
as expressly authorized herein or therein;




          (xvii) expect as provided in Article 10, liquidate, dissolve, wind up or declare the Company
bankrupt;




          (xviii) amend any Ancillary Agreement;




          (xix) cause or approve the bringing of an action, suit or proceeding against a Member, an
Affiliate of a Member or a Third Party; or




          (xx) amend this Section 4.3.




     4.4 Meetings of the Managing Board.



     (a) Agendas. The Chairperson will prepare or direct the preparation of the agenda
for, and preside over, meetings of the Managing Board. The Chairperson will deliver such agenda to
each Director as soon as practicable in advance, and any Director may add items to an agenda at any
time.



     (b) Timing; Place; Notice.



          (i) Regular Meetings. The Managing Board will convene at least one meeting during
each quarter of each Fiscal Year of the Company, with the place of the meeting, if any, alternating
between the principal offices of Alnylam and the principal offices of Isis, unless otherwise agreed
to by a majority of the Directors, including at least one Alnylam Director and one Isis Director.




          (ii) Special Meetings. Special meetings of the Managing Board may be called by the
Chairperson or at the written request of at least one (1) Director. Within three (3) days




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after determining to call or receiving a proposal for a special meeting by at least one (1)
Director, the Chairperson will consult with the other Directors to determine a mutually convenient
time within the following thirty (30) day period to convene such meeting; provided,
however, that the decision as to time and place will be made by the Chairperson. Any
special meeting of the Managing Board will not be held more than thirty (30) days from the date of
the receipt of the request.




          (iii) Notice. Written notice of the time and place of each meeting of the Managing
Board will be given by or at the direction of the Chairperson to each Director, at least five (5)
Business Days before such meeting.




          (iv) Waiver of Notice. The required notice to any Director may be waived by such
Director in writing. Attendance by a Director at a meeting will constitute a waiver of any
required notice of such meeting by such Director, except when such Director attends such meeting
for the express purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not properly called or convened.




     (c) Attendance by Telephone Conference, Etc. Directors may participate in a meeting
of the Managing Board by means of telephone conference or similar communications equipment by means
of which all Persons participating in the meeting can hear each other, and such participation will
constitute presence in person at such meeting, subject to such Director’s right to protest lack of
notice pursuant to Section 4.4(b)(iv).



     (d) Quorum. A quorum of any meeting of the Managing Board will require the presence of
a majority of the Directors, including at least one Alnylam Director and at least one Isis
Director.



     (e) Action at a Meeting. At any meeting of the Managing Board at which a quorum is
present, the vote of a majority of those present will be sufficient to take any action, unless a
different vote is required by this Agreement, the Certificate or the Act. Notwithstanding the
foregoing, or any other provision in this Agreement, neither the Company, the Managing Board nor
any Director or Officer will have any power or authority to do or perform any act with respect to
any Major Decision unless such matter has been approved in accordance with the provisions of
Section 4.3.



     (f) Minutes. In order to facilitate each meeting, a Director or another appropriately
qualified Person, in either case designated by the Chairperson, will act as the secretary of the
meeting. The responsibilities of the secretary are to keep minutes of the meeting and to record
and collect documents related to the meeting. The secretary will also distribute the above
documents to each Director and will cause the minutes and other documents related to the meetings
to be kept on file by the Company. The Directors who attended the meeting will consider the
minutes for approval at or prior to the next meeting.



     (g) Action by Written Consent. Any action required or permitted to be taken at a
meeting of the Managing Board may be taken without a meeting if all Directors consent to the action
in writing or by electronic transmission, and the written consents and hard copies of the
electronic transmissions are filed with the minutes of the proceedings of the Managing Board.



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     4.5 Compensation.



     (a) The Alnylam Directors and Isis Directors will serve without compensation from the Company
and each Member will reimburse its own Directors’ out-of-pocket expenses incurred in connection
with such Directors’ service on the Managing Board. The foregoing sentence will have no effect
with regard to the Director’s right to indemnification pursuant to Article 11.



     (b) The Independent Directors will be compensated, as determined by the Managing Board, in
cash by the Company for service on the Managing Board and attendance at meetings of the Managing
Board or its committees. The Company will reimburse the President and the Independent Directors
for their out-of-pocket expenses incurred in connection with their service on the Managing Board.



     (c) Each Independent Director will also enter into a consulting agreement (a “Director
Consulting Agreement”) with the Company, Alnylam and Isis, pursuant to which such Independent
Director will provide advisory, educational and other services to the Company, and pursuant to
which such Independent Director will provide advisory and educational services to each Member.
Each such Director Consulting Agreement will be in substantially the form attached hereto as
Schedule 4.5 and will provide for, among other things, the provision of stock options to purchase
common stock of the Members. Pursuant to the Director Consulting Agreement, the Managing Board
will recommend to each Member’s Board of Directors the stock options to be granted by such Member
to the Independent Directors pursuant to and consistent with such Member’s equity incentive plan.
To the extent either Member’s Board of Directors does not approve, or a Member does not make, such
stock option grant recommended by the Managing Board, such Member will be required to compensate
the Independent Director to whom the grant is not approved or made with cash, such that the Option
Value of the stock options granted, if any, and cash paid to the Independent Director by the Member
is equal to the Option Value of the stock options recommended to be issued by that Member to such
Independent Director by the Managing Board.



     4.6 Initial Designation.



     The Directors designated as of the Effective Date are set forth on Schedule 4.6 hereto.



     4.7 Directors Bound.



     (a) Each person elected to serve as a Director of the Company shall sign this Agreement, or a
counterpart hereof or amendment hereto, or other writing pursuant to which such person (i)
acknowledges receipt of a copy of this Agreement as amended and in effect as of the date of such
writing, (ii) agrees that such person is a party to and bound by this Agreement, including the
power of attorney set forth below, (iii) agrees to perform the duties of a Director hereunder, and
(iv) agrees to execute and deliver such additional agreements, instruments, certificates and
documents as may be necessary, appropriate or convenient to reflect the foregoing matters and the
election of such person as a Director of the Company.



     (b) Upon the death, resignation, removal or expiration of the term of any Director (a
“Terminated Director”), (i) such Terminated Director shall have no further authority under this



- 11 -









 




Agreement, (ii) such Terminated Director shall have no further obligations or rights under
this Agreement (except for liabilities and rights accruing prior to the date of death, resignation,
removal or expiration of such Terminated Director’s term, including rights to exculpation and
indemnification under Article 11 hereof which relate to actions or omissions occurring during such
person’s service as a Director), and (iii) no writing or instrument shall be required to be
executed by the Company or the Terminated Director to reflect such cessation of service, except
that the Terminated Director (or his legal representative or attorney-in-fact, as provided in the
following paragraph) shall execute and deliver any agreement, instrument, certificate or document
which may be reasonably required to reflect that the Terminated Director is no longer a Director of
the Company.




     (c) Each person now or hereafter serving as a Director of the Company, by execution of this
Agreement, an amendment hereto, or other writing acknowledging that such person is bound hereby,
hereby constitutes and appoints each other person who may from time to time be serving as an
Officer, and each of them acting singly, such Director’s agent and attorney-in-fact for the purpose
of executing and delivering any and all agreements, instruments and other documents as are
necessary or appropriate to reflect that such person is no longer a Director of the Company
following the death, resignation, removal or expiration of the term of such Director, which power
of attorney is hereby agreed and acknowledged to be and irrevocable and shall survive the death,
resignation, removal, expiration of the term, bankruptcy or incapacity of any Director until such
time as the cessation of such Director’s service in such capacity has been reflected by all
necessary or appropriate agreements, instruments and other documents.



ARTICLE 5




Employees; Operating Plan and Budget; Scientific Advisory Board




     5.1 Employees.



     (a) Number; Duties and Power. There will be such number of employees of the Company
(including for such purpose employees of a Member who are seconded thereby to the Company),
including a President, Chief Scientific Officer and such other senior management, as may be
determined from time to time by the Managing Board. The Managing Board will have the right to
confer upon any employee such titles and delegate thereto such specifically defined duties as the
Managing Board deems appropriate. Notwithstanding the foregoing or any other provision of this
Agreement, the Act or the Certificate to the contrary, no employee of the Company will have the
power or authority to do or perform any act with respect to a Major Decision unless such Major
Decision has been approved in accordance with Section 4.3.



     (b) Secondment and Reimbursement.



          (i) Until such time as the Members mutually agree that the Company may directly employ
employees, all employees of the Company will be employed by either Alnylam or Isis. Alnylam and
Isis will each determine which of its own employees will perform such Member’s research,
development and other obligations required by the Approved Operating Plan and/or Services
Agreement, each Member will second such employees to the Company. The




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Company will reimburse each Member for the cost of such employees as set forth in the Approved
Operating Plan and/or Services Agreement.




          (ii) After such time as the Members mutually agree that the Company may directly employ
employees, at the discretion of the employing Member and the approval of the President of the
Company, employees seconded to the Company may become full-time employees of the Company.




     (c) Appointment and Removal. Subject to Section 4.3, the Managing Board will have the
right to appoint and the right to remove (with or without cause), any Officer or employee and the
President will have the right to appoint and remove (with or without cause) any employee who is
directly employed by the Company and is not an Officer. Each Officer will hold office until a
successor has been designated by the Managing Board and qualified or until his or her earlier
death, resignation or removal.



     (d) Officers.



          (i) The Managing Board, with the approval of the Members pursuant to Section 4.3, will appoint
a President and Chief Scientific Officer. Until such time as the Members mutually agree otherwise,
each such Officer will be employed by either Alnylam or Isis (and to the extent not an employee of
Alnylam or Isis, as the case may be, then such Officer will enter into a consulting arrangement
with such Member), but will be seconded to the Company by such Member and dedicated full time to
activities relating to the Company. The Company will reimburse the Member employing the President
and/or Chief Scientific Officer as set forth in the Approved Operating Plan, or as otherwise
determined by the Managing Board and Members in accordance with Section 4.3.




          (ii) The President and Chief Scientific Officer, as well as any other employee designated by
the Managing Board as an officer of the Company (each, an “Officer”), if required to do so by the
Managing Board, will enter into employment and/or consulting agreements with the Company and/or the
Members that include customary assignment of inventions, non-disclosure and “non-compete”
provisions (to the extent enforceable under the laws of the jurisdiction in which the Officer
performs services for the Company) and other customary provisions approved by the Managing Board.




     (e) Compensation.



          (i) Any material compensation program or material benefit plans of the Company, as they may be
amended from time to time, are subject to approval by the Managing Board and, in the case of
Officers, by the Members in accordance with Section 4.3.




          (ii) Subject to the approval requirements of this Agreement, the Officers will receive such
compensation as the Managing Board may determine, including equity compensation in the form of
stock options grants from both Members. To the extent either Member’s Board of Directors does not
approve, or the Member does not make, such stock option grant in the full amount recommended, or at
all, such Member will be required to compensate the Officer to whom the grant is not approved or
made with cash such that the Option Value of the




- 13 -









 







stock options granted and cash paid to the Officer from such Member is equal to the Option
Value of the stock options recommended by the Managing Board.




          (iii) Subject to approval of the relevant Member’s Board of Directors, employees other than
Officers will receive equity compensation in the form of stock option grants from the Member
seconding such employee to the Company. The terms and conditions of such stock option grants will
be consistent with the stock option grants made by such Member to similarly situated employees
dedicated full time to activities of the Member.




     (f) Services. For the Initial Commitment Period, each Member will provide services to
the Company, the cost of which is included in the FTE rate and set forth in the Services Agreement,
with no resulting change to the Members’ Capital Accounts. The individuals providing such services
need not be dedicated full time to activities of the Company.



          (i) Isis will provide general and administrative support services, other than business
development services, on an as needed basis.




          (ii) Alnylam will provide business development services to the Company, on an as needed basis.




          (iii) Each of Alnylam and Isis will provide Intellectual Property prosecution and enforcement
services to the Company on an as needed basis and as determined by the Collaboration Working Group.




     5.2 Operating Plan.



     (a) The initial Operating Plan, dated as of the Effective Date attached hereto as Exhibit A
(the “Initial Operating Plan”), will be deemed the “Approved Operating Plan” for the period
beginning on the Effective Date and ending on [**] (such period, the “Initial Commitment Period”).
No later than [**], the Parties will review and consider, together with the Collaboration Working
Group, whether to revise the Initial Operating Plan.



     (b) No later than September 30, [**], and no later than September 30 in each Fiscal Year
thereafter, the Collaboration Working Group will submit to the Managing Board a proposal for
revising the Approved Operating Plan then in effect (“Proposed Operating Plan”), which will include
a proposed Development Plan (“Proposed Development Plan”), proposed Operating Budget (“Proposed
Operating Budget”) and proposed Capital Contribution Schedule (“Proposed Capital Contribution
Schedule”).



     (c) Each Proposed Operating Plan will be considered at the first meeting of the Managing Board
following its submission and will be subject to the approval of the Managing Board and the Members
in accordance with Section 4.3. The Chairperson will call a special meeting of the Managing Board
for this purpose at the request of any Director if the next scheduled regular meeting is later than
December 31 of the year in which submission is made. Any such Proposed Operating Plan (or any
amendment thereto) that is approved by the Managing Board will be considered the “Approved
Operating Plan” for all purposes of this Agreement until amended or replaced.



- 14 -









 





     (d) In the event that, during the Initial Commitment Period, funding in addition to that set
forth in the Initial Capital Contribution Schedule is required to continue to carry out the
Development Plan, the Members agree to use their best efforts to negotiate and approve a Proposed
Operating Plan for the remainder of the Initial Commitment Period.



     (e) If, after the Initial Commitment Period, the Managing Board and the Members in accordance
with Section 4.3 are unable to [**] (a “Stalemate”), either Member may initiate a Buy-Out;
provided, however, that in the event sufficient funding is available to the Company
to continue to carry out the Development Plan after the Initial Commitment Period, a Stalemate will
not be deemed to have occurred, and neither Member may initiate a Buy-Out, until a date [**] days
prior to the date on which all of the Company’s funds are expected to be depleted as determined
based on the Approved Operating Plan then in effect.



     5.3 Scientific Advisory Board.



     (a) The Company will establish a Scientific Advisory Board (“SAB”) consisting of at least
three (3) members. The initial members and chairperson of the SAB will be as set forth on Schedule
5.3. Any changes to the composition of the Scientific Advisory Board, including the removal or
appointment of the chairperson, will be made in accordance with Section 4.3.



     (b) Each member of the SAB will also enter into a consulting agreement with the Company (a
“SAB Consulting Agreement”) pursuant to which such member of the SAB will provide advisory,
educational and other services to the Company, and pursuant to which such SAB member will provide
advisory and educational services to each Member. Each such SAB Consulting Agreement will be in
substantially the form attached hereto as Schedule 4.5 and will provide for, among other things,
the provision of stock options to purchase common stock of the Members. Pursuant to the SAB
Consulting Agreement, the Managing Board will recommend to each Member’s Board of Directors the
stock options to be granted by such Member to the members of the SAB pursuant to and consistent
with such Member’s equity incentive plan. To the extent either Member’s Board of Directors does
not approve, or the Member does not make, such stock option grant as recommended by the Managing
Board, such Member will be required to compensate each SAB member to whom the grant is not approved
or made with cash, such that the Option Value of the stock options granted, if any, and cash paid
to the SAB member by the Member is equal to the Option Value of the stock options recommended to be
issued by such Member to the SAB member by the Managing Board.



     (c) The SAB will meet at least quarterly until December 31, 2009 and will initially be
responsible for:



          (i) advising the Company as to research goals and plans;




          (ii) reviewing research data and advising the Company with respect to interpretation of such
research data, as requested by the Managing Board, President or Chief Scientific Officer; and




          (iii) advising the Company with respect to research and development decisions, as requested by
the Managing Board, President or Chief Scientific Officer.





- 15 -











 





ARTICLE 6

Capital Contributions and Percentage Interests




     6.1 Capital Contributions.



     (a) In consideration for Alnylam’s initial Membership Interest in the Company, Alnylam is
contributing to the Company the Intellectual Property as set forth in Sections 2.1 and 2.2 of the
License Agreement (the “Alnylam Initial IP Contribution”). In addition, Alnylam agrees to
contribute in cash an aggregate of $10,000,000 to the Company within five (5) days following the
Effective Date. Such cash contribution by Alnylam is intended by the Parties to be used by the
Company to fund the Approved Operating Plan. The Parties agree that the aggregate fair market
value of the rights, assets and cash contributed by Alnylam as described in this Section 6.1(a)
will be equal to $[**] as of the date of their contribution.



     (b) In consideration for Isis’ initial Membership Interest, Isis is contributing to the
Company the Intellectual Property as set forth in Sections 2.1 and 2.2 of the License Agreement
(the “Isis Initial IP Contribution”). The Parties agree that the aggregate fair market value of
the rights and assets contributed by Isis as described in this Section 6.1(b) will be equal to
$[**] as of the date of their contribution.



     (c) Operating Plan Contributions. Each of the Members agrees to make the additional
Capital Contributions set forth in the Initial Capital Contribution Schedule, which is contained in
the Initial Operating Plan (“Initial Operating Plan Contributions”). Each Member also agrees to
make any additional Capital Contributions as set forth in any Capital Contribution Schedule
contained in an Approved Operating Plan (“Future Operating Plan Contributions" and together with
Initial Operating Plan Contributions, “Operating Plan Contributions”).



     (d) Pro Rata Contributions. The Members will be responsible, pro rata in accordance
with their Percentage Interests, for any Capital Contributions required to be made pursuant to
Section 6.1(c); provided, however, that in the event a Member fails to make any
Operating Plan Contribution in accordance with Section 6.1(c), then until such time as the
defaulted amount of capital has been paid by such Member (the “Defaulting Party”), interest will
accrue thereon (at the rate of [**] percent ([**]%) per annum or, if lower, the highest interest
rate permitted by applicable law), and will be due to the Company; provided further
that, in the event the Defaulting Party has not paid such defaulted amount of capital, plus accrued
interest thereon, within thirty (30) days of the Managing Board’s request for such Capital
Contribution, the other Member (the “Non-Defaulting Party”) will have the right to elect to
initiate a Buy-Out.



     (e) Additional Capital. Any funds contributed by the Members to the Company pursuant
to this Agreement (other than the Members’ Initial Capital Contributions), will be referred to as
an “Additional Capital Contribution” and will constitute additional Capital Contributions to the
Company.



     (f) Percentage Interests. The Members hereby agree that the Percentage Interests of
each Member as of the Effective Date are as set forth on Schedule 3.1.



-16-









 





     (g) Adjustments to Capital Contributions. Except as provided in Section 6.1(c), in no
event and at no time will a Member be required or permitted to make a Capital Contribution other
than in accordance with Section 6.1(a) and (b).



     (h) Capital Account. Each Member’s Capital Account will be determined in the manner
described in Section 6.4 of this Agreement.



     (i) Transfer Taxes. Each Member will pay all sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees (“Transfer Taxes”)
incurred in connection with its Capital Contributions to the Company and will be responsible for
filing all necessary documentation and tax returns with respect to such Transfer Taxes. Each
Member will be responsible for any and all Taxes imposed upon such Member or its Affiliates in
connection with their respective Capital Contributions to the Company or in connection with any
distribution of property from the Company.



     6.2 Withdrawal or Reduction of Capital Contributions.



     Except as expressly provided in this Agreement, no Member will have the right to withdraw from
the Company or be repaid all or any part of such Member’s Capital Contribution or any other payment
in respect of its Membership Interests (including any payment contemplated by Section 18-604 of the
Act), and this Section 6.2 will expressly constitute a “provision otherwise” for purposes of
Section 18-604.



     6.3 No Interest on Capital Contributions.



     No interest will be payable by the Company on or with respect to the Capital Contributions or
Capital Accounts.



     6.4 Capital Accounts.



     (a) A single Capital Account will be maintained for each Member (regardless of the time or
manner in which such interest was acquired) in accordance with the capital accounting rules of
section 704(b) of the Code, and the regulations thereunder (including Treasury Regulations section
1.704-1(b)(2)(iv)) (a “Capital Account”). In general, under such rules, a Member’s Capital Account
will be:



          (i) increased by (A) the amount of money contributed by the Member to the Company (including
the amount of any Company liabilities that are assumed by such Member other than in connection with
a distribution of Company property), (B) the Fair Market Value of property contributed by the
Member to the Company (net of liabilities secured by such contributed property that under
section 752 of the Code the Company is considered to assume or take subject to), and
(C) allocations to the Member of Company income and gain (or any item thereof), including income
and gain exempt from tax; and



          (ii) decreased by (A) the amount of money distributed to the Member by the Company (including
the amount of such Member’s individual liabilities that are assumed by the Company other than in
connection with a contribution of property to the Company), (B) the Fair Market Value of property
distributed to the Member by the Company (net of liabilities secured



-17-









 







by such distributed property that under section 752 of the Code such Member is considered to
assume or take subject to), (C) allocations to the Member of expenditures of the Company not
deductible in computing its taxable income and not properly chargeable to capital account, and
(D) allocations to the Member of Company loss and deduction (or any item thereof).



Except as otherwise required by the Treasury Regulations, the transferee of any Membership Interest
in the Company will succeed to the Capital Account of the transferor to the extent it relates to
the transferred Membership Interest.



     (b) Where section 704(c) of the Code applies to Company property or where Company property is
revalued pursuant to paragraph (b)(2)(iv)(f) of Treasury Regulations section 1.704-1, each Member’s
Capital Account will be adjusted in accordance with Treasury Regulations sections
1.704-1(b)(2)(iv)(g) and 1.704-3(d)(2) as to allocations to the Members of depreciation, depletion,
amortization and gain or loss, as computed for book purposes with respect to such property.



     (c) When Company property is revalued pursuant to Treasury Regulations section
1.704-1(b)(2)(iv)(f), or where Company property is distributed in kind (whether in connection with
liquidation and dissolution or otherwise), the Capital Accounts of the Members will first be
adjusted to reflect the manner in which the unrealized income, gain, loss and deduction inherent in
such property (that has not been reflected in the Capital Account previously) would be allocated
among the Members if there were a taxable disposition of such property for the Fair Market Value of
such property (taking into account section 7701(g) of the Code) on the date of distribution.



     (d) It is intended that the Capital Accounts of the Members will be determined and maintained
throughout the term of the Company in accordance with, and will be adjusted as may be required
under, section 704 of the Code and the Treasury Regulations promulgated thereunder. The foregoing
provisions of this Section 6.4 and certain other provisions of this Agreement are intended to
comply with the Treasury Regulations promulgated under section 704 of the Code and will be
interpreted and applied in a manner consistent with said Treasury Regulations. The Tax Matters
Partner will make or cause to be made all necessary adjustments in each Member’s Capital Account,
or the manner in which the Capital Accounts, or any debits or credits thereto, are computed, as
required by the capital accounting rules of section 704 of the Code and the regulations thereunder.



     (e) No Member will be required to pay the Company or to any other Member the amount of any
negative balance which may exist from time to time in such Member’s Capital Account.



-18-









 





ARTICLE
7

Allocation of Profits and Losses; Distributions; Tax and Accounting Matters




     7.1 Allocations.



     Each Member’s distributive share of the Company’s total income, gain, loss, deduction or
credit (or items thereof), which total will be as shown on the annual federal income tax return
prepared by or at the direction of the Tax Matters Partner or as finally determined by the United
States Internal Revenue Service or the courts, and as modified by the capital accounting rules of
section 704(b) of the Code and the Treasury Regulations thereunder, as implemented by Section 6.4
hereof, as applicable, will be determined as follows:



     (a) General Allocation. Except as otherwise provided in this Article 7, all of the
Company’s items of income, gain, loss, deduction or credit (or items thereof) will be allocated to
the Members pro rata in accordance with their Percentage Interests.



     (b) Regulatory Allocations. The following provisions are intended to comply with
certain regulatory requirements for allocations set forth in section 704(b) of the Code. It is the
intent and understanding of the parties that the allocations required by this Section 7.1(b) will
be offset by future, offsetting allocations pursuant to this Section 7.1(b).



     (i) Limitation. Notwithstanding anything in this Section 7.1 to the contrary, items
of loss and deduction allocated to any Member pursuant to this Section 7.1 with respect to any
taxable year will not exceed the maximum amount of such items that can be so allocated to such
Member without causing such Member to have a deficit balance in its Capital Account in excess of
the amount of such Member’s obligation, if any, to restore such deficit Capital Account, computed
in accordance with the rules of Treasury Regulations section 1.704-1(b)(2)(ii)(d). Any such items
of loss or deduction in excess of the limitation set forth in the preceding sentence will be
allocated as follows and in the following order of priority:



          (A) first, to those Members who would not be subject to such limitation,
proportionately in accordance with their Percentage Interests; and



          (B) second, any remaining amount to the Members in the manner required by the Code and
Treasury Regulations.



          (ii) Minimum Gain Chargeback. Notwithstanding anything to the contrary in this
Section 7.1, if there is a net decrease in “minimum gain” or “partner nonrecourse debt minimum
gain” (as such terms are defined in Treasury Regulations sections 1.704-2(b) and 1.704-2(i)(2))
during a taxable period of the Company, then each Member will be allocated items of income and gain
for such year (and, if necessary, for subsequent years) in the manner provided in Treasury
Regulations section 1.704-2. This provision is intended to be a “minimum gain chargeback” and
“partner nonrecourse debt minimum gain chargeback” within the meaning of Treasury Regulations
sections 1.704-2(f) and 1.704-2(i)(4) and will be interpreted and implemented as therein provided.



-19-









 





          (iii) Qualified Income Offset. Subject to the provisions of Section 7.1(b)(ii), but
otherwise notwithstanding anything to the contrary in this Section 7.1, if any Member’s Capital
Account has a deficit balance in excess of such Member’s obligation to restore its Capital Account
balance, computed in accordance with the rules of paragraph (b)(2)(ii)(d) of Treasury Regulations
section 1.704-1, then sufficient amounts of income and gain (consisting of a pro rata portion of
each item of Company income, including gross income, and gain for such year) will be allocated to
such Member in an amount and manner sufficient to eliminate such deficit as quickly as possible.
This provision is intended to be a “qualified income offset” within the meaning of Treasury
Regulations section 1.704-1(b)(2)(ii)(d) and will be interpreted and implemented as therein
provided.



          (iv) Effect of Special Allocations on Subsequent Allocations. Any special allocation
pursuant to Sections 7.1(b)(i), 7.1(b)(iii) and 7.1(b)(vi) hereof will be taken into account in
computing subsequent allocations of income and gain pursuant to this Section 7.1 so that the net
amount of all such allocations to each Member will, to the extent possible, be equal to the net
amount that would have been allocated to each such Member pursuant to the provisions of this
Section 7.1 if such special allocations had not occurred. It is anticipated that all allocations
pursuant to Section 7.1(b)(v) will be offset by allocations pursuant to Section 7.1(b)(ii) hereof.
To the extent the Tax Matters Partner determines that any amount allocated pursuant to
Section 7.1(b)(v) hereof is unlikely to be offset by a countervailing allocation of income from
Section 7.1(b)(ii) hereof, then so much of such allocation as the Tax Matters Partner has
determined is unlikely to be offset will also be taken into account in computing subsequent
allocations of income and gain pursuant to this Section 7.1 so that the net amount of all such
allocations will, to the extent possible, equal the net amount that would be allocated to such
Member in the absence of such special allocation.



          (v) Nonrecourse Debt. Items of deduction and loss attributable to “partner
nonrecourse debt” within the meaning of Treasury Regulations Section 1.704-2(b)(4) will be
allocated to the Members bearing the economic risk of loss with respect to such debt in accordance
with Treasury Regulations section 1.704-2(i)(1). Items of deduction and loss attributable to
“nonrecourse liabilities” of the Company within the meaning of Treasury Regulations section 1.752-1
will be allocated to the Members in proportion to their respective Percentage Interests.



          (vi) Recourse Debt. Items of deduction and loss attributable to “recourse debt”
within the meaning of Treasury Regulations section 1.752-1 (but excluding “partner nonrecourse
debt” as defined in Section 7.1(b)(v) hereof), will be allocated to the Members bearing the
economic risk of loss with respect to such debt.



     (c) Allocations With Respect to Certain Property and Income.



          (i) In determining each Member’s allocable share of the taxable income or loss of the Company,
depreciation, depletion, amortization and gain or loss with respect to any contributed property, or
with respect to property which has been revalued as provided in Treasury Regulations section
1.704-1(b)(2)(iv)(f), will be allocated among the Members in accordance with the principles of
section 704(c) of the Code, as set forth in the Treasury Regulations thereunder and under section
704(b) of the Code. Such allocation will be made in



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accordance with the remedial method described by Treasury Regulations section 1.704-3(d)
unless another method or combination of methods as permitted under Treasury Regulations section
1.704-3 is selected by the Tax Matters Partner.



          (ii) Solely for tax purposes, a Member’s share of the Company’s depreciation recapture
recognized for tax purposes upon the disposition of Company property will be computed in the manner
provided for in Treasury Regulations sections 1.704-3(a)(11), 1.1245-1(e) and 1.1250-1(f). The
allocations provided for in this Section 7.1(c)(ii) are required to be made solely for tax purposes
and will not affect any Member’s Capital Account.



          (iii) Subject to Sections 7.1(b) and 7.1(c)(i) hereof, if and to the extent any transaction
between the Company and a Member results in any adjustment being made to the income of the Company
under section 482 or 7872 of the Code, or any similar provision now or hereafter in effect, any
corresponding resulting item of Company income, gain, loss or deduction will be allocated in its
entirety to the affected Member.



     (d) Change in Percentage Interests. Except as otherwise required by law, if the
Percentage Interests of the Members of the Company are changed during any taxable year, all items
to be allocated to the Members for such entire taxable year will be prorated on the basis of the
portion of such taxable year which precedes each such change and the portion of such taxable year
on and after each such change by closing the books of the Company effective as of the close of
business on the date of such change, and the items so allocated for each such portion will be
allocated to the Members in the manner in which such items are allocated as provided in
Section 7.1(a) hereof during each such portion of the taxable year in question.



     (e) State and Local Items. Items of income, gain, loss, deduction, credit and tax
preference for state and local income tax purposes will be allocated to and among the Members in a
manner consistent with the allocation of such items for federal income tax purposes in accordance
with the foregoing provisions of this Section 7.1.



     7.2 Distributions.



     (a) Tax Distributions.



          (i) With respect to each fiscal quarter, subject to the limitations provided in
subsection (ii) below and in Section 7.4(b), and after making payment or provision for current
obligations and operating expenses of the Company, but otherwise notwithstanding anything to the
contrary provided for in this Section 7.2, the Company, to the extent of its available cash, will
make distributions of cash to the Members pro rata in accordance with their respective Percentage
Interests during such fiscal quarter, as promptly as practicable and in any event by the Tax
Distribution Date for such fiscal quarter, so that each Member will receive an amount (a “Tax
Distribution”) equal to its federal, state and local income taxes (including obligations for
estimated tax) on the taxable income that it derives as a Member of the Company for such fiscal
quarter (based upon an assumed combined marginal rate of federal, state and local taxation of
forty-two percent (42%), or as the Managing Board will otherwise reasonably determine). In
determining the taxable income of a Member with respect to any fiscal quarter, to the extent that
actual taxable income for the relevant period is not available as of the Tax Distribution Date, the



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determination will be made by the Company based upon a good faith estimate of actual taxable
income for such period and may be based upon the methodology permitted by the Code which results in
the lowest estimated tax liability for such Members. In determining the Tax Distribution for any
fiscal quarter, the cumulative amount of taxable income or loss for prior fiscal quarters in the
same Fiscal Year and the Tax Distributions with respect to such prior fiscal quarters can be taken
into account. To the extent the amount based upon estimates is more or less than the actual
taxable income for such period as subsequently determined, the Managing Board may appropriately
decrease or increase, respectively, subsequent distributions to take into account such variance.
In the event that the Percentage Interest of any Member changes during the fiscal quarter, the
appropriate Percentage Interests to be used in determining the amount of any Tax Distribution with
respect to such fiscal quarter will be determined in a manner consistent with Section 7.1(d). To
the extent cash is not available to make any Tax Distribution in full, the undistributed amount
thereof will be carried forward on a cumulative basis and distributed from available cash as soon
as reasonably practicable thereafter.



          (ii) The aggregate amount of Tax Distributions may be reduced with respect to any fiscal
quarter (x) to reflect a reduction in the applicable U.S. federal income tax rate; or (y) if and to
the extent that the Managing Board determines that the Company’s cash reserves are inadequate for
such purpose in view of identifiable Company expenses and projected investment activities.



          (iii)“Tax Distribution Date" will mean a date in each fiscal quarter by which timely
quarterly estimated tax payments can be filed.



     (b) Tax Withholding on Distributions. The Company will at all times be entitled to
make payments required to discharge any obligation of the Company to withhold or make payments to
any governmental authority with respect to any United States federal, state or local tax liability
or any other tax liability of any Member liable for such Taxes arising out of such Members’
interest in the Company. For purposes of this Agreement, any such payments or withholdings will be
treated as a distribution to the Member on behalf of whom the withholding or payment was made.



     (c) Distributions on Liquidation. Distributions pursuant to liquidation of the
Company will be made in accordance with Section 10.3 hereof.



     (d) Ordinary Course Distributions. Subject to the other provisions of this Agreement,
including Section 4.3 and Section 9, and Section 5 of the License Agreement, prior to the
dissolution of the Company, the Company shall distribute cash or assets to the Members in such
amounts, at such times and as of such record dates as the Managing Board determines, as long as
such distributions are in accordance with the Members’ respective Percentage Interests.



     7.3 Accounting Matters.



     (a) The Company will cause to be maintained complete books and records accurately reflecting
the accounts, business and transactions of the Company on a calendar-year basis and with sufficient
detail and completeness customary and usual for businesses of the type engaged in by the Company.
The Company’s books and records and financial statements will be kept



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using the accrual method of accounting and in accordance with U.S. generally accepted
accounting principles. The books and records with respect to the Company’s capital accounts and
allocations of income, gain, loss, deduction or credit (or items thereof) will be kept under United
States federal income tax accounting principles as applied to entities taxable as partnerships.
The Company’s financial statements will be audited annually by an independent nationally recognized
public accounting firm. At a minimum, the Company will keep such books and records as may be
required by the Act and such other books and records as are required by Article 12.



     (b) The shares of Alnylam and Isis are publicly traded in the United States. Consequently,
the Company may be subject to financial reporting and legal requirements imposed upon publicly
traded companies. Among these legal requirements are those imposed by Section 404 of the Sarbanes
Oxley Act of 2002, as the same may be amended from time to time. Notwithstanding any differences
in the internal control procedures of the Members, the Company will abide by the internal control
procedures required by the Member consolidating the Company’s financial books and records into such
Member’s books and records (“Consolidating Member”).



     7.4 Tax Status and Returns.



     (a) Any provision hereof to the contrary notwithstanding, solely for United States federal
income tax purposes, each of the Members hereby recognizes that the Company will be subject to all
provisions of Subchapter K of Chapter 1 of Subtitle A of the Code.



     (b) The Tax Matters Partner will prepare or cause to be prepared, at the Company’s expense,
all tax returns and statements, if any, that must be filed on behalf of the Company with any taxing
authority, and will make timely filing thereof, including filings pursuant to extensions permitted
under applicable federal and state tax regulations. To the extent allowed by applicable law, the
Tax Matters Partner will take no position on any tax return which adversely affects one Member
disproportionately, and will attempt to maximize, to the extent possible, the interests of all
Members. On or before June 30 of each calendar year, the Tax Matters Partner will prepare or cause
to be prepared and delivered to each Member a draft Internal Revenue Service Form 1065 and
Schedule K-1 and a report setting forth in reasonable detail the information with respect to the
Company during such calendar year reasonably required to enable each Member to prepare its federal,
state and local income tax returns in accordance with applicable law then prevailing, including
information required by such Member to allocate and apportion the Company’s income for state income
tax purposes. Each Member will have the right to object to any amount or information reported on
the draft Form 1065 or Schedule K-1 on or before July 31 of such calendar year. If the Members
cannot agree to the appropriate amounts or information to be included on Form 1065 or Schedule K-1,
the President of the Company will resolve the dispute in a manner consistent with the guidance set
forth in Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, specifically the concept that a tax position is more likely than not to be sustained
on audit by the taxing authority based solely on the technical merits of the associated tax
position.



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     7.5 754 Election.



     In the event of a distribution of property to a Member or a transfer of any interest in the
Company permitted under the Act or this Agreement, the Company will not file an election under
section 754 of the Code and the Treasury Regulations thereunder to adjust the basis of the
Company’s assets under section 734(b) or 743(b) of the Code or corresponding election under the
applicable provisions of state and local law, unless the Managing Board will have consented
thereto. In the event the Company makes such an election, the Person making such request will pay
all costs incurred by the Company in connection therewith, including reasonable attorneys’ and
accountants’ fees.



     7.6 Tax Information.



     Each Member may request from the Company any information reasonably necessary for the Member
to complete any of its tax returns or compute estimated tax payments and the Company will, within a
reasonable period of time following the request, provide such information to the requesting Member.



     7.7 Tax Matters Partner.



     (a) Isis will be (and is hereby designated as) the Company’s “Tax Matters Partner” in
accordance with section 6231(a)(7) of the Code and will have all powers conferred on a “Tax Matters
Partner” thereunder and all other powers necessary to perform thereunder, including the right to
manage administrative tax proceedings conducted at the Company level by the Internal Revenue
Service with respect to Company matters and the right to file for extensions for the Company’s tax
returns and statements pursuant to applicable federal and state tax regulations. The Tax Matters
Partner will provide such information to the Members as is required by the Code and Treasury
Regulations, which information will include informing each Member of administrative and judicial
proceedings for the adjustment of Company items required to be taken into account by a Member for
income tax purposes.



     (b) Notwithstanding anything in this Section 7.7 to the contrary, the Tax Matters Partner will
not enter into an agreement with the Internal Revenue Service or any other taxing authority to
extend the period for assessment of any federal, state or local income, franchise or unincorporated
business tax of any Member. The Tax Matters Partner will not settle with the Internal Revenue
Service or any other taxing authority to disallow items of the Company’s deductions or increase the
Company’s income unless the Managing Board will have agreed thereto. Each Member reserves all
rights under applicable law, including the right to retain independent counsel of its choice at its
expense (which counsel will receive the full cooperation of the Tax Matters Partner and will be
entitled to prior review of all submissions by the Company in respect of any dispute with the
relevant taxing authority).



     (c) Reasonable expenses incurred by the Tax Matters Partner in connection with the performance
of its duties as Tax Matters Partner, including third-party expenses of any such administrative
proceeding described in this Section 7.7 and undertaken by the Tax Matters Partner will be paid out
of (or reimbursed from) assets of the Company. The cost of participation



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in any such proceeding by a Member and the cost of any audit or adjustment to a Member’s tax
return will be borne by the affected Member.



ARTICLE 8


Restrictions on Transfer




     8.1 Transfer of Interests.



     (a) No Member may directly or indirectly sell, assign, transfer, pledge, hypothecate, or
otherwise deal with or encumber or dispose of in any way (each a
“Transfer”) such Member’s
Membership Interest, whether in whole or in part, voluntarily or involuntarily, by operation of law
or otherwise, except in accordance with the terms and conditions set forth in this Article 8. Any
attempt to Transfer in violation of this Article 8 will be deemed null and void and, for avoidance
of doubt, any Person to whom Membership Interests are attempted to be transferred in violation of
this Article 8 will not be entitled to vote on matters coming before the Members, act as an agent
of the Company, designate Directors, receive distributions from the Company, or have any other
rights in or with respect to such Membership Interests.



     (b) Except as provided in this Article 8, each Member agrees that it may not and will not
Transfer its Membership Interest without the prior written consent of the other Member. Any Member
purporting to Transfer its Membership Interest, or any part thereof, in violation of this Article 8
will be liable to the Company and the other Member for all liabilities, obligations, damages,
losses, costs and expenses (including reasonable attorneys’ fees and court costs) arising as a
direct or consequential result of such non-complying transfer, attempted transfer or purported
transfer, including any additional costs or taxes created thereby and any events of the types
described in Section 8.2(a).



     8.2 Exempt Transfers.



     (a) Affiliates. The Transfer restrictions set forth in Section 8.1 will not apply to
Transfers by a Member (the “Transferring Member”) to an Affiliate of such Member; provided,
however, that the Affiliate of the Transferring Member must have the resources, assets,
experience, qualifications, permits and other rights necessary to perform under this Agreement and
each of the Ancillary Agreements.



     (b) Change in Control. The Transfer restrictions set forth in Section 8.1 will not
apply to Transfers pursuant to a Change in Control of a Member. In the event of a Change in
Control of a Member, the other Member may initiate a Buy-Out pursuant to Section 9.1.



     (c) In the event of a Transfer pursuant to Section 8.2(a) or 8.2(b) the Transferring Member
will indemnify and hold the Company, and, if applicable, any Member other than the Transferring
Member, harmless for, and will pay to the Company and, if applicable, any such Member, the amount
of all Losses arising from or related to such Transfer, including the following:



          (i) expenses incurred by the Company in connection with the Transfer;



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          (ii) the violation of any securities laws or any other applicable Federal or state laws or the
order of any court having jurisdiction over the Company or any of its assets;



          (iii) the Transfer resulting in or creating a “prohibited transaction” as defined in
section 4975(c) of the Code or resulting in or causing the Company or any Member, other than the
Transferring Member, to be liable for excise tax under Chapter 42 of the Code or result in or cause
the Company or the Company’s assets to become the assets of an employee benefit plan (as defined in
section 3(3) of ERISA);



          (iv) the violation of or an event of default under, or result in acceleration of any
indebtedness under, any note, mortgage, loan, or similar instrument or document to which the
Company is a party;



          (v) the imposition of a material obligation or liability under a material contract;



          (vi) an adverse tax consequence to the Company or any of the Members, other than the
Transferring Member, including any adverse tax consequence resulting, directly or indirectly, from
the termination of the Company under section 708 of the Code; and



          (vii) the Transfer causing the Company to be classified as an entity other than a partnership
for purposes of the Code.



     In addition to the foregoing, a Member may not Transfer less than all of its Membership
Interest pursuant to Section 8.2(a) or 8.2(b) (a
“Partial Transfer”) unless such Partial Transfer
is approved by the Managing Board, which approval will not be unreasonably withheld
provided that (A) the Transferring Member agrees to any amendments to this
Agreement and the Ancillary Agreements reasonably necessary to preserve the relative rights and
obligations of the Transferring Member and its transferee, on the one hand, and those of the other
Members, on the other, and (B) the Partial Transfer will not result in a material adverse effect on
the Company.



     (d) Obligations of Transferring Members. The Transfer of a Membership Interest will
not release the Transferring Member from any liability or obligation that such Transferring Member
or its transferee may have to the Company. For the avoidance of doubt, the Transferring Member
will remain subject to the obligations of a Member under Section 6.1 and Section 12.4. In
addition, unless otherwise agreed by the Managing Board, the Transferring Member will be directly
liable for any non-performance or breach by the transferee under this Agreement.



     (e) Transfer of Shares of Public Companies. The provisions of this Article 8 will not
apply to any Transfer of interests in the Members that do not result in a Change of Control of such
Member.



     8.3 Substitution of Members.



     Upon the Transfer of all or any part of a Membership Interest to a transferee in accordance
with this Article 8, such transferee will have the right to become a Member only if (i) such Person
becomes a party to this Agreement, and, if requested by the other Member, any



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other Ancillary Agreement to which the transferor was a party immediately prior to the
Transfer, by executing one or more instruments reasonably satisfactory in form and substance to the
other Member and (ii) such Person pays any reasonable expenses in connection with such Person’s
admission as a new Member.



ARTICLE 9


Buy-Out




     9.1 Right to Initiate Buy-Out.



     (a) Within (a) the [**] day period immediately following the end of the Initial Commitment
Period, (b) solely in the event of a Stalemate occurring after the end of the Initial Commitment
Period, the [**] day period following such Stalemate, (c) at any time, whether before or after the
end of the Initial Commitment Period, during the [**] day period following notice from a Member
that it has entered into a binding agreement providing for a Change of Control of such Member (such
[**] or [**] day period, a “Buy-Out Notice Period”), (d) as provided for in the Ancillary
Agreements or (e) during the [**] day period following the Managing Board’s request for a Capital
Contribution as provided in Section 6.1(d), either Member (in the case of (a) or (b)), the Member
receiving the notice of a Change in Control (in the case of (c)), the Member or Members as
specified in the Ancillary Agreements (in the case of (d)) or the Non-Defaulting Member (in the
case of (e)) (in each case, the “Initiating Member”) has the right, exercisable upon written notice
to the Company and the other Member (the “Buy-Out Notice”), to initiate the sale of the Company or
the allocation of the Company’s assets, including the Company Intellectual Property and Company’s
rights in Licensed IP (the “Buy-Out”).



     (b) In the event a Buy-Out is initiated by a Member hereunder, the terms set forth in this
Article 9 will apply (unless otherwise mutually agreed by the Parties).



     9.2 Negotiated Resolution.



     Following the Company’s receipt of the Buy-Out Notice, the Members will mutually determine
whether to attempt to sell the Company to a Third Party or a Member (whether through merger,
acquisition of 100% of the Membership Interests or purchase of all or substantially all of the
assets of the Company) (a “Sale”). In the event the Members determine to attempt such a Sale, the
Company will retain a reputable investment bank chosen by mutual agreement of the Members to assist
with the valuation and possible Sale of the Company; provided, however, that,
notwithstanding anything in this Section 9.2 to the contrary, neither Member will be required to
agree to enter into, or to approve the Company’s entering into, such a Sale. Any such Sale will be
subject to all other terms agreed upon by the Members and the Company, which will be documented in
a separate written agreement among the parties (a “Sale Agreement”).



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     9.3 Non-Negotiated Resolution.



     (a) If the Members do not determine pursuant to Section 9.2 to attempt a Sale of the Company,
or have not within [**] days after the Company’s receipt of the Buy-Out Notice, or such longer
period as mutually agreed to by the Members (such period, the “Buy-Out Negotiation Period”),
executed a Sale Agreement, the Company will, except as otherwise set forth in this Section 9.3,
distribute and assign to the Members, or their designated Affiliate, jointly, in accordance with
Percentage Interests, all of the Company’s rights, interests and assets, other than any contracts
and/or arrangements between the Company and Third Parties that the Managing Board determines cannot
or should not be assigned (“Third Party Contracts”) (provided that the Parties
agree to use Commercially Reasonable Efforts to provide for the assignment of all Third Party
Contracts), and the provisions of this Section 9.3 will apply.



     (b) Distribution of Intellectual Property.



          (i) Upon the distribution of the Company’s assets pursuant to this Section 9.3, each Member or
its designated Affiliate will receive, subject to Third Party Rights and Third Party Contracts, (1)
a co-exclusive license under Company Intellectual Property Controlled by the Company at the end of
the Buy-Out Negotiation Period, for any and all purposes, and (2) a co-exclusive license under
Licensed IP licensed to the Company at the end of the Buy-Out Negotiation Period, for any and all
purposes within the scope of the license granted to the Company (collectively, the “Distributed
IP”); provided, however, that (y) to the extent that one Member has obtained a
license in connection with an Opt-In Election or obtains a license pursuant to Section 9.3(d) or
9.3(e), the licenses to the Distributed IP under this Section 9.3(b) will not include the right to
Develop, Manufacture or Commercialize the Program/Project Compounds or Program/Project Therapeutics
subject to such Opt-In election or license pursuant to Section 9.3(d) or 9.3(e); and (z) to the
extent that a Member has obtained a license in connection with Section 2.3 of the License
Agreement, the licenses to the Distributed IP under this Section 9.3(b) will be subject to such
license granted to such Member. For purposes of this Section 9.3(b)(i), “co-exclusive” means that
such license is exercisable by each Member or its designated Affiliate, and that the Company
retains no rights to exercise any such licensed Intellectual Property.



          (ii) The rights granted to each Member in this Section 9.3(b) will be (1) royalty-bearing, as
set forth in Section 9.3(b)(iii) below, and (2) sublicenseable solely (A) to such Member’s
Affiliates or (B) by such Member or its Affiliates to a Third Party pursuant to a Bona Fide
Collaboration; provided that, (x) each such sublicense will be subject and subordinate to, and
consistent with, the terms and conditions of the License Agreement and this Agreement, and will
provide that any such sublicensee will not further sublicense except on terms consistent with this
clause; (y) such Member will remain responsible for the performance of its sublicensees, and will
ensure that all such sublicensees comply with the relevant provisions of the License Agreement and
this Agreement and (z) in the event of a material default by any of its sublicensees under a
sublicense agreement, such Member will inform the Company and the other Member and will take such
action, after consultation with such other Parties, which, in such Member’s reasonable business
judgment, will address such default.



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          (iii) Each Member will, to the extent it, its Affiliates and/or Sublicensees develop a
Royalty-Bearing Product under Intellectual Property distributed from the Company to the Member
pursuant to this Section 9.3(b) that does not become subject to Section 9.3(d) or 9.3(e): (x) pay
to the other Member (or its designated Affiliate) a royalty of [**]% on Net Sales of such
Royalty-Bearing Products sold by the selling Member, its Affiliates and/or Sublicensees, on a
Royalty-Bearing Product-by-Royalty-Bearing Product and a country-by-country basis, during the
Royalty Term (provided, however, that, for the remainder of the relevant Royalty
Term following the end of both the relevant Exclusivity Period, the royalty rate will be [**]%),
and (y) be responsible for all milestones, royalties and other payments payable to Third Parties in
respect of the exercise of such license by such selling Member, its Affiliates and/or Sublicensees,
including without limitation any amounts payable by either Member or the Company to its Third Party
licensors with respect to the license and sublicense granted to such Member pursuant to this
Section 9.3(b). The royalty-paying Member will use Commercially Reasonable Efforts to benefit from
offsets to the amounts payable to such Member’s Third Party licensors.



     (c) Retained Assets and Rights. Following the distribution of the Company’s assets
pursuant to this Section 9.3, the Company will not maintain any interest in or right to any assets
of the Company, including Intellectual Property, except to the extent the Managing Board determines
is necessary to maintain Third Party Contracts or its obligations to Opt-In Parties or Members
pursuant to the Buy-Out. Notwithstanding the foregoing, the Parties will use their Commercially
Reasonable Efforts to remove any restrictions on, and facilitate the distribution of, the Company’s
assets pursuant to this Section 9.3.



     (d) Research Program Selection and Transfer.



          (i) Within [**] Business Days following the distribution of the Company’s assets in accordance
with Section 9.3(a) and (b), the non-Initiating Member will submit a bid, consisting solely of a
single up-front cash payment (“First Selection Right Bid”), to the Initiating Member to obtain the
first right to select a Research Program from the most recent Program/Project List with respect to
which such Member desires to acquire exclusive rights; provided, however, that in
the event the non-Initiating Member does not submit such a bid with [**] Business Days, the
Initiating Member may assume the rights of the non-Initiating Member set forth in this Section
9.3(d) with respect to the First Selection Right Bid. The Initiating Member will have [**]
Business Days to notify the non-Initiating Member of its acceptance or rejection of such First
Selection Right Bid.



          (ii) If the Initiating Member accepts such First Selection Right Bid,




	 	(1)	 	The non-Initiating Member will have the right,
upon payment to the Initiating Member of the amount set forth in the
First Selection Right Bid (which amount will be due and payable within
[**] Business Days after acceptance of such bid), to select one
Research Program (“Selected Program”). Upon such selection, the
non-Initiating Member will obtain the license set forth in clause (vi)
below under Intellectual Property directed to such Selected Program;
and




-29-









 












	 	(2)	 	Each of the Members, starting with the
Initiating Member, will then take turns selecting (by written notice
within [**] Business Days following the last selection by the other
Member) a Research Program (other than the Selected Program), until all
Research Programs on the Program/Project List have been selected by the
Members (and each such selected Research Program is a “Selected
Program” hereunder), and each Member will obtain the rights set forth
in clause (vi) below under Intellectual Property directed to the
Research Program selected by such Member.





          (iii) If the Initiating Member rejects such First Selection Right Bid, such Member will submit
to the non-Initiating Member, concurrently with such notice of rejection, a counterbid which is
higher than such First Selection Right Bid by at least [**]% or $[**] (whichever is higher). The
non-Initiating Member will have [**] Business Days to accept or reject such counterbid.



          (iv) If the non-Initiating Member accepts such counterbid, the Initiating Member will have the
right, upon payment to the non-Initiating Member of the amount set forth in such counterbid (which
amount will be due and payable within [**] Business Days after acceptance of such counterbid), to
select a Research Program (other than a Selected Program) and each such selected Research Program
is a “Selected Program” hereunder. Upon completion of the Buy-Out, the Initiating Member will
obtain from the non-Initiating Member the rights set forth in clause (vi) below with respect to the
Research Program selected by such Member.



          (v) If the non-Initiating Member rejects such counterbid, then such non-Initiating Member will
submit, concurrently with such notice of rejection, its counterbid to the Initiating Member’s
counterbid, which counterbid must be higher than the Initiating Member’s counterbid by at least
[**]%, and the process will repeat itself until a bid is accepted or no counterbid exceeds the
prior bid or counterbid by at least [**]%.



          (vi) Each Member will grant to the other Member which purchased a Selected Program hereunder
(the “Buy-Out Party”), subject to Third Party Rights, an exclusive (to the fullest extent possible)
license under Distributed IP (which, with respect to Licensed IP therein, is within the scope of
the license granted to the Member by the Company), to Develop, Manufacture and/or Commercialize the
miRNA Compound(s) and miRNA Therapeutics included in such Selected Program in the Field.



          (vii) Such licenses to Distributed IP will be (1) royalty-bearing as set forth in Section
9.3(d)(viii) below, and (2) sublicenseable; provided that, (x) each such sublicense
will be subject and subordinate to, and consistent with, the terms and conditions of this
Agreement, and will provide that any such Sublicensee will not further sublicense except on terms
consistent with this clause; (y) such Member will remain responsible for the performance of its
Sublicensees, and will ensure that all such Sublicensees comply with the relevant provisions of the
License Agreement and this Agreement and (z) in the event of a material default by any of its
Sublicensees under a sublicense agreement, such Member will inform the Company and the other Member
and will take such action, after consultation with such other Parties, which, in such Member’s
reasonable business judgment, will address such default.



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          (viii) Each Member selecting a Selected Program will (1) pay to the other Member (or its
designated Affiliate) a royalty of [**]% on Net Sales of any Royalty-Bearing Product with respect
to such Selected Program, on a Royalty-Bearing Product-by-Royalty-Bearing Product and a
country-by-country basis, during the Royalty Term (provided, however, that, for the
remainder of the relevant Exclusivity Period, the royalty rate will be [**]%, and (2) be
responsible for milestones, royalties and other payments payable to Third Parties in respect of the
exercise of such license by such selling Member, its Affiliates and/or Sublicensees, including
without limitation any amounts payable by either Member or the Company to its Third Party licensors
with respect to the licenses granted to such Member pursuant to Section 9.3(a). The royalty-paying
Member will use Commercially Reasonable Efforts to benefit from offsets to the amounts payable to
such Member’s Third Party licensors.



          (ix) Each Member will assign or exclusively license to the other Member, to the fullest extent
possible, all of its rights and obligations in assets, other than Intellectual Property,
distributed by the Company to the Members pursuant to Section 9.3(a), to the extent such assets are
solely related to any of the other Member’s Selected Programs. In the event any such assets are
related to Selected Programs of both Members, each Member will assign to or exclusively license the
other, to the fullest extent possible, the rights to such assets as they relate to the other
Member’s Selected Programs.



     (e) Development Project Selection and Transfer.



          (i) Within [**] Business Days following the completion of the distribution of the Company’s
assets pursuant to Section 9.3(a), the non-Initiating Party (the “Bidding Party”) will have the
right to submit to the other Member a bid, which need not be limited to a single up-front cash
payment (“Project Bid”), with respect to one or more Development Projects included in the most
recent Program/Project List; provided that, a separate Project Bid must be
submitted for each and every Development Project for which the Party is bidding. Notwithstanding
the foregoing, in the event the non-Initiating Party does not submit such a bid within [**]
Business Days, the Initiating Party may assume the rights of the non-Initiating Party set forth in
this Section 9.3(e) with respect to a Project Bid. The non-Bidding Party will have [**] Business
Days to notify the Bidding Party of its acceptance or rejection of a Project Bid made by the
Bidding Party, on a Project Bid-by-Project Bid basis.



          (ii) If the non-Bidding Party accepts a Project Bid or does not reject a Project Bid and
provide a counterbid in accordance with clause (iii) below (in which case the Project Bid is deemed
accepted) within such [**] Business Day period, the Bidding Party, subject to compliance with its
payment obligations under the terms of such Project Bid (including, without limitation, payment of
any upfront fees to the non-Bidding Party), will obtain the rights set forth in clause (vi) below
with respect to the Development Project covered by such accepted Project Bid.



          (iii) If the non-Bidding Party rejects a Project Bid, the non-Bidding Party (“Counterbidding
Party”) will submit to the Bidding Party, concurrently with its notice of rejection, a counterbid
with terms which are more favorable, when taken as a whole, to the Bidding Party than the terms set
forth in the Project Bid, by at least the greater of (1) [**]% (as



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measured by industry standards) or (2) $[**] (if the Project Bid is less than or equal to
$[**]). The Bidding Party will have [**] Business Days to accept or reject such counterbid.



          (iv) If the Bidding Party accepts such counterbid or does not reject such counterbid and
provide a counterbid in accordance with clause (v) below (in which case the Counterbidding Party’s
counterbid is deemed accepted) within such [**] Business Day period, the Counterbidding Party,
subject to compliance with its payment obligations under the terms of such counterbid (including,
without limitation, payment of any upfront fees to the Bidding Party), will obtain the rights set
forth in clause (vi) below with respect to the Development Project covered by such accepted
counterbid.



          (v) If the Bidding Party rejects such counterbid, such Bidding Party will submit, concurrently
with its notice of rejection, its counterbid to the Counterbidding Party’s counterbid, which
counterbid must be higher than the Counterbidding Party’s counterbid by at least [**]% (as measured
by industry standards), and the process will repeat itself until a bid for a Development Project is
accepted; provided, however, that, if a Member to which a counterbid is submitted
determines in good faith that the terms of such counterbid are not more favorable to such Member,
taken as a whole, than the terms offered in such Member’s most-recent prior bid, by at least [**]%
(as measured by industry standards), then at any time within the [**] day period during which such
Member may accept or reject such counterbid, such Member (the “Contesting Party”) may notify the
other Parties thereof and will have the right to submit such matter to a reputable investment bank
(“Qualified Third Party”) chosen by mutual agreement of the Members. If the Members are unable to
agree upon a Qualified Third Party within [**] Business Days after receipt of the Contesting
Party’s notice, the Company (through a vote of its Managing Board) will select a Qualified Third
Party within [**] Business Days after the end of such initial [**] Business Day period and will
promptly notify the Members of the Qualified Third Party selected. The Members will then submit
the dispute to such Qualified Third Party and will instruct such Qualified Third Party to determine
whether the counterbid most-recently proposed by the non-Contesting Party is more favorable, taken
as a whole, than the terms proposed by the Contesting Party, by at least [**]% (as measured by
industry standards) and to deliver a written report to both Members within [**] Business Days
following submission of such dispute to such Qualified Third Party. Such Qualified Third Party’s
determination will be binding on the Members. If such Qualified Third Party determines that the
counterbid proposed by the non-Contesting Party constitutes a sufficient counterbid, such
counterbid will be deemed accepted by the Contesting Party. If such Qualified Third Party
determines that the counterbid proposed by the non-Contesting Party does not constitute a
sufficient counterbid, then the immediately preceding bid or counterbid terms proposed by the
Contesting Party will be deemed accepted by the non-Contesting Party. The Member against whom the
Qualified Third Party finds will bear the costs of such Qualified Third Party.



          (vi) Each Member will grant to the other Member that purchased a Development Project hereunder
(the Buy-Out Party), subject to Third Party Rights, an exclusive (to the fullest extent possible)
sublicense under Distributed IP (which, with respect to Licensed IP therein, is within the scope of
the license granted to the Member by the Company), to Develop, Manufacture and/or Commercialize
miRNA Compounds and miRNA Therapeutics included in the Development Project in the Field.



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          (vii) Such license to such Development Project will be (1) royalty-bearing in accordance with
the terms of the accepted bid covering such Development Project, and (2) sublicenseable; provided
that, (1) each such sublicense will be subject and subordinate to, and consistent with, the terms
and conditions of this Agreement, and will provide that any such Sublicensee will not further
sublicense except on terms consistent with this clause; (2) such Member will remain responsible for
the performance of its Sublicensees, and will ensure that all such Sublicensees comply with the
relevant provisions of the License Agreement and this Agreement and (3) in the event of a material
default by any of its Sublicensees under a sublicense agreement, such Member will inform the
Company and the other Member and will take such action, after consultation with such other Parties,
which, in such Member’s reasonable business judgment, will address such default.



          (viii) Each Member will assign or exclusively license to the other Member, to the fullest
extent possible, all of its rights and obligations in assets, other than Intellectual Property,
distributed by the Company to the Members pursuant to Section 9.3(a) to the extent such assets are
solely related to any of the other Member’s Selected Development Projects. In the event any such
assets are related to Development Programs of both Members, each Member will assign to the other,
to the fullest extent possible, the rights to such assets as they relate to the other Member’s
Development Programs.



          (ix) The Parties will promptly negotiate in good faith and execute a written agreement
substantially in accordance with the terms of the accepted bid covering each such Development
Project.



     (f) Company Following Buy-Out. In the event of a Buy-Out pursuant to this Section
9.3, the Company will not be dissolved if, in the discretion of the Managing Board, it should
continue to exist for the purpose of maintaining Third Party Contracts and/or receiving payments
from Third Parties that may become due to the Company following the completion of the Buy-Out,
making tax and other distributions, filing tax and other required reports and conducting any
activity necessary for the purpose of dissolving the Company pursuant to Section 10 (the “Post
Buy-Out Activities”). In the event the Company is not dissolved following the completion of a
Buy-Out pursuant to this Section 9.3, the Company will be prohibited from engaging in any
activities other than the Post Buy-Out Activities, and any assets acquired by the Company after the
completion of the Buy-Out will be distributed as determined by the Managing Board, unless otherwise
distributable under then-existing agreements.



     (g) Diligence. Each Member will use Commercially Reasonable Efforts to Develop and
Commercialize the miRNA Compounds and miRNA Therapeutics covered by the Research Program or
Development Project purchased by such Member under this Section 9.3, at such Member’s own expense,
in the Field, either by itself or with or through its Affiliates or Sublicensees.



     (h) Non-Compete. With respect to any Research Program or Development Project, the
non-Opt-In Party or non-Buy-Out Party will not, itself or through its Affiliates or with Third
Parties, Discover, Develop, Manufacture or Commercialize the relevant Opt-In Products or Buy-Out
Products during the period (i) prior to first commercial sale of an Opt-In Product or Buy-Out
Product with respect to such Research Program or Development Project anywhere in the world,




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as long as the relevant Opt-In Party or Buy-Out Party reasonably believes that the Opt-In
Product or Buy-Out Product would be a Royalty-Bearing Product upon first commercial sale, and (ii)
after first commercial sale of a Royalty-Bearing Product with respect to such Research Program or
Development Project anywhere in the world, until the expiration of all Royalty Terms for all
Royalty-Bearing Products for such Research Program or Development Project; provided,
however, that each Party will be entitled to grant Permitted Licenses.




ARTICLE 10




Dissolution




     10.1    Dissolution.



     The Company will be dissolved and its affairs wound up upon the first to occur of the
following:



     (a)      the written consent of the Members;



     (b)      the Bankruptcy or dissolution of a Member, unless the other Member votes to continue the
business of the Company within ninety (90) days of receiving notice of such Bankruptcy; or



     (c)      Upon the occurrence of an event specified under non-waivable provisions of the Act or
other applicable law as one effecting dissolution, except that where, under the terms of this
Agreement or the Act, the Company is not to terminate, the Company will immediately be
reconstituted and reformed on all the applicable terms, conditions, and provisions of this
Agreement.



     The Company will not be dissolved upon the death, insanity, retirement, resignation,
expulsion, bankruptcy, dissolution or occurrence of any other event which terminates the membership
of a Member.



     10.2    Liquidation.



     (a)      Upon the occurrence of an event of dissolution as defined in Section 10.1 hereof, the
Company will cease to engage in any further business, except to the extent necessary to perform
existing obligations, and will wind up its affairs and liquidate its assets unless otherwise agreed
by the Members. The Members will jointly appoint a liquidator (who may but need not be an Officer
or Member) who will have sole authority and control (subject to this Agreement) over the winding up
and liquidation of the Company’s business and affairs. The liquidator will diligently pursue the
winding up and liquidation of the Company.



     (b)      During the course of liquidation, the Members will continue to share profits and losses as
provided in Section 7.1 of this Agreement, but there will be no cash distributions to the Members
until the Distribution Date.



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     10.3   Liabilities.



     Liquidation will continue until the Company’s affairs are in such condition that there can be
a final accounting, showing that all fixed or liquidated obligations and liabilities of the Company
are satisfied or can be adequately provided for under this Agreement. The assumption or guarantee
in good faith by one or more financially responsible Persons will be deemed to be an adequate means
of providing for such obligations and liabilities. When the liquidator has determined that there
can be a final accounting, the liquidator will establish a date (not to be later than the end of
the taxable year of the liquidation, i.e., the time at which the Company ceases to be a going
concern as provided in Treasury Regulations section 1.704-1(b)(2)(ii)(g), or, if later, ninety (90)
days after the date of such liquidation) for the distribution of the proceeds of liquidation of the
Company (the “Distribution Date”). The net proceeds of liquidation of the Company will be
distributed to the Members as provided in Section 10.5 hereof not later than the Distribution Date.



     10.4    Settling of Accounts.



     Except as otherwise required by Section 18-804 of the Act, upon the dissolution and
liquidation of the Company, the proceeds of liquidation will be applied in the following order:
(i) to pay all expenses of the Company’s liquidation and wind up costs, including the costs and
expenses of the liquidator and any fees payable to the liquidator as agreed by the Members; (ii) to
pay all debts, obligations and liabilities of the Company, in the order of priority as provided by
law, other than debts owing to the Members or on account of Members’ Capital Contributions;
(iii) to pay all debts of the Company owing to a Member; and (iv) to establish reasonable reserves
for any remaining contingent or unforeseen liabilities of the Company not otherwise provided for,
which reserves will be maintained by the liquidator on behalf of the Company in a regular
interest-bearing trust account for a reasonable period of time as determined by the liquidator. If
any excess funds remain in such reserves at the end of such reasonable time, then such remaining
funds will be distributed by the Company to the Members pursuant to Section 10.5 hereof.



     10.5    Distribution of Proceeds.



     Except as otherwise required by Section 18-804 of the Act, upon final liquidation of the
Company but not later than the Distribution Date, the net proceeds of liquidation remaining
following the settling of accounts in accordance with Section 10.4 hereof will be distributed to
the Members in proportion to their respective positive Capital Accounts as those accounts are
determined after all adjustments to such accounts for the taxable year of the Company during which
the liquidation occurs as are required by this Agreement and Treasury Regulations
Section 1.704-1(b), such adjustments to be made within the time specified in such Treasury
Regulations.



     10.6    Certificate of Cancellation.



     Upon dissolution and liquidation of the Company, the liquidator will cause to be executed and
filed with the Secretary of State of the State of Delaware, a certificate of cancellation in
accordance with Section 18-203 of the Act.



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     10.7    Payment of Royalties.



     Following the dissolution of the Company, any royalties, milestones and/or sublicense fees due
to the Company by a Member in connection with an Opt-In Election under the License Agreement, will
be reduced by [**] percent ([**]%) and this amount will instead be payable by the Member required
to pay such fee directly to the other Member (the “Receiving Member”); provided,
however, if the Receiving Member has pass-through obligations with respect to a royalty
payment, milestone or sublicense fee, the payment to the Receiving Member will not be reduced to an
amount less than the amount of the pass-through obligation.



     10.8    Treatment of Certain Assets.



     (a)      Goodwill. The Company’s name and goodwill will, as among the Members, be deemed
to have no value and will belong to the Company, and no Member will have any right or claim
individually to the use thereof. Upon liquidation of the Company, undivided interests on a pro
rata basis in the proportion required by Section 10.5 in the right to use the name of the Company
and any goodwill associated with the Company’s name or business will be assigned to all Members
that are Members who are not then in default of any of their material obligations hereunder.



     (b)      Distribution of In-Kind Assets. To the extent reasonably possible, the assets of
the Company will be distributed in kind to the Members. Such assets distributed in kind will be
distributed at their Fair Market Value as determined by the liquidator appointed pursuant to
Section 10.2(a). Those of such assets that are indivisible (such as Intellectual Property,
Intellectual Property rights and various contracts) will be distributed and licensed to the Members
in accordance with Sections 10.8(c).



     (c)      Distribution of Indivisible Assets. Any assets of the Company that are
indivisible (such as Intellectual Property and rights therein and various contracts) will be
distributed in accordance with the following:



     (i)      Subject to the rights granted to and obligations assumed by either Member or a Third Party
in connection with an Opt-In Election or Buy-Out and subject to any Third Party Rights, all of the
Company’s right, title and interest in Intellectual Property and other indivisible assets owned by
the Company (including, without limitation, all Company Intellectual Property and other items of
Intellectual Property owned in their entirety or in which the Company has a partial ownership
interest or a transferable right or license) will be distributed and assigned to all those Members
that are not then in default of any of their material obligations hereunder (each a “Distributee
Member”), with each Distributee Member receiving an undivided ownership interest therein on a pro
rata basis in the proportion required by Section 10.5, subject to Section 10.8(e), as follows:




     (A)      Co-exclusive in all respects, and “co-exclusive” means that such license is
exercisable by each Member or its designated Affiliate, and that the Company retains no
rights to exercise any such licensed Intellectual Property);




     (B)      Free of any obligation to make accounting or pay royalties or license fees or other
amounts; and



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     (C)      Perpetual and irrevocable.



     (d)      Maintenance and Enforcement of Intellectual Property. With respect to any issued
patents, registered trademarks or registered copyrights and any applications to obtain or register
the same that are distributed in accordance with Section 10.8(c)(i) (the “Registered Intellectual
Property”), responsibility for the prosecution, registration, maintenance and protection thereof
will be allocated to the Members with an ownership interest therein, subject to Third Party rights,
as follows:



     (i)      in the case of Registered Intellectual Property licensed to a Member in connection with an
Opt-In Election, in accordance with Section 9 of the License Agreement; and



     (ii)      in the case of Registered Intellectual Property licensed to a Member in connection with a
Buy-Out, as determined by the Parties at the time of the Buy-Out, it being agreed that the Parties
intend such allocation to be substantially similar to the provisions of Section 9 of the License
Agreement as they apply to an Opt-In Product.



     (e)      Non-Transferable Licenses. As to any items of Intellectual Property and other
indivisible assets that would have been distributed under Section 10.8(c)(i) but for the lack of a
transferable right or license in the Company, the liquidator will use commercially reasonable
efforts such that each Distributee Member thereunder has, from and after the time of dissolution,
rights or licenses to use such Intellectual Property and other indivisible assets in the same
manner and to the same extent as the Company.



     (f)      Binding on Transferees. In the event a Member transfers its interest in any
Intellectual Property distributed or licensed to it under this Section 10.8, it will cause the
transferee to agree in writing to be bound by the applicable obligations of this Section 10.8.



     (g)      Termination of Ancillary Agreements; Further Assurances.



     (i)      Upon consummation of a termination of this Agreement and the distribution or liquidation
of the assets of the Company pursuant to this Article 10, the parties hereto will cause the
termination of the Ancillary Agreements subject to the provisions of this Section 10.8 or unless
otherwise agreed by the Members. At or any time after such distribution or liquidation, the
Parties will execute and deliver such written agreements and instruments as may be requested by any
Member or its Affiliate to confirm or document the licenses, rights and obligations of each Member,
as described herein and in the License Agreement; provided, however:



     (ii)      The intent of the Parties is that all of such licenses, rights and obligations be self
executing automatically, and without further act by any Person, upon the occurrence of the event
that triggers the same;



     (iii)      Execution and delivery of any such written agreement or instrument is neither a
condition precedent to nor a requirement or pre-requisite for the effectiveness of any of such
licenses, rights and obligations; and



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     (iv)      Neither a failure to make such request nor a failure to mutually agree on the text of
and/or to execute or deliver any such written agreement or instrument will limit or constrain any
of such licenses, rights and obligations.



     (h)      Survival of Provisions. The provisions of, and the licenses, rights and
obligations set forth in, this Section 10.8 will survive any termination of this Agreement, any
dissolution of the Company and any distribution of the assets of the Company pursuant to this
Article 10 and will continue until fully performed.



ARTICLE 11




Exculpation and Indemnification




     11.1    Duties of Directors.



     Subject to the last sentence of this Section 11.1, each Director will owe such duty of loyalty
and due care to the Company as is required of a director of a for profit corporation organized and
existing under the Delaware General Corporation Law (the “DGCL”) to which the provisions of
Subchapter XIV of the DGCL are not applicable, will discharge his or her duties in good faith with
the care an ordinary prudent Person in like position would exercise under similar circumstances and
in a manner such Director reasonably believes to be in the best interests of the Company, and in so
acting will enjoy each and every protection afforded to the directors of a Delaware corporation
under applicable Delaware law, including those afforded by the business judgment rule and the
presumptions afforded thereby and the limitation on personal liability to the maximum extent
permitted by Section 102(b) of the Delaware General Corporation Law as if the provisions thereof
were set forth in this Agreement; provided, however, that any act of a Director
relating to or affecting an acquisition or a potential acquisition of the Company will not be
subject to a higher level of duty or greater scrutiny than is applied to any other act of a
Director; provided, further, that the provisions of Section 3.6 hereof will, to the
maximum extent necessary to give effect thereto, be construed as a “renunciation” of interest or
expectancy in, or as being offered an opportunity to participate in, business opportunities
presented to the Company or its Members, Directors or Officers as contemplated by Section 122(17)
of the DGCL. Notwithstanding the foregoing, the Members understand that actions or refusals to act
by a Director taken with respect to a matter requiring approval of Directors at the direction of
the Member who designated such Director, if any, will not be a breach of such Director’s fiduciary
duty to the Company or the other Members.



     11.2    Exculpation.



     No Member or Affiliate, director or officer thereof, Director, Officer, or employee or agent
of the Company (each an “Indemnified Party”) will be liable, responsible or accountable for damages
or otherwise to any other Member, their Affiliates or the Company for (i) any act performed or
omission within the scope of the authority conferred on the Indemnified Party by this Agreement or
otherwise by the Managing Board except for the gross negligence, fraud or willful misconduct
(including any willful violation of the terms of this Agreement) of such Indemnified Party,
(ii) the Indemnified Party’s performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Company or its accountants or other



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experts retained by the Company, or (iii) the negligence, dishonesty or bad faith of any
agent, consultant or broker of the Company selected, engaged or retained in good faith and with
reasonable prudence. Each Member may (on its own behalf or on behalf of any Director designated by
such Member, any Affiliates of such Member or their respective partners, shareholders, directors,
officers, employees or agents) consult with counsel, accountants and other experts in respect of
the Company’s affairs and such Member will be fully protected and justified in any action or
inaction which is taken in accordance with the advice or opinion of such counsel, accountants or
other experts; provided, however, that such counsel, accountant or other experts
will have been selected with reasonable care. Notwithstanding any of the foregoing to the
contrary, the provisions of this Section 11.2 will not be construed so as to relieve (or attempt to
relieve) an Indemnified Party of any liability, to the extent (but only to the extent) that such
liability may not be waived, modified or limited under applicable law, but will be construed so as
to effectuate the exculpation of the Member Indemnified Party to the fullest extent permitted by
law.



     11.3    Indemnification by the Company.



     (a)      In any threatened, pending or completed action, suit or proceeding, each Indemnified Party
who is an Officer, Director or Member or Affiliate or director or officer thereof (the “Member
Indemnitees”) will, to the fullest extent permitted by law, be fully protected and indemnified and
held harmless by the Company against all Losses incurred by virtue of his or her status as a Member
Indemnitee or with respect to any action or omission taken or suffered in good faith, other than
liabilities and losses resulting from the fraud, breach of fiduciary duty or willful misconduct
(including any willful violation of the terms of this Agreement) of such Member Indemnitee. Any
Indemnified Party who is not an Officer, Director or Member may, upon approval of the Managing
Board, to the fullest extent permitted by law, be fully protected and indemnified and held harmless
by the Company against all Losses incurred by virtue of his or her status as an Indemnified Party
or with respect to any action or omission taken or suffered in good faith, other than liabilities
and losses resulting from the fraud, breach of fiduciary duty or willful misconduct (including any
willful violation of the terms of this Agreement) of such Indemnified Party. The indemnification
provided by this Section 11.3 will be recoverable only out of the assets of the Company, and no
Member will have any personal liability on account thereof.



     (b)      To the extent that, at law or in equity, an Indemnified Party has duties (including
fiduciary duties) and liabilities relating thereto to the Company, any Member or to any other
Indemnified Party, an Indemnified Party acting under this Agreement will not be liable to the
Company or to any Member or to any other Indemnified Party for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict
the duties and liabilities of an Indemnified Party otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of such Indemnified
Party.



     (c)      As a condition precedent to the Member Indemnitee’s right to be indemnified, the Member
Indemnitee must notify the Company in writing as soon as practicable of any action, suit,
proceeding or investigation involving him or her for which indemnity hereunder will or could be
sought. With respect to any action, suit, proceeding or investigation of which the Company is so
notified, the Company will be entitled to participate therein at its own expense



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and/or to assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Member Indemnitee.



     (d)      In the event that the Company does not assume the defense of any action, suit, proceeding
or investigation of which the Company receives notice under this Section 11.3, the Company will pay
in advance of the final disposition of such matter any expenses (including attorneys’ fees)
incurred by a Member Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; provided, however, that the payment of such
expenses incurred by a Member Indemnitee in advance of the final disposition of such matter will be
made only upon receipt of an undertaking by or on behalf of the Member Indemnitee to repay all
amounts so advanced in the event that it will ultimately be determined that the Member Indemnitee
is not entitled to be indemnified by the Company as authorized in this Section 11.3, which
undertaking will be accepted without reference to the financial ability of the Member Indemnitee to
make such repayment; and further provided that the Member Indemnitee will repay the
Company any such advancement of expenses in respect of a matter for which it is ultimately
determined by a court of competent jurisdiction that (i) the Member Indemnitee did not act (A) in
good faith and in a manner the Member Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Company, or (B) in the good faith reliance on the provisions of this
Agreement, or (ii) with respect to any criminal action or proceeding, the Member Indemnitee had
reasonable cause to believe his conduct was unlawful.



     (e)      The Company will not indemnify a Member Indemnitee seeking indemnification in connection
with a proceeding (or part thereof) initiated by such Member Indemnitee unless the initiation
thereof was approved by both Members. In addition, the Company will not indemnify a Member
Indemnitee to the extent such Member Indemnitee is reimbursed from the proceeds of insurance, and
in the event the Company makes any indemnification payments to a Member Indemnitee and such Member
Indemnitee is subsequently reimbursed from the proceeds of insurance, such Member Indemnitee will
promptly refund such indemnification payments to the Company to the extent of such insurance
reimbursement.



     (f)      All determinations hereunder as to the entitlement of a Member Indemnitee to
indemnification or advancement of expenses will be made in each instance by (i) the Managing Board,
(ii) independent legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Company), or (iii) a court of competent jurisdiction.



     (g)      The indemnification rights provided in this Section 11.3 (i) will not be deemed exclusive
of any other rights to which a Member Indemnitee may be entitled under any law, agreement or
otherwise, and (ii) will inure to the benefit of the heirs, executors and administrators of the
Member Indemnitees. The Company may, to the extent authorized from time to time by the Managing
Board, grant indemnification rights to other employees or agents of the Company or other Persons
serving the Company and such rights may be equivalent to, or greater or less than, those set forth
in this Section 11.3. Any indemnification to be provided hereunder may be provided although the
Person to be indemnified is no longer a Member, Director or Officer or an Affiliate, or a director
or officer of a Member. Notwithstanding the foregoing, the indemnification rights provided in this
Section 11.3 do not replace, amend or supersede the indemnity provisions set forth in the License
Agreement.



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     11.4 Insurance.



     The Company may purchase and maintain insurance on behalf of any Person who is or was a
Member, Director, Officer, employee or agent of the Company, or is or was serving at the request of
the Company as a manager, member, director, officer, employee or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise, for any liability
asserted against such Person and liability and expenses incurred by such Person in such Person’s
capacity as Member, Director, Officer, employee or agent, or arising out of such Person’s status as
such, whether or not the Company has the authority to indemnify such Person against such liability
and expenses. Notwithstanding the foregoing, the Company will purchase or obtain directors’ and
officers’ insurance at a level of coverage that is customary for an entity conducting a business of
similar size, with a minimum level of coverage in the amount of $3.0 million.



     11.5    Notice of Indemnification and Advancement.



     Any indemnification of, or advancement of expenses to an Indemnified Party in accordance with
this Article 11, if arising out of a proceeding by or on behalf of the Company, will be reported in
writing to the Members.



     11.6    Repeal or Modification.



     Any repeal or modification of this Article 11 will not adversely affect any right of any
indemnitee existing hereunder at the time of such repeal or modification.



     11.7    Indemnification by Members.



     (a)      Subject to the terms and conditions of this Article 11, each Member hereby agrees to
indemnify and hold harmless the Company and each other Member and such other Member’s respective
directors, officers, employees, members, managers, representatives or agents and stockholders (the
“Company Indemnitees”) from any liability for, or to the extent arising directly out of or based on
(i) any Tax of such Member or any subsidiary of such Member (other than the Company and its
subsidiaries for any period or portion thereof beginning after the Effective Date); and (ii) any
Third Party claim arising out of (A) any actual or alleged death, personal bodily injury or damage
to real or tangible personal property claimed to result, directly or indirectly, from the
possession, use or consumption of, or treatment with, any miRNA Compound or miRNA Therapeutic
Developed, Manufactured and/or Commercialized by such Member, its Affiliates or Sublicensees
pursuant to a Buy-Out, regardless of the form in which any such claim is made, (B) any actual or
alleged infringement or unauthorized use or misappropriation of any Patent Right or other
intellectual property right of a Third Party with respect to the activities of such Member, its
Affiliates or Sublicensees hereunder, (C) any breach by such Member of its warranties or covenants
under this Agreement given to the other Party seeking indemnification hereunder, or (D) any grossly
negligent act or omission, fraud or willful misconduct of such Member or its Affiliates, or any of
their employees, contractors or agents, in performing its obligations or exercising its rights
under this Agreement; provided, however, that the foregoing indemnity will not
apply with respect to a Party and its directors, officers, employees, members, managers,
representatives or agents to the extent that any such Losses are



 - 41 - 









 




(i)      attributable to the gross negligence or willful misconduct of such Party or its officers
or directors or (ii) otherwise subject to an obligation by such Party to indemnify the Member
Indemnitees under Section 11.3(a).




     (b)      A Company Indemnitee will notify the indemnifying Member of any action, claim or
proceeding (“Claim”) for Losses in writing, and in reasonable detail, as promptly as reasonably
possible after receipt by such Company Indemnitee of notice of such Claim; provided,
however, that failure to give such notification on a timely basis will not affect the
indemnification provided hereunder except to the extent that such indemnifying Member will have
been actually prejudiced as a result of such failure. The indemnifying Member will assume the
defense of such Claim, including the employment of counsel reasonably satisfactory to the Company
Indemnitee and the payment of such counsel’s fees and expenses. Thereafter, the Company Indemnitee
will promptly deliver to the indemnifying Member copies of all notices and documents received by
the Indemnitee relating to such Claim.



     (c)      The indemnifying Member will keep the Indemnitee advised as to all material developments
in connection with any Claim, including promptly furnishing to the Indemnitee copies of all
material documents filed or served in connection therewith. The indemnifying Member may not settle
or compromise any Claim or consent to the entry of any judgment without the Company Indemnitee’s
consent (which consent may not unreasonably be withheld), unless such settlement, compromise or
judgment involves only the payment of money damages by the indemnifying Member (which payment is
made or adequately provided for at the time of such settlement, compromise or judgment) or provides
for the unconditional release by the claimant or plaintiff of the Company Indemnitee and its
Affiliates from all liability in respect of such Claim and does not impose injunctive relief
against any of them. The Company Indemnitee will provide reasonable assistance to the indemnifying
Member in the defense of the Claim.



     (d)      In the event that the indemnifying Member, within twenty (20) Business Days after
receiving written notice of any such Claim, fails to assume the defense thereof, the Company
Indemnitee will have the right to undertake the defense, compromise or settlement of such Claim at
the expense of the indemnifying Member.



     (e)      If a Company Indemnitee receives a refund or credit of Taxes or insurance benefits for
which it has been indemnified pursuant to this Section 11.7, such Company Indemnitee agrees to pay
the indemnifying Member the amount of such refund, credit or benefits (including any interest
received thereon) up to the amount paid by the indemnifying Member to indemnify the Company
Indemnitee pursuant to this Section 11.7.



     11.8    Limitation on Damages.



     (a)      Neither any Member nor the Company will be liable to the other for any indirect, special,
incidental or consequential loss or damage or for loss of profits or loss of use suffered by a
Member or the Company arising from or relating to a Member’s performance, non-performance, breach
of or default under a covenant, warranty, representation, term or condition hereof; and each Member
and the Company, other than with respect to a claim arising from such other Member’s willful
misconduct or fraudulent actions, waives and relinquishes claims for indirect, special, incidental
or consequential damages.



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     (b)      The limitations on liability and damages set out in Section 11.8(a) apply to all causes of
action that may be asserted under this Agreement, other than a cause of action resulting from
another Member’s willful misconduct or fraudulent actions, whether sounding in breach of contract,
breach of warranty, tort, product liability, negligence or otherwise.



     11.9    Contractual Limitation Period.



     To be subject to indemnification hereunder, any Dispute arising from this Agreement and
involving the Members or the Company must be commenced prior to the earlier of (i) the applicable
statute of limitation and (ii) the third (3rd) anniversary of the occurrence of the cause of action
giving rise to the Dispute; provided, however, that the foregoing shall not be
applicable to any Dispute under Section 11.7(a)(ii)(A).



ARTICLE 12




Inspection of Records; Annual and Other Reports; Confidentiality




     12.1    Records to be Kept. 



     The Company will keep at its registered office:



     (a)      A current list of the full name and last known business, residence or mailing address of
each Member and each Director separately identifying the Members and Directors in alphabetical
order;



     (b)      A copy of the filed Certificate and all amendments thereto, together with executed copies
of any powers of attorney pursuant to which any document has been executed;



     (c)      Copies of this Agreement, and all amendments hereto, and copies of each Ancillary
Agreement, and all amendments thereto;



     (d)      Copies of the Company’s federal and state income tax returns and reports;



     (e)      Copies of any financial statements of the Company for the [**] most recent years; and



     (f)      The minutes of all meetings of the Managing Board and all meetings of the Members.



     12.2    Inspection of Company Records. 



     The accounting books and records, the record of Members, and minutes of proceedings of the
Members of the Company set forth in Section 12.1 and any other information a Member is entitled to
inspect pursuant to Section 18-305 of the Act, will be open to inspection upon the reasonable
request of any Member at any reasonable time during usual business hours, for a purpose reasonably
related to such Member’s interest as a Member. Such inspection by a Member may be made in person
or by its agent or attorney, and the right of inspection includes the right to copy and make
extracts at the inspecting Member’s expense.



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     12.3    Reports.



     (a)      Commencing with respect to the period beginning on the Effective Date and ending December
31, 2007, and for each Fiscal Year during the term hereof after such interim period, the Company
will deliver or mail to each Member the audited annual financial statements of the Company at least
three (3) weeks prior to the earliest date by which either Member is required to file its annual
report on Form 10-K for such Fiscal Year (or such earlier time as may be required by either Member
to satisfy its reporting obligations under law, including without limitation, the rules and
regulations of the SEC), which financial statements will have been prepared in accordance with U.S.
generally accepted accounting principles and audited by the accounting firm approved by the
Managing Board, which shall be the same accounting firm appointed by the Consolidating Member.



     (b)      Commencing with respect to the period beginning on the Effective Date and ending on
September 30, 2007, for each fiscal quarter during the term hereof after such interim period (other
than the fourth quarter), the Company will deliver or mail to each Member an unaudited balance
sheet of the Company as at the end of such quarter and unaudited statements of income and cash
flows of the Company for such quarter and for the current fiscal year to the end of such fiscal
quarter within fourteen (14) days after the end of each fiscal quarter of the Company (or such
earlier time as may be required by the Member to satisfy its reporting obligations under law,
including without limitation, the rules and regulations of the SEC).



     (c)      Commencing with respect to the period beginning on the Effective Date and ending on
September 30, 2007, the Company will deliver to each Member an unaudited balance sheet of the
Company as at the end of such month and unaudited statements of income and of cash flows of the
Company for such month and for the current fiscal year to the end of such month promptly following
the Company’s completion of the review of its financial statements for such month (other than the
last month of any fiscal quarter) (or such earlier time as may be required by the Member to satisfy
its reporting obligations under law, including without limitation, the rules and regulations of the
SEC).



     (d)      The income statements and balance sheets referred to in this Section 12.3 will be
accompanied by the report thereon, if any, of any independent accountants engaged by the Company or
by the certificate of the President that such financial statements were prepared without audit from
the books and records of the Company.



     12.4    Confidentiality.



     (a)      Each Member and the Company will, and will cause each of its Affiliates, and its and their
respective members, shareholders, directors, officers, employees, advisors and agents
(collectively, “Representatives”), to keep secret and retain in strictest confidence, except as
provided in subsection (c) hereof, any and all Confidential Information received by it
(“Recipient”) from another Member or the Company or their respective Affiliates or Representatives
(“Disclosing Party”) and will not distribute, disseminate or disclose a Disclosing Party’s
Confidential Information, and such Recipient will cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) the Company, (ii) any lender
to the Company, (iii) any Member or any of their respective Affiliates



 - 44 - 









 




or Representatives on a “need to know” basis in connection with the transactions leading up to
and contemplated by this Agreement and the operation of the Business and the Company, which shall
include disclosure to a Member’s independent public accountants and tax and financial advisors, and
who are bound by an obligation to maintain in confidence the Confidential Information of the
Disclosing Party to the same extent as if they were parties hereto, (iv) any other Person that
agrees in writing to keep in confidence such Confidential Information in accordance with the terms
of this Section 12.4, or (v) as permitted under the Ancillary Agreements; provided,
however, that the disclosure of financial statements of, or other information relating to,
the Company will not be deemed to be the disclosure of Confidential Information (i) to the extent
that any Member is required by law, including without limitation, the rules and regulations
promulgated by the SEC, or GAAP to disclose such financial statements or other information; (ii) to
the extent that in order to sustain a position taken for tax purposes, any Member deems it
necessary and appropriate to disclose such financial statements or other information or (iii) if
the disclosure of such information to a Member’s Representatives is in the ordinary course of such
Member’s business. In addition, each Party may make Permitted Disclosures of another Party’s
Confidential Information. All Confidential Information disclosed in connection with the Company or
pursuant to this Agreement will remain the property of the Person whose property it was prior to
such disclosure.




     (b)      In the event that a Recipient or anyone to whom a Recipient transmits any Confidential
Information becomes legally compelled (by oral questions, interrogatories, requests for information
or documents, subpoena, investigative demand or similar process or by rules or regulations of any
securities exchange or NASDAQ) to disclose any of the Confidential Information, such Recipient will
use its Commercially Reasonable Efforts to provide the Disclosing Party with prompt written notice
prior to disclosure (not less than 24 hours) so that the Disclosing Party may seek a protective
order or other appropriate remedy or waive compliance with the provisions of this Agreement. In
the event that such protective order or other remedy is not obtained, or that the Disclosing Party
waives compliance with the provisions of this Section 12.4, the Recipient who is compelled to
disclose such Confidential Information will furnish only that portion of the Confidential
Information which (based on the advice of counsel) it is legally required to disclose and will
exercise its Commercially Reasonable Efforts (but without incurring significant expense) to obtain
reliable assurance that protective treatment will be accorded the Confidential Information.



     (c)      No Party will have the right to make any public announcements with respect to this
Agreement or the Ancillary Agreements, nor publicly disclose the terms of this Agreement or the
Ancillary Agreements, without the prior written consent of the other Parties, except as follows:



          (i)      The Parties will issue a mutually agreed upon press release in the form attached as
Schedule 12.4.



          (ii)      Each Party may make subsequent disclosures of information to the same extent that such
information has been previously disclosed in accordance with this Agreement.



          (iii)      Each Member may publicly file this Agreement and/or the Ancillary Agreements with the
SEC in a redacted form as mutually agreed in good faith and consistent



 - 45 - 









 





with custom in the industry (provided, however, that, if such agreement is not
reached within a reasonable period of time after the Effective Date in order for such Member to
comply with law, such Member may file this Agreement and/or the Ancillary Agreements in a redacted
form reasonably determined by such Member), and will request, and use Commercially Reasonable
Efforts to obtain, confidential treatment of all terms redacted from such redacted form of this
Agreement and the Ancillary Agreements; provided that the redaction of such terms
is permitted by the applicable rules and regulations of the SEC.



          (iv)      Each Party may disclose this Agreement and the Ancillary Agreements in whole or in part
to (i) its then-current and potential Affiliate and Third Party licensors, collaborators and
sublicensees, and (ii) its then-current and potential investors, lenders and acquirers (and their
respective legal counsel); provided that such Persons are bound to maintain the
confidentiality of this Agreement and the Ancillary Agreements to the same extent as if they were
parties hereto.



     (d)      Each Member who ceases to be a Member will, and will cause its Affiliates and
Representatives to, maintain the confidentiality required by this Section 12.4. Notwithstanding
the foregoing, if a license is granted by the Company to the Member in connection with such
Member’s ceasing to be a Member, such Member’s obligations under this Section 12.4(d) will be
deemed modified to the extent necessary to give full effect to such license.



     (e)      To the fullest extent permitted by law, if a Recipient breaches, or threatens to commit a
breach of, this Section 12.4, the other Members and, in the case of such breach, or threat to
commit a breach, of this Section 12.4 by a Member or its Affiliate or Representative, the Company
will have the right and remedy to have this Section 12.4 specifically enforced, it being
acknowledged and agreed that money damages will not provide an adequate remedy to such other
Members or the Company. Nothing in this Section 12.4 will be construed to limit the right of any
Member or the Company to collect money damages in the event of breach of this Section 12.4.



ARTICLE 13




Miscellaneous




     13.1    Governing Law.



     This Agreement will in all respects be governed by and construed in accordance with the
substantive laws of the State of Delaware, without regard to its choice of law rules.



     13.2    Amendments. 



     Any amendment of the Certificate and this Agreement will be in writing and be duly executed by
each Member (or by the Chairperson of the Managing Board solely with respect to conforming
amendments to Schedule 3.1) and, in the case of an amendment to the Certificate, will be executed
and filed in accordance with Section 18-202 of the Act.



 - 46 - 









 





     13.3    Nature of Membership Interest; Agreement Is Binding upon Successors. 



     The successors, assigns and legal representatives of each Member will be bound by the
provisions of this Agreement, including Article 8, Article 11 and Section 12.4.



     13.4    Seal. 



     The President may adopt a seal of the Company in such form as the President will decide.



     13.5    Entire Agreement. 



     This Agreement, together with the Ancillary Agreements, including the exhibits and schedules
hereto and thereto, constitutes the entire agreement among the Members and the Company with respect
to the specific subject matter hereof, and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties with respect to such specific subject matter.
No party hereto will be liable or bound to the other in any manner by any warranties,
representations or covenants with respect to the subject matter hereof except as specifically set
forth herein. Notwithstanding the foregoing and except as provided herein or in any Ancillary
Agreement, neither the dissolution of the Company nor the termination of any Ancillary Agreement
will have any affect on any other agreement or contract between the Members, and the termination or
cancellation of any such other agreement or contract will have no effect on this Agreement or any
Ancillary Agreement.



     13.6   Further Actions. 



     Each Member will execute and deliver such other certificates, agreements and documents, and
take such other actions, as may reasonably be requested by the Company in connection with the
formation of the Company and the achievement of its purposes, including (a) any documents that the
Company deems necessary or appropriate to form, qualify or continue the Company as a limited
liability company in all jurisdictions in which the Company conducts or plans to conduct the
Business and (b) all such agreements, certificates, tax statements and other documents as may be
required to be filed in respect of the Company.



     13.7    Power of Attorney. 



     Each Member hereby constitutes and appoints the President with full power of substitution, the
true and lawful attorney-in-fact and agent of such Member, to execute, acknowledge, verify, swear
to, deliver, record and file, in its or its assignee’s name, place and stead, all in accordance
with the terms of this Agreement, all instruments, documents and certificates which may from time
to time be required by the laws of the United States of America, the State of Delaware, any other
jurisdiction in which the Company conducts or plans to conduct its affairs, or any political
subdivision or agency thereof to effectuate, implement and continue the valid existence and affairs
of the Company, including the power and authority to verify, swear to, acknowledge, deliver, record
and file:



     (a)      all certificates and other instruments, including any amendments to this Agreement or to
the Certificate, which the Managing Board deems appropriate to form, qualify



 - 47 - 









 





or continue the Company as a limited liability company in the State of Delaware and all other
jurisdictions in which the Company conducts or plans to conduct its affairs; and



     (b)      certificates of assumed name and such other certificates and instruments as may be
necessary under the fictitious or assumed name statutes from time to time in effect in the State of
Delaware and all other jurisdictions in which the Company conducts or plans to conduct its affairs.



     Such attorneys-in-fact and agents will not, however, have the right, power or authority to
amend or modify this Agreement when acting in such capacities, except to the extent authorized
herein. The power of attorney granted herein will be deemed to be coupled with an interest, will
survive and not be affected by the dissolution, bankruptcy or legal disability of the Member and
will extend to its successors and assigns; and may be exercisable by such attorney-in-fact and
agent for all Members (or any of them) by listing all (or any) of such Members required to execute
any such instrument, and executing such instrument acting as attorney-in-fact. Any Person dealing
with the Company may conclusively presume and rely upon the fact that any instrument referred to
above, executed by such attorney-in-fact and agent, is authorized, regular and binding, without
further inquiry. If required, each Member will execute and deliver to the Company within five (5)
days after the receipt of a request therefor, such further designations, powers of attorney or
other instruments as the Company will reasonably deem necessary for the purposes described in this
Section 13.7.



     13.8    No Third Party Beneficiary. 



     Nothing in this Agreement, express or implied, is intended to confer upon any Person, other
than the parties hereto, and their respective successors and permitted assigns, the Indemnified
Parties, the Member Indemnitees and Company Indemnitees any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided herein.



     13.9    Notice. 



     Except where otherwise specifically provided in this Agreement, all notices, requests,
consents, approvals and statements will be in writing and will be deemed to have been properly
given by (i) personal delivery, (ii)  electronic facsimile transmission, (iii) electronic mail, or
by (iv) nationally recognized overnight courier service, addressed in each case, to the intended
recipient as set forth below:



	 	 	 	 	 	 	 
	 

	 	To the Company:
	 	Regulus Therapeutics LLC
	 	 
	 

	 	 	 	1896 Rutherford Road	 	 
	 

	 	 	 	Carlsbad, California 92008	 	 
	 

	 	 	 	Attention: President	 	 
	 
	 	 	 	 	 	 
	 

	 	With a copy to:
	 	Alnylam and/or Isis at the addresses below	 	 






 - 48 - 









 






	 	 	 	 	 	 	 
	 

	 	To Alnylam:
	 	Alnylam Pharmaceuticals, Inc.	 	 
	 

	 	 	 	300 Third Street, 3rd Floor	 	 
	 

	 	 	 	Cambridge, MA 02142	 	 
	 

	 	 	 	Attention: Vice President, Legal	 	 
	 
	 	 	 	 	 	 
	 

	 	With a copy to:
	 	WilmerHale	 	 
	 

	 	 	 	60 State Street	 	 
	 

	 	 	 	Boston, MA 02109	 	 
	 

	 	 	 	Attention: Steven D. Singer, Esq.	 	 
	 
	 	 	 	 	 	 
	 

	 	To Isis:
	 	Isis Pharmaceuticals, Inc.	 	 
	 

	 	 	 	1896 Rutherford Road	 	 
	 

	 	 	 	Carlsbad, California 92008	 	 
	 

	 	 	 	Attention: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	With a copy to:
	 	Isis Pharmaceuticals, Inc.	 	 
	 

	 	 	 	1896 Rutherford Road	 	 
	 

	 	 	 	Carlsbad, California 92008	 	 
	 

	 	 	 	Attn: General Counsel	 	 
	 

	 	 	 	(fax) 760-268-4922	 	 





Such notice, request, demand, claim or other communication will be deemed to have been duly
given on (a) the date of personal delivery, (b) the date actually received if by facsimile or
electronic mail; or (c) on the third Business Day after delivery to a nationally recognized
overnight courier service, as the case may be. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.




     13.10    Limited Liability Company.



     The Members agree to form a limited liability company and do not intend to form a partnership
or other relationship in which a Member has or has had any interest in the business or affairs or
assets of the other Members or their Affiliates under the laws of the State of Delaware or any
other laws; provided, however, that, to the extent permitted by law, the Company
will be treated as a partnership for federal, state and local income tax purposes. No Member is
the agent of the other and no Member is authorized to take any action on behalf of the other,
except as set forth herein or in an Ancillary Agreement.



     13.11    Fees and Expenses. 



     Each party will pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement and each Ancillary Agreement. If any action
at law or in equity is necessary to enforce or interpret the terms of any of this Agreement or any
of the Ancillary Agreements, the prevailing party will be entitled to reasonable attorneys’



 - 49 - 









 





fees, costs and necessary disbursements in addition to any other relief to which such party
may be entitled. For purposes of this Section 13.11, “prevailing party” means the net winner of a
Dispute, taking into account the claims pursued, the claims on which the pursuing party was
successful, the amount of money sought, the amount of money awarded, and offsets or counterclaims
pursued (successfully or unsuccessfully) by the other Party. If a written settlement offer is
rejected and the judgment or award finally obtained is equal to or more favorable to the offeror
than an offer made in writing to settle, the offeror is deemed to be the prevailing party from the
date of the offer forward.



     13.12    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, and will become
effective when there exist copies hereof which, when taken together, bear the authorized signatures
of each of the parties hereto. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this Agreement.



     13.13    Precedence. 



     The provisions of this Agreement will prevail over any inconsistencies or conflicting
provisions of any of the Ancillary Agreements.



     13.14    Titles and Subtitles; Form of Pronouns; Construction and Definitions. 



     The titles of the Sections and paragraphs of this Agreement are for convenience only and are
not to be considered in construing this Agreement. All pronouns used in this Agreement will be
deemed to include masculine, feminine and neuter forms, the singular number includes the plural and
the plural number includes the singular and will not be interpreted to preclude the application of
any provision of this Agreement to any individual or entity. Unless the context otherwise
requires, (i) each reference in this Agreement to a designated “Section,” “Schedule,” “Exhibit,” or
“Appendix” is to the corresponding Section, Schedule, Exhibit, or Appendix of or to this Agreement;
(ii) the word “or” will not be applied in its exclusive sense; (iii) “including” will mean
“including, without limitation”; (iv) references to “$” or “dollars” will mean the lawful currency
of the United States; and (v) ”herein,” “hereof,” “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Section or other subdivision.
References in this Agreement to particular sections of the Code, the Act or to any other provisions
of Delaware law will be deemed to refer to such sections or provisions as they may be amended or
succeeded after the date of this Agreement.



     13.15    Severability. 



     If one or more provisions of this Agreement are held by a proper court or arbitral tribunal to
be unenforceable under applicable law, the unenforceable portions of such provisions, or such
provisions in their entirety, to the extent necessary and permitted by law, will be severed
herefrom, and the balance of this Agreement will be enforceable in accordance with its terms.



 - 50 - 









 





     13.16    Survival of Certain Provisions. 



     The obligations of each Member pursuant to Section 11 will survive until 30 days after the
expiration of all statutes of limitation applicable to the matters referred to therein and the
obligations of the Members pursuant to Section 12.4 will survive for a period of [**] years
following the termination of this Agreement and the winding-up, liquidation and dissolution of the
Company.



     13.17    Survival of Warranties. 



     The warranties, representations and covenants of the Company contained in or made pursuant to
this Agreement will survive the execution and delivery of this Agreement and will in no way be
affected by any investigation of the subject matter thereof made by or on behalf of a Member or the
Company.



     13.18    Waiver of Partition. 



     Except as may otherwise be required by law in connection with the winding-up, liquidation and
dissolution of the Company in accordance with Article 10 or the Act, each Member hereby irrevocably
waives any and all rights that it may have to maintain an action for partition of any of the
Company’s property.



     13.19    Delaware Limited Liability Company Act Prevails.



     Unless the context otherwise requires, the general provisions, rules of construction and
definitions contained in the Act and the DGCL will govern the construction of this Agreement;
provided, however, that in the event of any inconsistency between such laws, the
provisions of the Act will prevail.



     13.20    Specific Performance. 



     The failure of any party to this Agreement to perform its agreements and covenants hereunder
may cause irreparable injury to the other parties to this Agreement for which monetary damages,
even if available, will not be an adequate remedy. Accordingly, each of the parties hereto hereby
consents to the granting of equitable relief (including specific performance and injunctive relief)
by any court of competent jurisdiction to enforce any Member’s obligations hereunder. The parties
further agree to waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this Section 13.20 is without prejudice to any
other rights that the Members and the Company hereto may have for any failure to perform this
Agreement.



[Remainder of page intentionally left blank]




 - 51 - 









 





     IN WITNESS WHEREOF, the Company and its Members hereby execute this Limited Liability Company
Agreement as of the date first written above.



	 	 	 	 	 	 	 
	 	 	REGULUS THERAPEUTICS LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Philip T. Chase	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Philip T. Chase	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Authorized Person	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ALNYLAM PHARMACEUTICALS, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Barry Greene	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Barry Greene	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Chief Operating Officer	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ISIS PHARMACEUTICALS, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ B. Lynne Parshall	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	B. Lynne Parshall	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	EVP & CFO	 	 
	 

	 	 	 	 	 	 





 











 





SCHEDULE 1




DEFINITIONS




     “Act” has the meaning provided in the recitals of this Agreement.



     “Additional Capital Contribution” has the meaning provided in Section 6.1(c).



     “Additional Requested Capital Contribution” has the meaning provided in Section 6.1(d).



     “Affected Member” has the meaning provided in the definition of “Change in Control.”



     “Affiliate” means, with respect to any Person, another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control with
such first Person. For purpose of this definition only, “control” (and, with correlative meanings,
the terms “controlled by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct the management or policies of a Person, whether through the
ownership of voting securities or by contract relating to voting rights or corporate governance.
For purposes of this Agreement, including the other definitions set forth in this Schedule 1, (i)
the Company will not be deemed to be an Affiliate of any Member and (ii) a Member and its
Affiliates will not be considered an Affiliate of the Company.



     “Agreement” means this Limited Liability Company Agreement, as amended from time to time.



     “Alnylam” has the meaning provided in the preamble of this Agreement.



     “Alnylam Director” has the meaning provided in Section 4.1.



     “Alnylam Initial IP Contribution” has the meaning provided in Section 6.1(a).



     “Ancillary Agreements” means the License Agreement, the Services Agreement, the Director
Consulting Agreements and the SAB Consulting Agreements, each as amended from time to time.



     “Approved Operating Plan” has the meaning provided in Section 5.2(c).



     “Bankruptcy” will mean, with respect to a Person,



     (a) an adjudication that it is bankrupt or insolvent, or the entry of an order for relief
under applicable bankruptcy or any similar law;



     (b) the making by it of a general assignment for the benefit of creditors;



     (c) the commencement by it of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect (other than a liquidation for tax



Schedule 1




 









 




restructuring purposes that results in a Member’s Membership Interest being distributed to a
permitted assignee under this Agreement), or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official over it or any substantial part of its property, or
consent to any such relief or to the appointment of or taking of possession by any such official in
an involuntary case or other proceeding commenced against it; or




     (d) the commencement against it of an involuntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official over it or any substantial part of its
property, such involuntary case or other proceeding remaining undismissed or unstayed for a period
of sixty (60) days.



     “Bidding Party” has the meaning provided in Section 9.3(e)(i).



     “Bona Fide Collaboration” means a collaboration (pursuant to a written agreement) between the
relevant Member or one of its Affiliates, on the one hand, and a Third Party, on the other hand,
involving the Development of miRNA Compounds or miRNA Therapeutics in which such Member or such
Affiliate plays an integral, though not necessarily dominant or co-equal, role in the
decision-making, relating to the Development of miRNA Compounds or miRNA Therapeutics, and which
may, thereafter, involve the Commercialization of any such miRNA Compounds and miRNA Therapeutics.



     “Book Value” means the value of the Company’s assets less the Company’s liabilities, all as
determined in accordance with United States Generally Accepted Accounting Principles.



     “Business” has the meaning provided in Section 2.5.



     “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial
banks are required or authorized by law to be closed in San Diego, California.



     “Buy-Out” has the meaning provided in Section 9.1(a).



     “Buy-Out Negotiation Period” has the meaning provided in Section 9.3(a).



     “Buy-Out Notice” has the meaning provided in Section 9.1(a).



     “Buy-Out Notice Period” has the meaning provided in Section 9.1(a).



     “Buy-Out Party” has the meaning provided in Sections 9.3(d)(vi) and 9.3(e)(vi).



     “Buy-Out Product” means any miRNA Therapeutic that is Developed, Manufactured or
Commercialized pursuant a Research Program or Development Project obtained by a Member pursuant to
Section 9.3(d) or 9.3(e).



     “Capital Account” has the meaning provided in Section 6.4(a).



Schedule 1-2









 





     “Capital Contribution” means a contribution made to the Company by a Member pursuant to
Section 6.1 hereof and, in the case of all of the Members, the aggregate of all of such Capital
Contributions.



     “Capital Contribution Schedule” has the meaning provided in the definition of “Operating
Plan.”



     “Certificate” has the meaning provided in the recitals of this Agreement.



     “Chairperson” has the meaning provided in Section 4.1(b).



     “Change of Control” means, with respect to a Member (the “Affected Member”), the earlier of
(x) the public announcement of and (y) the closing of: (a) a merger, reorganization or
consolidation involving the Affected Member in which its shareholders immediately prior to such
transaction would hold less than 50% of the securities or other ownership or voting interests
representing the equity of the surviving entity immediately after such merger, reorganization or
consolidation, or (b) a sale to a Third Party of all or substantially all of the Affected Member’s
assets or business relating to this Agreement. Any Member will notify each other Member within two
(2) Business Days of entering into an agreement which, if consummated, would result in a Change of
Control.



     “Claim” has the meaning provided in Section 11.7(b).



     “Code” means the United States Internal Revenue Code of 1986, as amended, or any corresponding
provision or provisions of any succeeding law.



     “Collaboration Working Group” has the meaning provided in the License Agreement.



     “Commercialization” or “Commercialize” means any and all activities directed to marketing,
promoting, detailing, distributing, importing, having imported, exporting, having exported, selling
or offering to sell a miRNA Therapeutic following receipt of Regulatory Approval for such miRNA
Therapeutic.



     “Commercializing Party” means the Party Manufacturing, Developing or Commercializing a miRNA
Therapeutic pursuant to a license granted under this Agreement or under Sections 2.2 or 5.6 of the
License Agreement.



     “Commercially Reasonable Efforts” means, reasonable, diligent, good faith efforts to
accomplish an objective as such Party would normally use to accomplish a similar objective, under
similar circumstances exercising reasonable business judgment. With respect to the Development,
Manufacturing or Commercialization of a miRNA Therapeutic, such efforts will be substantially
equivalent to the efforts used by such Party for other products at similar stages in their
development or product life and of similar market potential, taking into account the profile of the
miRNA Therapeutic, the competitive landscape and other relevant factors commonly considered in
similar circumstances. For all Parties the level of effort will be at least that of a typical
medium sized biopharmaceutical company.



     “Company” has the meaning provided in the preamble of this Agreement.



Schedule 1-3









 





     “Company Indemnitees” has the meaning provided in Section 11.7(a).



     “Company Intellectual Property” means all Company Know-How and Company Patent Rights.



     “Company Know-How” means all Know-How conceived and/or developed by or on behalf of the
Company (including by employees of a Member or its Affiliates in performance of the Services
Agreement), or over which the Company otherwise acquires Control, including but not limited to any
Know-How assigned to the Company by a Member, but specifically excluding Licensed IP.



     “Company Patent Rights” means any Patent Right claiming an invention conceived and/or
developed by or on behalf of the Company (including by employees of a Member or its Affiliates in
performance of the Services Agreement), or over which the Company otherwise acquires Control,
including but not limited to any Patent Right assigned to Company by a Member, but specifically
excluding Licensed IP.



     “Company Work Product” means all (i) Work Product conceived or developed solely by the Company
(or by the employees, consultants or representatives) and (ii) any Intellectual Property conceived,
authored or developed under or pursuant to an Ancillary Agreement and owned or made the property of
Company by such Ancillary Agreement, in each case to the extent of Company’s interest therein.



     “Confidential Information” means, with respect to a Party, information which is (i) of a
confidential and proprietary nature; and (ii) 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. Once a Member obtains an exclusive license,
pursuant to Company Know-How, such Company Know-How will be considered Confidential Information (to
the extent such Know-How otherwise is considered confidential herein) of such Member, rather than
of the Company. The terms of this Agreement and each Ancillary Agreement will be Confidential
Information of each Party.



     Notwithstanding the foregoing, information of a Party will not be deemed Confidential
Information to the extent that the receiving Party can show by competent proof that such
information:



     (a) was already known to the receiving Party, prior to the time of disclosure to such
receiving Party pursuant to this Agreement;



     (b) is generally available in the public domain through no fault of the receiving Party or
its Affiliates, or is known to Persons reasonably skilled in the field to which such information
pertains;



     (c) was disclosed to such receiving Party by a Third Party lawfully in possession thereof;
or



Schedule 1-4









 





     (d) was independently discovered or developed by employees or (sub)contractors of the
receiving Party or any of its Affiliates, without the aid, application or use of Confidential
Information of the disclosing Party.



     “Consolidating Member” has the meaning provided in Section 7.3(b).



     “Contesting Party” has the meaning provided in Section 9.3(e)(i).



     “Control” means, with respect to any Intellectual Property right, the possession of the right
(whether by ownership, license or otherwise) to assign, or grant a license, sublicense or other
right to or under, such Intellectual Property right as provided for herein without violating the
terms of any agreement or other arrangement with any Third Party; provided,
however, that neither Member will be deemed to Control Company Intellectual Property and no
Party other than the relevant Member shall be deemed to Control such Member’s Licensed IP.



     “Counterbidding Party” has the meaning provided in Section 9.3(e)(ii).



     “Covered” means, (a) with respect to a patent, that, in the absence of a license granted to a
Person under a Valid Claim included in such patent, the practice by such Person of an invention
claimed in such patent would infringe such Valid Claim, or (b) with respect to a patent
application, that, in the absence of a license granted to a Person under a Valid Claim included in
such patent application, the practice by such Person of an invention claimed in such patent
application would infringe such Valid Claim if it were to issue as a patent.



     “Defaulting Party” has the meaning provided in Section 6.1(e).



     “Develop” or “Development” means, with respect to a miRNA Compound or miRNA Therapeutic, any
discovery, characterization, preclinical or clinical activity with respect to such miRNA Compound
or miRNA Therapeutic, including human clinical trials conducted after Regulatory Approval of such
miRNA Therapeutic to seek Regulatory Approval for additional Indications for such miRNA
Therapeutic.



     “Development Plan” has the meaning provided in the definition of “Operating Plan.”



     “Development Project” means a Research Program for which the Company’s Officers and Managing
Board agree there exists a sufficient portfolio of data to support the initiation of [**] on a
miRNA Compound drug candidate targeting such miRNA.



     “DGCL” means the Delaware General Corporation Law, 8 Del. Code Sec. 101 et seq.



     “Director” has the meaning provided in Section 4.1(a).



     “Director Consulting Agreement” has the meaning provided in Section 4.5(c).



     “Disclosing Party” has the meaning provided in Section 12.4(a).



     “Dispute” means any dispute, controversy or claim concerning the validity, interpretation,
scope, performance or enforceability of one or more provisions of this Agreement



Schedule 1-5









 







or any Ancillary Agreement; provided, however, that a difference of opinion
concerning a choice among one or more business alternatives, including a matter subject to a vote
by the Members or the Managing Board (but not concerning the legal consequences under this
Agreement or any Ancillary Agreement of such choice or vote once made), in the operation or
management of any aspect of the Company or its business that does not involve the interpretation of
any provision of this Agreement or any Ancillary Agreement but involves only a disagreement between
optimal and suboptimal decisions will not be a “Dispute.”



     “Distributee Member” has the meaning provided in Section 10.8(c)(i).



     “Distributed IP” has the meaning provided in Section 9.3(b).



     “Distribution Date” has the meaning provided in Section 10.3.



     “Effective Date” means the date set forth in the preamble of this Agreement.



     “Exclusivity Period” means, with respect to a Royalty-Bearing Product in a country, that
period of time beginning with the first commercial sale of such Royalty-Bearing Product in such
country and ending on the later to expire of (1) the time during which the applicable Regulatory
Authority in such country is not permitted to grant Regulatory Approval for a generic equivalent of
such Royalty-Bearing Product and (2) the last Valid Claim of the Patent Rights under the Licensed
IP and/or Regulus IP licensed to the relevant Commercializing Party pursuant to the License
Agreement or this Agreement Covering (i) the Manufacture of such Royalty-Bearing Product in such
country, or (ii) the use, sale or other Commercialization of such Royalty-Bearing Product in such
country.



     “Fair Market Value” means, with respect to any property, as of the date of determination, the
cash price at which a willing buyer would buy and a willing seller would sell, each being apprised
of all relevant facts and neither acting under compulsion, such property in an arm’s length,
negotiated transaction with an unaffiliated third party without time constraints, determined
according to the procedure set forth below. The Members will mutually select an independent expert
who will provide a written determination of the requested valuation and such valuation will be
binding upon the parties. If the Members fail to agree on an independent expert within [**] days
of the delivery of the request for valuation, each of the Members will select an independent expert
by written notice to the other Members. The independent experts so selected will meet and confer
and attempt to agree on a valuation. If they reach such agreement, their written determination
will be binding on the Members. If the independent experts are unable to agree upon a valuation
within [**] days of their appointment, and the highest valuation is less than [**] percent ([**]%)
of the lowest valuation, the valuation will be deemed to be the average of the valuations and such
valuation will be binding on the Members. If the independent experts are unable to agree within
[**] days of their appointment, and the highest valuation is greater than [**] percent ([**]%) of
the lowest valuation, the independent experts will, within [**] days following expiration of such
[**]-day period, select an additional independent expert. If the first independent experts cannot
agree on an additional independent expert within such [**] day period, the additional independent
expert will be designated by the independent certified public accountants of the Company. The
additional independent expert will meet and confer with the first independent experts, but the
decision of the independent expert whose valuation was the



Schedule 1-6









 







median amount will be binding on the Members. Such decision will be delivered in writing and
state the reasons supporting it.



     “FDA” means the United States Food and Drug Administration or any successor agency thereto.



     “Field” means treatment and/or prophylaxis of any or all Indications.



     “Fiscal Year” means the annual accounting period of the Company, which is the twelve (12)
months ended on December 31.



     “First Selection Right Bid” has the meaning provided in Section 9.3(d).



     “Future Operating Plan Contributions” has the meaning provided in Section 6.1(c).



     “GLP” means the then-current good laboratory practice standards promulgated or endorsed by the
FDA as defined in 21 C.F.R., Part 58, and comparable foreign regulatory standards.



     “[**]” means a [**].



     “Indemnified Party” has the meaning provided in Section 11.2.



     “Independent Director” means a Director who is not an (i) Affiliate, director or officer of,
or an immediate family member of, any director or officer of the Member designating such Director,
or (ii) an Officer or employee of, or immediate family member of any Officer or employee of, the
Company.



     “Indication” means any disease or condition, or sign or symptom of a disease or condition, or
symptom associated with a disease or syndrome.



     “Initial Approved Operating Plan” means the operating plan attached hereto as Exhibit A.



     “Initial Capital Contributions Schedule” means the schedule of capital contributions included
in the Initial Approved Operating Plan, attached as Exhibit A.



     “Initial Commitment Period” has the meaning provided in Section 5.2.



     “Initial Operating Plan” has the meaning provided in Section 5.2.



     “Initial Operating Plan Contributions” has the meaning provided in Section 6.1(c).



     “Initiating Member” has the meaning provided in Section 9.1(a).



     “Intellectual Property” means all patents and patent rights, copyrights and copyright rights
(including moral rights and rights in music, audio, visual and audiovisual works), trademarks and
trademark rights (and related intellectual property such as service marks and trade dress and
rights therein), trade secrets and trade secret rights, mask works and other designs



Schedule 1-7









 







and design rights, proprietary rights, confidentiality rights and any and all other
intellectual property and intellectual property rights recognized by the law of the applicable
jurisdiction.



     “Isis” has the meaning provided in the preamble of this Agreement.



     “Isis Director” has the meaning provided in Section 4.1.



     “Isis Initial IP Contribution” has the meaning provided in Section 6.1(b).



     “Joint Venture” has the meaning provided in the recitals of this Agreement.



     “Know-How” means any information, inventions, trade secrets or technology (excluding Patent
Rights), whether or not proprietary or patentable and whether stored or transmitted in oral,
documentary, electronic or other form. Know-How includes ideas, concepts, formulas, methods,
procedures, designs, compositions, plans, documents, data, discoveries, developments, techniques,
protocols, specifications, works of authorship, biological materials, and any information relating
to research and development plans, experiments, results, compounds, therapeutic leads, candidates
and products, clinical and preclinical data, clinical trial results, and Manufacturing information
and plans.



     “License Agreement” means that certain License and Collaboration Agreement by and among the
Company, Alnylam and Isis dated the Effective Date, as amended from time to time.



     “Licensed IP” means, with respect to a Licensor, such Licensor’s Licensed Know-How and
Licensed Patent Rights.



     “Licensed Know-How” means, with respect to a Member, all Know-How Controlled by such Member on
the Effective Date or during the term of the License Agreement (except as otherwise expressly
provided therein) that relates to (a) miRNA Compounds or miRNA Therapeutics in general, (b)
specific miRNA Compounds or miRNA Therapeutics, (c) chemistry or delivery of miRNA Compounds or
miRNA Therapeutics, (d) mechanism(s) of action by which a miRNA Antagonist directly prevents the
production of a specific miRNA or (e) methods of treating an Indication by modulating one or more
miRNAs; provided, however that in each case, (i) for any such Know-How that
include financial or other obligations to a Third Party, the provisions of Section 2.4 of the
License Agreement will govern whether such Know-How will be included as Licensed Know-How and (ii)
Licensed Know-How does not include manufacturing technology (including but not limited to
analytical methods).



     “Licensed Patent Rights” means, with respect to a Member, (A) all Patent Rights Controlled by
such Member on the Effective Date and listed on Schedule 2.2(A) to the License Agreement and (B)
all Patent Rights Controlled by such Member during the term of the License Agreement (except as
otherwise expressly provided therein) that claim (a) miRNA Compounds or miRNA Therapeutics in
general, (b) specific miRNA Compounds or miRNA Therapeutics, (c) chemistry or delivery of miRNA
Compounds or miRNA Therapeutics, (d) mechanism(s) of action by which a miRNA Antagonist directly
prevents the production of the specific miRNA, or (e) methods of treating an Indication by
modulating one or more miRNAs; provided, however, that in each case, (i) for any
such Patent Rights that include financial or other obligations to a Third Party, the provisions of
Section 2.4 of the License Agreement will govern whether such



Schedule 1-8









 







Patent Right will be included as a Licensed Patent Right and (ii) Licensed Patent Rights do
not include manufacturing technology (including but not limited to analytical methods).



     “Losses” means all liabilities, obligations, losses, damages, penalties, actions, judgments,
taxes, suits, proceedings, charges, costs, expenses and disbursements of any kind or nature
whatsoever (including reasonable attorneys’ fees, costs of investigation, fines, judgments, awards
and amounts paid in settlement, actually incurred in connection with such an action, suit or
proceeding).



     “Major Decisions” has the meaning provided in Section 4.3.



     “Managing Board” has the meaning provided in Section 4.1.



     “Manufacture” or “Manufacturing” means any activity involved in or relating to the
manufacturing, quality control testing (including in-process, release and stability testing),
releasing or packaging, for pre-clinical, clinical or commercial purposes, of a miRNA Compound or a
miRNA Therapeutic.



     “Member” will mean, as of the Effective Date, each of Alnylam or Isis, and will include
thereafter their respective successors and permitted assigns, and any other members admitted in
accordance with Section 8.3.



     “Member Indemnitee” has the meaning provided in Section 11.3(a).



     “Membership Interest” means the ownership interest of a Member in the Company, including a
Member’s right to share in Company items of income, gain, loss, deduction, credits and similar
items, and the right to receive distributions from the Company, as well as a Member’s right to vote
and otherwise participate in the operation or affairs of the Company, all as provided herein and
under the Act and the Certificate.



     “miRNA” means a structurally defined functional RNA molecule usually between 21 and 25
nucleotides in length, which is derived from genetically-encoded non-coding RNA which is predicted
to be processed into a hairpin RNA structure that is a substrate for the double-stranded
RNA-specific ribonuclease Drosha and subsequently is predicted to serve as a substrate for the
enzyme Dicer, a member of the RNase III enzyme family; including, without limitation, those miRNAs
exemplified in miRBase (http://microrna.sanger.ac.uk/). To the extent that [**] for purposes of
this Agreement; provided, however, that nothing contained herein shall require any
Party hereto to [**].



     “miRNA Antagonist” means a single-stranded oligonucleotide (or single-stranded analogs
thereof) that is designed to interfere with or inhibit a particular miRNA. For purposes of
clarity, the definition of “miRNA Antagonist” is not intended to include oligonucleotides that
function predominantly through the RNAi mechanism of action or the RNase H mechanism of action.



     “miRNA Compound” means a compound consisting of (a) a miRNA Antagonist, (b) to the extent
listed in Schedule 1.58 of the License Agreement or otherwise agreed upon by the Company and the
relevant Member(s) pursuant to Section 2.2(b) of the License Agreement, a



Schedule 1-9









 







miRNA Precursor Antagonist (an “Approved Precursor Antagonist”), or (c) to the extent agreed
upon by Regulus and the relevant Licensor(s) pursuant to Section 2.2(b) of the License Agreement, a
miRNA Mimic (an “Approved Mimic”).



     “miRNA Mimic” means a double-stranded or single-stranded oligonucleotide or analog thereof
with a substantially similar base composition as a particular miRNA and which is designed to mimic
the activity of such miRNA.



     “miRNA Precursor” means a transcript that originates from a genomic DNA and that contains, but
not necessarily exclusively, a non-coding, structured RNA comprising one or more mature miRNA
sequences, including, without limitation, (a) polycistronic transcripts comprising more than one
miRNA sequence, (b) miRNA clusters comprising more than one miRNA sequence, (c) pri-miRNAs, and/or
(d) pre-miRNAs.



     “miRNA Precursor Antagonist” means a single-stranded oligonucleotide (or single-stranded
analogs thereof) that is designed to bind to a miRNA Precursor to prevent the production of one or
more miRNAs. For purposes of clarity, the definition of “miRNA Precursor Antagonist” is not
intended to include oligonucleotides that function predominantly through the RNAi mechanism of
action or the RNase H mechanism of action.



     “miRNA Therapeutic” means a therapeutic product having one or more miRNA Compounds as an
active ingredient(s).



     “NDA” means a 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.



     “Net Sales” means, with respect to a Royalty-Bearing Product, the gross invoice price of all
units of such Royalty-Bearing Products sold by the relevant Commercializing Party, its Affiliates
and/or their direct Sublicensees to any Third Party, less the following items: (a) trade
discounts, credits or allowances, (b) credits or allowances additionally granted upon returns,
rejections or recalls, (c) freight, shipping and insurance charges, (d) taxes, duties or other
governmental tariffs (other than income taxes), (e) government-mandated rebates, and (f) a
reasonable reserve for bad debts. “Net Sales” under the following circumstances will mean the fair
market value of such Royalty-Bearing Product: (i) Royalty-Bearing Products which are used by such
Commercializing Party, its Affiliates or direct Sublicensees for any commercial purpose without
charge or provision of invoice, (ii) Royalty-Bearing Products which are sold or disposed of in
whole or in part for non cash consideration, or (iii) Royalty-Bearing Products which are provided
to a Third Party by such Commercializing Party, its Affiliates or direct Sublicensees without
charge or provision of invoice and used by such Third Party except in the cases of Royalty-Bearing
Products used to conduct clinical trials, reasonable amounts of Royalty-Bearing Products used as
marketing samples and Royalty-Bearing Product provided without charge for compassionate or similar
uses.



     Net Sales will not include any transfer between or among a Party and any of its Affiliates or
direct Sublicensees for resale.



Schedule 1-10









 





     In the event a Royalty-Bearing 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, will be determined by multiplying the Net Sales (as determined without reference to this
paragraph) of the Combination Product, by the fraction, A/A+B, where A is the average sale price of
the Royalty-Bearing Product when sold separately in finished form and B is the average sale price
of the other therapeutically active pharmaceutical compound(s) included in the Combination Product
when sold separately in finished form, each during the applicable royalty period or, if sales of
all compounds did not occur in such period, then in the most recent royalty reporting period in
which sales of all occurred. In the event that such average sale price cannot be determined for
both the Royalty-Bearing Product and all other therapeutically active pharmaceutical compounds
included in the Combination Product, Net Sales for the purposes of determining royalty payments
will be calculated as above, but the average sales price in the above equation will be replaced by
a good faith estimate of the fair market value of the compound(s) for which no such price exists.
As used above, the term “Combination Product” means any pharmaceutical product which consists of a
Royalty-Bearing Product and other therapeutically active pharmaceutical compound(s).



     “Non-Defaulting Party” has the meaning provided in Section 6.1(h).



     “Observer Rights” has the meaning provided in Section 4.1(c).



     “Officer” has the meaning provided in Section 5.1(b).



     “Operating Budget” has the meaning provided in the definition of “Operating Plan.”



     “Operating Plan” means the comprehensive “Joint Venture Business Plan” developed in support of
the creation of the Company. The Operating Plan will include a Development Plan, an Operating
Budget and a Capital Contribution Schedule, all as described below:



          (a) The Development Plan (the “Development Plan”) will reflect the research and development
activities to be carried out by the Company for the applicable period set forth in the Operating
Plan.




          (b) The Operating Budget (the “Operating Budget”) will include monthly income statements,
balance sheets and capital budgets and cash flow statements which will show in reasonable detail
the receipts (including the anticipated distributions and disbursements to the Members) projected
for the Company for such period and the amount of any corresponding cash deficiency or surplus, if
any. The Operating Budget will be the basis for the creation and subsequent revisions of the
Capital Contribution Schedule.




          (c) The Capital Contribution Schedule (the “Capital Contribution Schedule”) will forecast the
cash surplus or deficit of the Company as determined by the Operating Budget, and forecast the cash
requirements of the Company, all on a monthly basis for a one year period (except with respect to
the initial Capital Contribution Schedule, as to which the period will be from the Effective Date
through [**]).




     “Operating Plan Contributions” has the meaning provided in Section 6.1(c).



Schedule 1-11









 





     “Opt-In Election” means the election by at least one Member, pursuant to the License
Agreement, to continue to pursue the Development and Commercialization of a Development Project
that the Company has determined not to pursue.



     “Opt-In Party” means the single Member which, pursuant to an Opt-In Election, is granted the
right, pursuant to the License Agreement to continue to pursue the Development and
Commercialization of a Development Project that the Company has determined not to pursue.



     “Opt-In Product” means any miRNA Therapeutic that is Developed, Manufactured or
Commercialized pursuant to a Development Project for which one and only one Member has exercised an
Opt-In Election and which the relevant Opt-In Party subsequently licensed.



     “Option Value” means the value of the relevant stock options, as determined based on the
method and assumptions then used by the relevant Member to value stock options for financial
reporting purposes.



     “Partial Transfer” has the meaning provided in Section 8.2(c).



     “Parties” means Alnylam, Isis and the Company, or any combination thereof.



     “Party” means Alnylam, Isis or the Company.



     “Patent Rights” means (a) patent applications (including provisional applications and 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; and (d) any substitutions, extensions
(including supplemental protection certificates), registrations, confirmations, reissues,
divisionals, continuations, continuations-in-part, re-examinations, renewals and foreign
counterparts thereof.



     “Percentage Interest” means the respective Percentage Interests of the Members as indicated on
Schedule 3.1 hereto.



     “Permitted Disclosures”. The following are Permitted Disclosures:



          (a) To the extent that a Recipient has been granted the right to sublicense under the terms of
this Agreement, such Party will have the right to provide a Disclosing Party’s Confidential
Information to the employees, consultants and advisors of such Recipient’s Affiliate and Third
Party sublicensees and potential sublicensees who have a need to know the Confidential Information
for purposes of exercising such sublicense and are bound by an obligation to maintain in confidence
the Confidential Information of the Disclosing Party; provided, that such Persons are bound
to maintain the confidentiality of such information to the same extent as if they were parties
hereto.




          (b) Each Recipient will have the right to provide a Disclosing Party’s Confidential
Information:




Schedule 1-12









 








               (i) to governmental or other regulatory agencies in order to seek or obtain patents, to seek
or obtain approval to conduct clinical trials, or to gain Regulatory Approval, as contemplated by
this Agreement; provided that such disclosure may be made only to the extent
reasonably necessary to seek or obtain such patents or approvals; and



               (ii) as necessary, if embodied in products, to develop and commercialize such products as
contemplated by this Agreement.



     “Permitted License” means a license granted by a Licensor to a Third Party to enable such
Third Party to broadly manufacture or formulate oligonucleotides, where such Third Party is
primarily engaged in [**] and is not engaged in [**]; provided, however, that any
such license will not grant rights to research, manufacture or formulate miRNA Compounds or miRNA
Therapeutics for which the other Licensor has obtained or later obtains a license pursuant to
Section 5 of the License Agreement or pursuant to a Buy-Out.



     “Person” means a natural person, company, corporation, partnership, trust or other
organization or legal entity of any type, whether or not formally organized.



     “Post Buy-Out Activities” has the meaning provided in Section 9.3(f).



     “Prevailing Party” has the meaning provided in Section 12.11.



     “Program/Project Compound” means, with respect to a Research Program or Development Project,
any miRNA Compound directed to the miRNA(s) which is the focus of such Research Program or
Development Project.



     “Program/Project List” means the list, which the Company is required to maintain pursuant to
the License Agreement, specifying the Company’s Research Programs and Development Projects.



     “Project Bid” has the meaning provided in Section 9.3(e)(i).



     “Proposed Capital Contribution Schedule” has the meaning provided in Section 5.2(b).



     “Proposed Development Plan” has the meaning provided in Section 5.2(b).



     “Proposed Operating Budget” has the meaning provided in Section 5.2(b).



     “Proposed Business Plan” has the meaning provided in Section 5.2(b).



     “Qualified Third Party” has the meaning provided in Section 9.3(e)(v).



     “Receiving Member” has the meaning provided in Section 10.7.



     “Recipient” has the meaning provided in Section 12.4(a).



     “Registered Intellectual Property” has the meaning provided in Section 10.8(d).



Schedule 1-13









 





     “Regulatory Approval” means the act of a Regulatory Authority necessary for the marketing and
sale (including, if required for marketing and sales, pricing) of such product in a country or
regulatory jurisdiction, including, without limitation, the approval of an NDA by the FDA.



     “Regulatory Authority” means any applicable government regulatory authority involved in
granting approvals for the marketing and/or pricing of a product in a country or regulatory
jurisdiction including, without limitation, the FDA.



     “Representatives” has the meaning provided in Section 12.4(a).



     “Required Additional Capital Contribution” has the meaning provided in Section 6.1(e).



     “Research Program” means a program for which discovery or characterization activities focused
on one or more specific miRNA(s) have commenced after preliminary validation of the biological
function of such miRNA(s) have been identified (i.e., compound discovery, not target validation)
and will include all activities with respect to the Development, Manufacturing and
Commercialization of miRNA Compounds and miRNA Therapeutics directed to such miRNA(s).



     “Reserves” means the reserves established and maintained from time to time by the Managing
Board to pay taxes, fees, insurance or other costs and expenses incident to the Company’s business.



     “Royalty-Bearing Product” means (a) an Opt-In Product or (b) a Buy-Out Product that, on a
country-by-country basis, is, or the relevant Buy-Out Party reasonably believes will be, at the
time of first commercial sale of such Buy-Out Product, Covered in such country by a Valid Claim of
a Patent Right or covered by Know-How, which Patent Right or Know-How is licensed to the applicable
Buy-Out hereunder.



     “Royalty Term” means, with respect to each Royalty-Bearing Product in a country, the period
commencing upon first commercial sale of such Royalty-Bearing Product in such country and ending
upon the later of (a) the expiration of the Exclusivity Period, or (b) 10 years following first
commercial sale of such Royalty-Bearing Product.



     “SAB” has the meaning provided in Section 5.3.



     “SAB Consulting Agreement” has the meaning provided in Section 5.3(b).



     “Sale” has the meaning provided in Section 9.2.



     “Sale Agreement” has the meaning provided in Section 9.2.



     “SEC” means the United States Securities and Exchange Commission.



     “Selected Program” has the meaning provided in Section 9.3(d)(ii).



Schedule 1-14









 





     “Services Agreement” means that certain Services Agreement by and between the Company, Alnylam
and Isis dated the Effective Date, as amended from time to time.



     “Stalemate” has the meaning provided in Section 5.2.



     “Sublicensee” means a Third Party to whom a Party or its Affiliates or Sublicensees, has
granted a sublicense in accordance with the terms of the License Agreement or this Agreement.



     “Tax” and “Taxes” means any and all national, local and foreign taxes, assessment and other
governmental charges, duties, impositions and liabilities including taxes based upon or measured by
gross receipts, income, profits, sales, use or occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property taxes, together with
all interest, penalties and additions imposed with respect to such amounts.



     “Tax Distribution” has the meaning provided in Section 7.2(a)(i).



     “Tax Distribution Date” has the meaning provided in Section 7.2(a)(iii).



     “Tax Matters Partner” has the meaning provided in Section 7.7.



     “Terminated Director” has the meaning provided in Section 4.7(b).



     “Third Party” means any Person other than the Members or any of their Affiliates.



     “Third Party Contracts” has the meaning provided in Section 9.3(a).



     “Third Party Rights” has the meaning ascribed to it in the License Agreement.



     “Transfer” has the meaning provided in Section 8.1(a).



     “Transfer Taxes” has the meaning provided in Section 6.1(i).



     “Transferring Member” has the meaning provided in Section 8.2(a).



     “Valid Claim” means a claim (a) of any issued, unexpired patent that has not been revoked or
held unenforceable or invalid by a decision of a court or governmental agency of competent
jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken
within the time allowed for appeal, and that has not been disclaimed or admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise; or (b) of any patent application that has
not been cancelled, withdrawn or abandoned, or been pending for more than [**] years.




Schedule 1-15












 





SCHEDULE 2




REPRESENTATIONS AND WARRANTIES OF

EACH MEMBER TO THE OTHER MEMBER AND THE COMPANY




     1. Such Member is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has all corporate powers and all material
licenses, authorizations, consents and approvals required to enter into and perform this Agreement,
each of the Ancillary Agreements to which it is a party, and the transactions contemplated hereby
and thereby.



     2. The execution, delivery and performance by such Member of this Agreement and each of the
Ancillary Agreements to which it is a party, and the consummation by such Member of the
transactions contemplated hereby and thereby, are within such Member’s corporate powers and have
been duly authorized by all necessary corporate action on the part of such Member. This Agreement
and each of the Ancillary Agreements to which it is a party have been duly executed and delivered
by, and constitute the legal, valid and binding agreement of such Member, enforceable against such
Member in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors generally and to
equitable principles.



     3. The execution, delivery and performance by such Member of this Agreement and the Ancillary
Agreements to which it is a party do not require any notice to, action or consent by, or in respect
of, or filing with, any governmental authority.



     4. The execution, delivery and performance by such Member of this Agreement and each of the
Ancillary Agreements to which it is a party do not (i) contravene or conflict with the
organizational or constitutional documents of such Member; (ii) contravene or conflict with or
constitute a violation of any provision of any law, rule or regulation binding upon or applicable
to such Member; (iii) contravene or conflict with or constitute a violation of any judgment,
injunction, order or decree binding upon or applicable to such Member; (iv) constitute a default
under or give rise to any right of termination, cancellation or acceleration of any right or
obligation of such Member; or (v) require the consent or permission of any Person.



     5. There is no action, suit, investigation or proceeding pending or, to the knowledge of such
Member, threatened before any governmental authority to which such Member is a party that would
materially and adversely affect such Member’s ability to perform its obligations under this
Agreement and each of the Ancillary Agreements to which it is a party.



Schedule 2




 









 





SCHEDULE 3.1




SCHEDULE OF MEMBERS




Names and Addresses, Initial Percentage Interests and Capital Account Balances




	 	 	 	 	 
	Name and Address of Member	 	Percentage Interest	 	Capital Account Balance
	 
	 	 	 	 
	Alnylam Pharmaceuticals, Inc.
300 Third Street, 3rd Floor
Cambridge, MA 02142

	 	[**]%
	 	$[**]
	 
	 	 	 	 
	Isis Pharmaceuticals, Inc.
1896 Rutherford Road Carlsbad, California 92008

	 	[**]%
	 	$[**]






Schedule 3.1




 









 








SCHEDULE 4.5




FORM OF CONSULTING AGREEMENT




     This Consulting Agreement (together with its attachments, this “Agreement”) made as of [DATE]
(the “Effective Date”) is between Alnylam Pharmaceuticals, Inc. (“Alnylam”), Isis Pharmaceuticals
Inc. (“Isis”), Regulus Therapeutics, LLC (“Regulus”) and [NAME] (“Consultant”). Alnylam, Isis,
Regulus, and Consultant may each be referred to herein as a “Party” and collectively as the
“Parties”.



     WHEREAS, Alnylam and Isis have combined to form Regulus, and are the sole stockholders of
Regulus; and



     WHERAS, Consultant has agreed to serve on the Scientific Advisory Board of Regulus; and



     WHEREAS, Alnylam, Isis and Regulus each desire that Consultant advise them independently with
respect to microRNA technology and the business and strategy of developing microRNA products, and
Consultant desires to so advise Alnylam, Isis and Regulus; and



     NOW, THEREFORE, in furtherance of the foregoing and in exchange for good and valuable
consideration, the sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:


1. Advisory Services. Alnylam, Isis and Regulus (collectively, the “Engaging Parties”) each
independently hereby retains Consultant and Consultant agrees to provide consulting and advisory
services to each Engaging Party (the “Advisory Services”) as it may from time to time reasonably
request; provided, however, that Consultant shall provide only advisory and educational services
for Alnylam and Isis, and that any work performed by Consultant that could reasonably be expected
to lead to the creation of intellectual property pursuant hereto shall only be performed by
Consultant on behalf of Regulus and not on behalf of Alnylam or Isis. Any changes to the Advisory
Services (and any related compensation adjustments) must be agreed upon in writing between
Consultant and the Engaging Parties prior to commencement of the changes.





	 	1.1	 	Performance. Consultant agrees to render the Advisory Services to each Engaging
Party, (a) at such reasonably convenient times and places as such Engaging Party may
direct, (b) under the general supervision of such Engaging Party, and (c) on a best
efforts basis; provided, however, that in the event of logistical conflict between the
Engaging Parties, the Engaging Parties shall be responsible for coordinating among
themselves without liability to Consultant. Consultant will comply with all rules,
procedures and standards promulgated from time to time by an Engaging Party with regard
to Consultant’s access to and use of such Engaging Party’s property, information,
equipment and facilities. Consultant agrees to furnish each Engaging Party with
written reports with respect to the Advisory Services if and when requested by such
Engaging Party.





Schedule 4.5




 









 









	 	1.2	 	Third Party Confidential Information. Consultant agrees not to use any trade
secrets or other confidential information of any other person, firm, corporation,
institution or other entity in connection with any of the Advisory Services.
	 
	 	1.3	 	No Conflicts. Consultant is under no contractual or other obligation or
restriction which is inconsistent with Consultant’s execution of this Agreement or the
performance of the Advisory Services. Consultant will not enter into any agreement,
either written or oral, in conflict with Consultant’s obligations under this Agreement.
Consultant will arrange to provide the Advisory Services in such manner and at such
times that the Advisory Services will not conflict with Consultant’s responsibilities
under any other agreement, arrangement or understanding or pursuant to any employment
relationship Consultant has at any time with any third party.
	 
	 	1.4	 	Compliance with Policies. If Consultant is a faculty member at or employee of
a university or hospital (“Institution”) or of another company, Consultant represents
and warrants that (i) Consultant has a good faith belief that such Institution will not
oppose this arrangements set forth in this Agreement and (ii) Consultant shall comply
with such Institution’s policies and procedures. If Institution’s approval of this
Agreement is required by Institution policies, Consultant will obtain and deliver to
each Engaging Party, Institution’s consent on the form attached to this Agreement.
	 
	 	1.5	 	Absence of Debarment. Consultant represents that Consultant has not been
debarred, and to the best of Consultant’s knowledge, is not under consideration to be
debarred, by the U.S. Food and Drug Administration from working in or providing
Advisory Services to any pharmaceutical or biotechnology company under the Generic Drug
Enforcement Act of 1992.




2. Compensation. In consideration for the Advisory Services rendered by Consultant to each
Engaging Party, each Engaging Party agrees to compensate Consultant as set forth in the Business
Terms Exhibit attached hereto. Unless otherwise specified in the Business Terms Exhibit,
undisputed payments will be made by each Engaging Party within thirty (30) days from such Engaging
Party’s receipt of Consultant’s invoice. Invoices will contain such detail as each Engaging Party
may reasonably require and will be payable in U.S. Dollars. Each Engaging Party will reimburse
Consultant for reasonable business expenses incurred by Consultant in the performance of the
Advisory Services as specified in the Business Terms Exhibit.



3. Inventions.





	 	3.1	 	Definition. Consultant will promptly disclose in confidence to each Engaging
Party all inventions, discoveries, improvements, ideas, designs, processes, products,
computer programs, works of authorship, databases, mask works, trade secrets, know-how,
research and creations (whether or not patentable or subject to copyright or trade
secret protection) that Consultant makes, conceives or reduces to practice, either
alone or jointly with others, and that (a) result from the performance of the Advisory
Services with any Engaging Party pursuant hereto,





Schedule 4.5-2




 









 






	 	 	 	and/or (b) result from use of facilities, equipment, supplies, or Confidential
Information (defined below) of any Engaging Party (“Inventions”).






	 	3.2	 	Ownership. All Inventions arising solely under Advisory Services will be the
property of Regulus. For purposes of the copyright laws of the United States, all
Inventions will constitute “works made for hire”, except to the extent such Inventions
cannot by law be “works made for hire”. To the extent Inventions have not been
previously assigned to Regulus, Consultant hereby assigns and, to the extent any such
assignment cannot be made at present, hereby agrees to assign to Regulus, without
further compensation, all right, title and interest in and to all Inventions and any
and all related patents, patent applications, copyrights, copyright applications,
trademarks, trade names, trade secrets and other proprietary rights in the United
States and throughout the world. For purposes of clarity, it is the intention of the
Parties that any invention made by Consultant pursuant hereto shall be owned
exclusively by Regulus.
	 
	 	3.3	 	Records. Consultant shall make and maintain adequate and current written
records of all Inventions, which records shall be available to and remain the property
of each Engaging Party at all times.
	 
	 	3.4	 	Agreement with Institution. This Agreement is made subject to the
understanding that Consultant, if affiliated with an Institution, may be required to
fulfill certain obligations, including teaching, directing laboratory operations,
conducting research, and publishing work. It is further understood that Consultant may
have signed an agreement concerning inventions with Institution, under which Consultant
may be obligated to assign to Institution certain inventions which arise out of or
otherwise relate to Consultant’s work at or for Institution or from Consultant’s use of
certain of its facilities or intellectual property. In performing the Advisory
Services, Consultant agrees not to utilize Institution facilities or intellectual
property if the result of such use is that any Inventions will not be assignable solely
to the Engaging Parties. Consultant agrees to confirm with Institution that use of
Institution’s telephone, fax machines or computers for communication purposes, does
not constitute use of Institution’s facilities under this Agreement.
	 
	 	3.5	 	Work at Third Party Facilities. Consultant agrees not to make any use of any
funds, space, personnel, facilities, equipment or other resources of a third party in
performing the Advisory Services nor take any other action that would result in a third
party owning or having a right in any Inventions, unless agreed upon in writing in
advance by each Engaging Party.





4. Confidential Information.





	 	4.1	 	Definition. “Confidential Information” means all trade secrets and
confidential or proprietary information owned, possessed or used by an Engaging Party,
learned of by Consultant or developed by Consultant in connection with the Advisory
Services, whether or not labeled “Confidential”, including but not





Schedule 4.5-3




 









 









	 	 	 	limited to (a) Inventions, scientific data and sequence information, (b) marketing
plans, business strategies, financial information, forecasts, personnel information
and customer lists of an Engaging Party, (c) all information of third parties that
an Engaging Party has an obligation to keep confidential, and (d) the terms and
conditions of this Agreement (including the compensation paid to Consultant pursuant
to Section 2). Confidential Information does not include information which (i) is
in the public domain or which becomes part of the public domain through no wrongful
act on Consultant’s part but only after it becomes so publicly known, (ii) is
already in Consultant’s possession at the time of disclosure by an Engaging Party,
other than by previous disclosure by an Engaging Party, as evidenced by written or
electronic records, or (iii) that becomes known to Consultant through disclosure by
a third party having the right to disclose the information, as evidenced by written
or electronic records.
	 
	 	4.2	 	Obligations of Confidentiality. During the Term and for a period of five (5)
years thereafter, Consultant will not directly or indirectly publish, disseminate or
otherwise disclose, use for Consultant’s own benefit or for the benefit of a third
party, deliver or make available to any third party, any Confidential Information,
other than in furtherance of the purposes of this Agreement, and only then with the
prior written consent of each Engaging Party. If required, Consultant may disclose the
Confidential Information to a governmental authority or by order of a court of
competent jurisdiction, provided that such disclosure is subject to all applicable
governmental or judicial protection available for like material and reasonable advance
notice is given to each Engaging Party. Consultant will exercise all reasonable
precautions to physically protect the integrity and confidentiality of the Confidential
Information and will not remove any Confidential Information or copies thereof from an
Engaging Party’s premises except to the extent necessary to fulfill the Advisory
Services, and then only with each Engaging Party’s prior consent. Each Engaging Party
will be entitled to seek injunctive relief as a remedy for any breach of the terms of
this Section 4.




5. Non-Competition. During the Term, Consultant shall not provide (whether for or without
compensation) Advisory Services to any business or entity developing a product which is a microRNA
therapeutic other than an Engaging Party. It shall not be considered a competitive activity within
the meaning of this Section for Consultant to be a member of the faculty or staff of a university,
college or other educational or non-profit research institution.



6. Publication. Consultant agrees to submit to each Engaging Party a copy of any proposed
manuscript or other materials to be published or otherwise publicly disclosed which may contain
Confidential Information in sufficient time to enable each Engaging Party to determine if
patentable Inventions or any Confidential Information of an Engaging Party would be disclosed.
Consultant will cooperate with each Engaging Party in this respect and will delete from the
manuscript or other disclosure any Confidential Information if requested by an Engaging Party, and
if Inventions arose solely through Advisory Services, then Consultant will assist the Engaging
Parties in filing for patent protection for any patentable Inventions prior to publication or other
disclosure.




Schedule 4.5-4




 









 







7. Term and Termination.





	 	7.1	 	Term. This Agreement will commence on the Effective Date and continue until
terminated by the Consultant, on the one hand, or the Engaging Parties acting
collectively, on the other hand, on not less than thirty (30) days notice (the “Term”);
provided, however, that Alnylam or Isis, respectively, may terminate this Agreement
with respect to such company’s involvement in this Agreement in which case the
Agreement shall remain in place for the remaining Parties.
	 
	 	7.2	 	Effect of Expiration/Termination. Upon expiration or termination, neither any
Engaging Party nor Consultant will have any further obligations under this Agreement,
except (a) the liabilities accrued through the date of termination, and (b) the
obligations under, sections 3, 4, 5, 6, 7 and 8 will survive. Upon expiration or
termination, and in any case upon an Engaging Party’s request, Consultant will return
immediately to each Engaging Party all tangible Confidential Information, including all
copies and reproductions thereof, except for one (1) copy which may be retained solely
for archival purposes.





8. Miscellaneous.





	 	8.1	 	Independent Contractor. All Advisory Services will be rendered by Consultant
as an independent contractor and this Agreement does not create an employer-employee
relationship between any Engaging Party and Consultant. Consultant will have no rights
to receive any employee benefits, such as health and accident insurance, sick leave or
vacation which are accorded to regular employees of any Engaging Party. Consultant will
not in any way represent himself to be an employee, partner, joint venturer, or agent
of any Engaging Party.
	 
	 	8.2	 	Taxes. Consultant will pay all required taxes on Consultant’s income from any
Engaging Party under this Agreement. Consultant will provide each Engaging Party with
Consultant’s taxpayer identification number or social security number, as applicable.
	 
	 	8.3	 	Use of Name. Consultant consents to the use by each Engaging Party of
Consultant’s name and likeness in written materials and oral presentations to current
or prospective customers, partners, investors or others, provided that such materials
or presentations accurately describe the nature of Consultant’s relationship with or
contribution to such Engaging Party.
	 
	 	8.4	 	Assignability and Binding Effect. The Advisory Services to be rendered by
Consultant are personal in nature. Consultant may not assign or transfer this
Agreement or any of Consultant’s rights or obligations hereunder except to a
corporation of which Consultant is the sole stockholder. In no event will Consultant
assign or delegate responsibility for actual performance of the Advisory Services to
any other natural person. This Agreement will be binding upon and inure to the benefit
of the parties and their respective legal representatives, heirs, successors and
permitted assigns.





Schedule 4.5-5









 









 












	 	8.5	 	Headings. The section headings are included solely for convenience of
reference and will not control or affect the meaning or interpretation of any of the
provisions of this Agreement.
	 
	 	8.6	 	Notices. Any notices or other communications from one party to the other will
be in writing and will be given by addressing the same to each other Party at the
address or facsimile number set forth below:





	 	 	 	 	 
	 

	 	If to Alnylam:
	 	Alnylam Pharmaceuticals, Inc.
	 

	 	 	 	300 Third Street
	 

	 	 	 	Cambridge, MA 02142
	 

	 	 	 	Attn: Philip Chase, VP, Legal
	 

	 	 	 	pchase@alnylam.com
	 

	 	 	 	617-551-8200
	 
	 	 	 	 
	 

	 	If to Isis:
	 	Isis Pharmaceuticals, Inc
	 

	 	 	 	1896 Rutherford Ave.
	 

	 	 	 	Carlsbad CA 92008-7208
	 

	 	 	 	760-931-9200







	 	 	 	Notice will be deemed to have been duly given when (a) deposited in the United
States mail with proper postage for first class Registered or Certified Mail
prepaid, return receipt requested, (b) sent by any reputable commercial courier,
delivery confirmation requested, (c) delivered personally, or (d) if promptly
confirmed by mail or commercial courier as provided above, when dispatched by
facsimile.
	 
	 	8.7	 	No Modification. This Agreement may be changed only by a writing signed by
authorized representatives of each Party; provided, however that Alnylam or Isis may
terminate its participation in this Agreement pursuant to Section 7.1 without a further
agreement in writing between the Parties.
	 
	 	8.8	 	Severability. In the event that any one or more of the provisions contained in
this Agreement will, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability will not affect any other
provisions of this Agreement, and all other provisions will remain in full force and
effect. If any provision of this Agreement is held to be excessively broad, it will be
reformed and construed by limiting and reducing it so as to be enforceable to the
maximum extent permitted by law.
	 
	 	8.9	 	Entire Agreement. This Agreement constitutes the entire agreement of the
parties with regard to its subject matter, and supersedes all previous written or oral
representations, agreements and understandings between the parties.
	 
	 	8.10	 	Governing Law. This Agreement will be governed by, and construed and enforced
in accordance with, the laws of the Commonwealth of Massachusetts





Schedule 4.5-6









 









 












	 	 	 	applicable to contracts made and to be performed therein, without giving effect to
the principles thereof relating to the conflict of laws.
	 
	 	8.11	 	Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one
and the same instrument.





Schedule 4.5-7









 









 











     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement under seal as of the
Effective Date.



	 	 	 	 	 	 	 
	 	 	Alnylam Pharmaceuticals, Inc.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

duly authorized
	 	 
	 
	 	 	 	 	 	 
	 	 	Isis Pharmaceuticals Inc.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

duly authorized
	 	 
	 
	 	 	 	 	 	 
	 	 	Consultant:
	 
	 	 	 	 	 	 
	 	 	   
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

duly authorized
	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Telephone:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Facsimile:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	SS or Tax ID No.:
	 

	 	 	 	 
	 	 
	 

	 	 	 	(required for payment)	 	 






Schedule 4.5-8




 









 





INSTITUTION ACKNOWLEDGEMENT

AND CONSENT FORM



Alnylam Pharmaceuticals, Inc. (“Alnylam”), Isis Pharmaceuticals Inc. (“Isis”), Regulus
Therapeutics, LLC (“Regulus”) are prepared to enter into the foregoing Agreement with the
consultant named on the preceding signature page (“Consultant”). Alnylam, Isis, and Regulus
recognize that as a member of the institution named below (“Institution”), Consultant is
responsible for ensuring that any consulting agreement Consultant enters into with a for-profit
entity is not in conflict with the patent, consulting or other policies of Institution. The
proposed Agreement requires Consultant, if required by Institution policies, to disclose the
proposed Agreement to Institution and/or to obtain Institution’s consent to enter into the proposed
Agreement.



Institution hereby acknowledges and consents to Consultant entering into the foregoing Agreement.




	 	 	 	 	 	 	 
	 

	 	INSTITUTION:	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Print Name	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title	 	 	 	 
	 

	 	 	 	 

duly authorized
	 	 
	 

	 	Date	 	 	 	 
	 

	 	 	 	 

	 	 






Schedule 4.5-9




 









 





BUSINESS TERMS EXHIBIT




1. Compensation:





	 	a.	 	Compensation for SAB membership. Regulus will pay Consultant quarterly cash
compensation of $[     ] at the end of each calendar quarter as compensation for
serving on the Scientific Advisory Board. Such quarterly retainer will be prorated
with respect to the first calendar quarter of service hereunder.
	 
	 	b.	 	Expenses. Each Engaging Party will reimburse Consultant for all reasonable
travel and other business expenses incurred by Consultant in rendering the Advisory
Services for such Engaging Party, provided that such expenses are agreed upon in
writing in advance, and are confirmed by appropriate written expense statements and
other supporting documentation.
	 
	 	 	 	On the last day of each calendar month, Consultant will invoice each Engaging Party
for expenses incurred during the preceding month. Invoices should reference this
Agreement and should be submitted to the following address:




If to Alnylam:

Alnylam Pharmaceuticals, Inc.

Attn: Accounts Payable Dept.

300 Third Street, 3rd Floor

Cambridge, MA 02142



If to Isis:

Isis Pharmaceuticals, Inc

Attn: Accounts Payable

1896 Rutherford Ave.

Carlsbad CA 92008-7208

760-931-9200





	 	c.	 	Initial Option Grant. As additional compensation for the Advisory Services,
Consultant will receive options to purchase [     ] shares of Alnylam’s common stock
(the “Alnylam Options”) and [     ] shares of Isis’ common stock (the “Isis
Options”, and together with the Alnylam Options, the “Options”), each at a purchase
price equal to the fair market value of the shares at the close of the market in the
United States for such shares on the day of issuance. The vesting of the Options and
other terms will be detailed in the standard form of Stock Option Agreement of Alnylam
and Isis, respectively, which Consultant must execute as a condition of receiving the
Options. To the extent not previously approved by the Board of Directors of Alnylam or
Isis, as the case may be, the grant herein of Alnylam Options or Isis Options, as the
case may be, remains subject to such approval.





Schedule 4.5-10









 









 












	 	d.	 	Annual Option Grant. Consultant will receive an annual grant of [      ]
options to purchase Alnylam stock and [      ] options to purchase Isis stock,
subject in both cases to the terms of the respective stock plans and policies of
Alnylam and Isis, as applicable, as compensation for Consultant’s continued advisory
role.





Schedule 4.5-11




 









 





SCHEDULE
4.6


INITIAL MANAGING BOARD MEMBERS




	 	 	 
	Name	 	Title
	TBD

	 	President, Regulus Therapeutics LLC
	David Baltimore, Ph.D.

	 	Independent Director nominated by Alnylam
	TBD

	 	Independent Director nominated by Isis
	John M. Maraganore, Ph.D.

	 	Alnylam Director
	Barry E. Greene

	 	Alnylam Director
	Stanley T. Crooke, M.D., Ph.D.

	 	Isis Director
	B. Lynne Parshall, J.D.

	 	Isis Director






Schedule 4.6




 









 





SCHEDULE
5.3


INITIAL SAB MEMBERS AND CHAIRPERSON




	 	 	 
	Name	 	Title
	David Baltimore, Ph.D.

	 	Member and Chairperson
	Scott Hammond, Ph.D.

	 	Member
	Markus Stoffel, M.D., Ph.D.

	 	Member
	Thomas Tuschl, Ph.D.

	 	Member
	Philip Zamore, Ph.D.

	 	Member






Schedule 5.3




 









 





SCHEDULE 12.4

PRESS RELEASE










	 	 	 
	Contacts
Alnylam Pharmaceuticals, Inc.	 	Isis Pharmaceuticals, Inc.
	Cynthia Clayton (Investors) 

617-551-8207

	 	Kristina Lemonidis

Associate Director, Investor Relations

760-603-2490
	 
	 	 
	Kathryn Morris (Media) 

KMorrisPR 

845-635-9828

	 	Amy Blackley, Ph.D.


Manager, Corporate Communications


760-603-2772






Isis and Alnylam Launch Regulus Therapeutics, a Joint Venture

to Discover, Develop, and Commercialize microRNA Therapeutics




- By Targeting Gene Pathways, microRNA Therapeutics Represent a New Approach for the Treatment of a

Broad Range of Human Disease -




- David Baltimore to Join Regulus Board of Directors and Chair Scientific Advisory Board Comprised

of Key Pioneers in microRNA Research -




- Companies to Host Conference Call Webcast to Discuss Regulus Therapeutics at 8:30 a.m. ET Friday -



CAMBRIDGE, Mass. and CARLSBAD, Calif., September 7, 2007 – Alnylam Pharmaceuticals, Inc. (Nasdaq:
ALNY) and Isis Pharmaceuticals, Inc. (Nasdaq: ISIS) announced today the launch of Regulus
Therapeutics LLC, a joint venture focused on the discovery, development, and commercialization of
microRNA (miRNA) therapeutics. Because miRNAs regulate whole networks of genes that can be involved
in discrete disease processes, miRNA therapeutics represent a new approach to target the pathways
of human disease. Regulus will combine the strengths and assets of Isis’ and Alnylam’s
technologies, know-how, and intellectual property (IP) with strong leadership from a focused
management team and Scientific Advisory Board to be chaired by Nobel laureate David Baltimore and
include key pioneers in the miRNA field.



Both Isis and Alnylam will grant Regulus exclusive licenses to their IP for miRNA therapeutic
applications, as well as certain early fundamental patents in the miRNA field including the “Tuschl
III” patent. Alnylam will make an initial investment of $10 million to balance venture ownership;
thereafter Isis and Alnylam will share funding of Regulus. Regulus will be operated as an
independent company with an independent Board of Directors and management team. Alnylam and Isis
will retain rights to develop and commercialize on pre-negotiated terms miRNA therapeutic products
that Regulus decides not to develop either itself or with a partner.



“The emerging biology of microRNAs points to a completely new understanding of cellular mechanisms
for regulation of gene expression,” said David Baltimore, Ph.D., of California Institute of
Technology. “I believe that microRNAs represent previously unexplored disease targets where
pharmacological approaches could lead to the emergence of novel therapies for


 









 








many human disorders. Accordingly, I’m very excited to join in the formation of Regulus and to
help build the leading microRNA therapeutics company.”



“The opportunity to antagonize microRNAs could create a new frontier for pharmaceutical research
where an entire disease pathway is targeted for intervention, not just a single disease target.
Indeed, due to their mechanism of action, we believe microRNA therapeutics could have profound
implications for the treatment of a broad range of diseases including cancer, viral infection, and
metabolic disorders,” said John Maraganore, Ph.D., President and Chief Executive Officer of
Alnylam. “Isis’ and Alnylam’s intellectual property and technologies open the door to these new
opportunities and, when combined to form Regulus, create an unmatched effort to establish the
leading microRNA therapeutics company.”



“We are excited to embark on this venture, which represents an opportunity to invest in a focused
expansion of our ongoing microRNA research efforts through Regulus’ application of our antisense
technology platform to create microRNA therapeutics. Indeed, it is timely to extend our know-how
and clinical advances with antisense drugs to the field of microRNAs, an area that stands at the
forefront of modern biology,” said Stanley Crooke, M.D., Ph.D., Chairman and Chief Executive
Officer of Isis. “Regulus will be fully enabled with intellectual property, technology, and
funding from Isis and Alnylam to create a bold and successful new venture.”



Regulus’ newly formed Scientific Advisory Board will be chaired by David Baltimore, Ph.D., who will
also serve as the first Regulus independent Director, and, subject to relevant institutional
approvals, initially will comprise the following members:





	 	•	 	David Baltimore, Ph.D., Professor of Biology at California Institute of
Technology and the recipient of the 1975 Nobel Prize in Physiology or Medicine;
	 
	 	•	 	David Bartel, Ph.D., Professor of Biology at MIT and a member of the Whitehead
Institute for Biomedical Research;
	 
	 	•	 	Scott Hammond, Ph.D., Assistant Professor of Cell and Developmental Biology at
the University of North Carolina School of Medicine;
	 
	 	•	 	Markus Stoffel, M.D., Ph.D., Professor for Metabolic Diseases at the Institute
of Molecular Systems Biology, Swiss Federal Institute of Technology (ETH);
	 
	 	•	 	Thomas Tuschl, Ph.D., Associate Professor at the Rockefeller University; and
	 
	 	•	 	Phillip D. Zamore, Ph.D., Gretchen Stone Cook Professor of Biomedical Sciences
at the University of Massachusetts Medical School.





Conference Call Information



Alnylam and Isis will host a conference call on September 7, 2007 at 8:30 a.m. ET to discuss the
formation and launch of Regulus Therapeutics. The call may be accessed by dialing 800-901-5231
(domestic) or 617-786-2961 (international) five minutes prior to the start time, and providing the
passcode 44818346. A replay of the call will be available from 10:30 a.m. ET September 7, 2007
until September 13, 2007. To access the replay, please dial 888-286-8010 (domestic) or
617-801-6888 (international), and provide the passcode 11989900. A live audio webcast of the call
will be available on Isis’ website at www.isispharm.com and on the “Investors” section of the
Alnylam’s website, www.alnylam.com, and on Regulus’ website at www.regulusrx.com. An archive of
the webcast will be available on the both companies’ websites approximately two hours after the
event.




 









 







About microRNA



microRNAs (miRNAs) are a recently discovered class of genetically encoded small RNAs, approximately
20 nucleotides in length, and are believed to regulate the expression of a large number of human
genes. miRNA therapeutics represent a new approach for the treatment of a broad range of human
disease When inappropriately encoded, miRNAs represent potential disease targets whose selective
antagonism can result in the correction of an entire disease pathway in a manner unachievable by
today’s medicines. In fact, the inappropriate absence or presence of specific miRNA molecules in
various cells has been shown to be associated with specific human diseases including cancer, viral
infection, and metabolic disorders.




About Regulus



Regulus Therapeutics LLC is a biopharmaceutical company formed to discover, develop and
commercialize miRNA therapeutics. The company was created as a joint venture between Alnylam
Pharmaceuticals, a leader in RNAi therapeutics, and Isis Pharmaceuticals, a leader in antisense
technologies and therapeutics. Isis and Alnylam scientists and collaborators were the first to
discover miRNA antagonist strategies that work in vivo in animal studies (Krutzfeldt et al. (2005)
Nature 438, 685-689; Esau et al. (2006) Cell Metab., 3, 87-98). Isis and Alnylam have also created
and consolidated key IP believed by the companies to be required for development and
commercialization of miRNA therapeutics. The company, founded in 2007, maintains facilities in
Carlsbad, California. For more information, visit www.regulusrx.com.




About Alnylam Pharmaceuticals



Alnylam is a biopharmaceutical company developing novel therapeutics based on RNA interference, or
RNAi. The company is applying its therapeutic expertise in RNAi to address significant medical
needs, many of which cannot effectively be addressed with small molecules or antibodies, the
current major classes of drugs. Alnylam is leading the translation of RNAi as a new class of
innovative medicines with peer-reviewed research efforts published in the world’s top scientific
journals including Nature, Nature Medicine, and Cell. The company is leveraging these capabilities
to build a broad pipeline of RNAi therapeutics; its most advanced program is in Phase II human
clinical trials for the treatment of respiratory syncytial virus (RSV) infection. In addition, the
company is developing RNAi therapeutics for the treatment of influenza, hypercholesterolemia, and
liver cancers, amongst other diseases. The company’s leadership position in fundamental patents,
technology, and know-how relating to RNAi has enabled it to form major alliances with leading
companies including Merck, Medtronic, Novartis, Biogen Idec, and Roche. The company, founded in
2002, maintains headquarters in Cambridge, Massachusetts. For more information, visit
www.alnylam.com.




About Isis Pharmaceuticals



Isis is exploiting its expertise in RNA to discover and develop novel drugs for its product
pipeline and for its partners. The Company has successfully commercialized the world’s first
antisense drug and has 17 drugs in development. Isis’ drug development programs are focused on
treating cardiovascular and metabolic diseases. Isis’ partners are developing drugs for cancer,
and inflammatory and other diseases. Ibis Biosciences, Inc., Isis’ wholly owned subsidiary, is
developing and commercializing the Ibis T5000TM Biosensor System, a revolutionary system to identify
infectious organisms. As an innovator in RNA-based drug discovery and development, Isis is the
owner or exclusive licensee of over 1,500 issued patents worldwide. Additional information about
Isis is available at www.isispharm.com.




 









 








Alnylam Forward-Looking Statements



Various statements in this release concerning Alnylam’s future expectations, plans and prospects,
including statements concerning the potential of miRNA therapeutics and the importance of Alnylam’s
IP, know-how, and other technology in the discovery, development and commercialization of miRNA
therapeutics, constitute forward-looking statements for the purposes of the safe harbor provisions
under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially
from those indicated by these forward-looking statements as a result of various important factors,
including risks related to: Alnylam’s approach to discover and develop novel drugs, which is
unproven and may never lead to marketable products; Alnylam’s ability to attract and retain highly
qualified employees; obtaining, maintaining and protecting intellectual property utilized by
Alnylam’s products; Alnylam’s ability to enforce its patents against infringers and to defend its
patent portfolio against challenges from third parties; Alnylam’s ability to obtain additional
funding to support its business activities; Alnylam’s dependence on third parties for development,
manufacture, marketing, sales and distribution of products; the successful development of Alnylam’s
product candidates, all of which are in early stages of development; obtaining regulatory approval
for products; competition from others using technology similar to Alnylam’s and others developing
products for similar uses; Alnylam’s dependence on collaborators; and Alnylam’s short operating
history; as well as those risks more fully discussed in the “Risk Factors” section of its most
recent quarterly report on Form 10-Q on file with the Securities and Exchange Commission. In
addition, any forward-looking statements represent Alnylam’s views only as of today and should not
be relied upon as representing its views as of any subsequent date. Alnylam does not assume any
obligation to update any forward-looking statements.




Isis Forward Looking Statements



This press release includes forward-looking statements regarding the future therapeutic and
commercial potential of Isis’ technologies and intellectual property related to microRNA
therapeutics being discovered and developed by Regulus. Any statement describing Isis’ goals,
expectations, financial or other projections, intentions or beliefs is a forward-looking statement
and should be considered an at-risk statement, including those statements that are described as
Isis’ goals. Such statements are subject to certain risks and uncertainties, particularly those
inherent in the process of discovering, developing and commercializing drugs that are safe and
effective for use as human therapeutics, and in the endeavor of building a business around such
products. Isis’ forward-looking statements also involve assumptions that, if they never
materialize or prove correct, could cause its results to differ materially from those expressed or
implied by such forward-looking statements. Although Isis’ forward-looking statements reflect the
good faith judgment of its management, these statements are based only on facts and factors
currently known by Isis. As a result, you are cautioned not to rely on these forward-looking
statements. These and other risks concerning Isis’ programs are described in additional detail in
Isis’ annual report on Form 10-K for the year ended December 31, 2006, and its quarterly report on
Form 10-Q for the quarter ended June 30, 2007, which are on file with the SEC. Copies of this and
other documents are available from the Company.



Isis Pharmaceuticals, Ibis Biosciences and Ibis T5000 are registered trademarks or trademarks of
Isis Pharmaceuticals, Inc.





 











 








EXHIBIT A




INITIAL APPROVED OPERATING PLAN



Confidential Materials omitted and filed separately with the Securities
and Exchange Commission. Asterisks denote omissions.




[**]




     A total of 17 pages have been omitted pursuant to a request for confidential treatment.



Exhibit A-1