EXHIBIT 10.35


 


REGULUS THERAPEUTICS LLC


 


EMPLOYMENT AGREEMENT


 


This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as of December 29,
2008 by and between Regulus Therapeutics LLC, a Delaware limited liability
corporation (the “Company”), and
Kleanthis G. Xanthopoulos, Ph.D. (the “Executive”).  The Company and the Executive are hereinafter
collectively referred to as the “Parties”, and
individually referred to as a “Party”.


 


The
Company desires assurance of the association and services of the Executive in
order to retain the Executive’s experience, skills, abilities, background and
knowledge, and is willing to engage the Executive’s services on the terms and
conditions set forth in this Agreement.


 


The
Parties previously entered into a letter agreement dated November 30, 2007
(the “Prior Agreement”) and desire to
terminate and replace the Prior Agreement with this Agreement, except as set
forth herein.


 


The
Executive desires to be in the employ of the Company, and is willing to accept
such employment on the terms and conditions set forth in this Agreement.


AGREEMENT


 


In consideration of the foregoing recitals and the mutual promises and
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:


 


1.                                      EMPLOYMENT.


 


1.1          Term.  The term of
this Agreement shall begin on the date first set forth above (the “Effective Date”), and shall continue until terminated in
accordance with Section 4 herein.


 


1.2          Title.  The Executive shall have the title of Chief
Executive Officer of the Company and shall serve in such other capacity or
capacities as the Board of Directors of the Company (the “Board”)
may from time to time prescribe, but only as consistent with the customary duties
of a Chief Executive Officer.  During the
term of this Agreement, unless otherwise agreed by the Parties, the Executive
shall also serve as a member of the Board. 
Upon termination of the Executive’s employment with the Company, for any
reason or no reason, the Executive shall immediately resign as a member of the
Board.


 


1.3          Duties.  The Executive shall report
to the Board and shall do and perform all reasonable services, acts or things
necessary or advisable to manage and conduct the business of the Company and
which are normally associated with the position of Chief Executive Officer,
consistent with the bylaws of the Company and as required by the Board.


 


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1.4          Location.  The Executive shall perform services pursuant
to this Agreement at the Company’s offices located in Carlsbad, California, or
at any other place at which the Company maintains an office; provided, however,
that (i) the Company will not relocate the offices that are the primary
location at which the Executive performs services pursuant to this Agreement by
more than thirty miles from the then current location without the Executive’s
prior written consent and (ii) the Company may from time to time require
the Executive to travel temporarily to other locations in connection with the
Company’s business.


 


2.                                      LOYAL AND
CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.


 


2.1          Loyalty.  During the Executive’s employment by the
Company the Executive shall devote the Executive’s full business energies, interest,
abilities and productive time to the proper and efficient performance of the
Executive’s duties under this Agreement.


 


2.2          Covenant not to Compete.  Except with the prior written consent of the
Board, the Executive will not, while employed by the Company, or during any
period during which the Executive is receiving compensation or any other
consideration from the Company, including, but not limited to, severance pay
pursuant to Section 4.1.3  herein, engage in competition with the Company  and/or any of its affiliates,
subsidiaries, or joint ventures currently existing or which shall be
established during the Executive’s employment by the Company (collectively, “Affiliates”) either directly or indirectly, in any manner or
capacity, as adviser, principal, agent, affiliate, promoter, partner, officer,
director, employee, stockholder, owner, co-owner, consultant, or member of any
association or otherwise, in any phase of the business of developing,
manufacturing and marketing of products or services which are in the same field
of use or which otherwise compete with the products or services or proposed
products or services of the Company or any of its Affiliates.


 


2.3          Agreement not to
Participate in Company’s Competitors.  During his employment by the Company, the
Executive agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by the Executive to be
adverse or antagonistic to the Company, its business or prospects, financial or
otherwise or in any company, person or entity that is, directly or indirectly,
in competition with the business of the Company or any of its Affiliates.  Ownership by the Executive, as a passive
investment, of less than 2% of the outstanding shares of capital stock of any
corporation with one or more classes of its capital stock listed on a national
securities exchange or in the over-the-counter market shall not constitute a
breach of this paragraph.


 


3.                                      COMPENSATION
OF THE EXECUTIVE.


 


3.1          Base Salary.  The Company shall pay the Executive a base
salary of $420,000 per year (the “Base Salary”),
less payroll deductions and all required withholdings, payable in regular
bi-weekly payments or otherwise in accordance with Company policy.  Such Base Salary shall be prorated for any
partial year of employment on the basis of a 365-day fiscal year.


 


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3.2          Discretionary
Bonuses.  In addition
to the Base Salary, the Executive will be eligible to receive a yearly
discretionary merit bonus (with a base percentage factor of forty percent
(40%)) in accordance with the Company’s Executive Bonus Plan to be established
by the Company based upon the Executive’s performance, as determined by the
Board in its sole discretion, against fundamental objectives to be mutually
agreed upon by the Executive and the Board. 
Any bonus that is earned by the Executive under the Executive Bonus
Plan, or any other bonus plan approved by the Board, shall be paid to the
Executive no later than the March 15 of the year immediately following the
year in which such bonus was earned.


 


3.3          Stock Options.  The Company agrees that it will grant to the Executive,
pursuant to the terms of the Company’s 2009 Equity Incentive Plan (the “Plan”) to be established by the Company following the
Company’s conversion to a Delaware corporation, stock options to purchase
shares of the Common Stock of the Company (each an “Option”
and collectively, the “Options”)
representing five percent (5%) of the shares of capital stock of the Company
outstanding following the Series A Preferred Stock Financing of the
Company (which is expected to occur in the first fiscal quarter of 2009)
determined on a fully-diluted, as converted to Common Stock basis, including
shares reserved for issuance pursuant to the Plan.  Such Options shall include an “early-exercise”
feature, which will allow the Executive to exercise the Options with respect to
some or all of the unvested shares and such unvested shares shall thereafter be
subject to a repurchase option in favor of the Company, which repurchase option
shall lapse in accordance with the stated vesting of such unvested
Options.  To the maximum extent possible,
the Options shall be “incentive stock options” as such term is defined in Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”).  The purchase price of the shares issuable
upon exercise of the Options shall be equal to the fair market value per share of the
Company’s Common Stock on the date of grant, as determined in good faith by the
Board based on a valuation performed by a qualified independent appraiser
using a traditional appraisal methodology.  The Options will be subject to vesting over a
period of four (4) years following the grant date, with 1/4th of the shares subject to such
Options vesting on the one (1) year anniversary of the grant date and 1/48th of the shares
subject to such Options vesting on a monthly basis thereafter until all the
shares subject to such Options are vested on the fourth anniversary of the
grant date, in each case only so long as the Executive remains continuously
employed by the Company.  In the event of
a Change in Control (as defined below), regardless of termination of the
Executive’s employment, the vesting of the Options set forth in Section 3.3
hereof shall accelerate and vest in full. 
The terms and vesting of the Options will be more fully set forth in the
Plan and shall be subject to the Company’s standard form of stock option
agreement.


 


3.4          Changes to
Compensation.  It is
anticipated that the Executive will be considered on an annual basis for merit
increases in base compensation consistent with performance and market trends
but subject to Board approval in its sole discretion.  Subject to Section 4.1.3 below, the
Executive’s compensation may be changed from time to time in the Company’s sole
discretion based upon Board approved changes to the Company’s operating plan
after considering relevant business conditions.


 


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3.5          Employment Taxes.  All of the Executive’s compensation and
payments under this Agreement shall be subject to customary withholding taxes
and any other employment taxes as are commonly required to be collected or
withheld by the Company.


 


3.6          Benefits.  The Executive shall, in accordance with
Company policy and the terms of the applicable plan documents, be eligible to
participate in benefits under any executive benefit plan or arrangement which
may be in effect from time to time and made available to the Company’s
executive or key management employees.


 


3.7          Vacations and Holidays.  The Executive shall be entitled to receive
three (3) weeks of paid vacation during each calendar year, and shall be
entitled to paid holidays in accordance with the Company’s policies.


 


4.                                      TERMINATION.


 


4.1          Termination By the Company.  The Executive’s employment with the Company
may be terminated under the following conditions:


 


4.1.1       Termination for Death or
Disability.  The Executive’s employment with the Company
shall terminate effective upon the date of the Executive’s death or Complete Disability (as defined below).  If the Executive’s employment shall be
terminated by death or Complete Disability, the Company shall pay to the
Executive, and/or the Executive’s heirs, the Executive’s Base Salary and
accrued and unused vacation benefits earned through the date of termination at
the rate in effect at the time of termination, less standard deductions and
withholdings, and the Company shall thereafter have no further obligations to
the Executive and/or the Executive’s heirs under this Agreement.


 


4.1.2       Termination by the Company For
Cause.  The Company may terminate the Executive’s
employment under this Agreement for Cause
(as defined below) or the Executive may resign his employment under this
Agreement without Good Reason (as defined below).  If the Executive’s employment shall be
terminated by the Company for Cause or by the Executive without Good Reason,
the Company shall pay the Executive’s Base Salary and accrued and unused
vacation benefits earned through the date of termination at the rate in effect
at the time of termination, less standard deductions and withholdings, and the
Company shall thereafter have no further obligations to the Executive under
this Agreement.


 


4.1.3       Termination By The Company
Without Cause Or By The Executive With Good Reason. 
If the Company (or its successor) terminates the Executive’s employment
without Cause, or if the Executive terminates his employment for Good Reason,
then the Company shall pay the Executive’s Base Salary and accrued and unused
vacation benefits earned through the date of termination at the rate in effect
at the time of termination, less standard deductions and withholdings.  In addition, subject to the Executive’s
delivery to the Company of a release and waiver of claims in the form attached
hereto as Exhibit A within the applicable
time period set forth therein, but in no event later than forty-five (45) days
following termination of Executive’s employment, and permitting such Release
and Waiver to become


 


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fully effective in
accordance with its terms, (the date Executive’s Release becomes fully
effective, the “Release Effective Date”), the Company shall provide the Executive
with the following benefits hereunder, as applicable (the “Severance
Benefits”):


 


4.1.3.1          If the Executive’s termination occurs
prior to and not within one month of a Change of Control, the Executive shall
be entitled to 18 months of his Base Salary
in effect as of the termination date (ignoring any reduction in salary that is
the basis for a the Executive’s termination of employment for Good Reason),
less required deductions and withholdings, paid in the form of salary
continuation on the Company’s standard payroll dates following termination;
provided, however, no such payments will be made prior to the Release Effective
Date, and on the first regular payroll date following the Release Effective
Date, the Company will pay the Executive in a lump sum the amount of the salary
continuation he would have otherwise received on and prior to such date but for
the delay due to the Release, with the balance paid thereafter on the original
schedule.


 


4.1.3.2          If the Executive’s termination occurs
within one month of, or within 12 months following, the effective date of a
Change in Control, the Executive shall be
entitled to 24 months of his Base Salary in effect as of the termination date
(ignoring any reduction in salary that is the basis for a Good Reason
Resignation) and two times the maximum amount of the discretionary bonus
payable for the then-current year as if all milestones or other performance
targets had been achieved, less required
deductions and withholdings, paid in the form of a lump sum on the first
regular payroll date following the Release Effective Date.


 


4.1.3.3          The Company shall pay the premiums (the “COBRA Premiums”) for group health plan continuation coverage
(i.e., medical, dental and vision insurance) under Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
under the same plans available to active Company employees and under
the same rules, restrictions and regulations applicable thereto for up to 18 months following the Executive’s employment
termination date or until the Executive becomes eligible for group health
insurance coverage through a new employer or otherwise cease to be eligible for
COBRA coverage, whichever occurs first; provided, that the Executive timely elects
continued group health coverage under COBRA and otherwise qualifies for
continued coverage.  COBRA premium payments extending past 18
months following the Executive’s separation from service, to the extent subject
to Section 409A (as defined below), shall be made in compliance with Section 409A.


 


4.1.3.4          The vesting of the Options set forth in Section 3.3
hereof shall accelerate and vest in full.


 


4.2          Termination by Mutual Agreement of the Parties.  The Executive’s employment pursuant to this
Agreement may be terminated at any time upon mutual agreement, in writing, of
the Parties.  Any such termination of
employment shall have the consequences specified in such writing.


 


4.3          Survival of Certain Provisions.  Sections 2.2, 5 and 17 shall survive the
termination of this Agreement.


 


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4.4          Definitions.  For purposes of this Agreement:


 


4.4.1       “Cause” shall
have the meaning defined in the Plan.


 


4.4.2       “Change of Control”
shall mean the occurrence of any one (1) or more of the following
events:  (i) any person (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended) becomes the owner, directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding securities (other than in
connection with a transaction involving the issuance of securities by the
Company the principal purpose of which is to raise capital for the Company)
other than Isis Pharmaceuticals, Inc. or Alnylam Pharmaceuticals; (ii) there
is consummated a merger, consolidation or similar transaction to which the
Company is a party and the stockholders of the Company immediately prior
thereto do not own outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving entity
immediately following such merger, consolidation or similar transaction or more
than fifty percent (50%) of the combined outstanding voting power of the parent
of the surviving entity immediately following such merger, consolidation or
similar transaction; (iii) there is consummated a sale, lease exclusive
license or other disposition of all or substantially all of the consolidated
assets of the Company and its subsidiaries, other than a sale, lease or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity more than fifty percent (50%) of the
combined voting power of which is owned immediately following such disposition
by the stockholders of the Company immediately prior thereto or (iv) prior
to December 31, 2009, any of (i), (ii), or (iii) occur with respect
to Isis Pharmaceuticals, Inc. or Alnylam Pharmaceuticals.


 


4.4.3       “Complete Disability” shall mean the
inability of the Executive to perform the Executive’s duties under this
Agreement because the Executive has become permanently disabled within the
meaning of any policy of disability income insurance covering employees of the
Company then in force.  In the event the
Company has no policy of disability income insurance covering employees of the
Company in force when the Executive becomes disabled, the term Complete Disability shall mean the
inability of the Executive to perform the Executive’s duties under this
Agreement by reason of any incapacity, physical or mental, which the Board,
based upon medical advice or an opinion provided by a licensed physician
acceptable to the Board, determines to have incapacitated the Executive from
satisfactorily performing all of the Executive’s usual services for the Company
for a period of at least 120 consecutive days or 150 days in total during any
12 month period (whether or not consecutive). 
Based upon such medical advice or opinion, the determination of the
Board shall be final and binding and the date such determination is made shall
be the date of such Complete Disability for purposes of this Agreement.


 


4.4.4       “Good Reason” for the Executive to terminate the Executive’s
employment hereunder shall mean the occurrence of any of the following events
without the Executive’s consent; provided however, that any resignation by the
Executive due to any of the following conditions shall only be deemed for Good
Reason if: (i) the Executive gives the Company written notice of the
intent to terminate for Good Reason within ninety (90) days following the first
occurrence of the condition(s) that the Executive believes constitutes
Good


 


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Reason,
which notice shall describe such condition(s); (ii) the Company fails to
remedy, if remediable, such condition(s) within thirty (30) days following
receipt of the written notice (the “Cure Period”)
of such condition(s) from the Executive; and (iii) Executive actually
resigns his employment within the first fifteen (15) days after expiration of
the Cure Period:


 


4.4.4.1          a material
breach of this Agreement with the Executive by the Company;


 


4.4.4.2          a material
reduction by the Company of the Executive’s Base Salary as initially set forth
herein or as the same may be increased from time to time;


 


4.4.4.3          a material
reduction in the Executive’s authority, duties or responsibilities; or


 


4.4.4.4          the Company relocates the facility that
is the Executive’s principal place of business with the Company to a location
that requires an increase in the Executive’s one-way driving distance by
more than 30 miles.


 


5.                                      CONFIDENTIAL
AND PROPRIETARY INFORMATION; NONSOLICITATION.


 


5.1          As a condition
of employment the Executive agrees to abide by the Employee Confidential
Information and Inventions Agreement entered into between the Company and the
Executive as referenced in the Prior Agreement.


 


5.2          While employed
by the Company and for one year thereafter, the Executive agrees that in order
to protect the Company’s trade secrets and confidential and proprietary
information from unauthorized use, the Executive will not, either directly or
through others, solicit or attempt to solicit any employee, consultant or
independent contractor of the Company to terminate his or her relationship with
the Company in order to become an employee, consultant or independent
contractor to or for any other person or business entity.


 


6.                                      ASSIGNMENT
AND BINDING EFFECT.


 


This Agreement shall be
binding upon and inure to the benefit of the Executive and the Executive’s
heirs, executors, personal representatives, assigns, administrators and legal
representatives.  Because of the unique
and personal nature of the Executive’s duties under this Agreement, neither
this Agreement nor any rights or obligations under this Agreement shall be
assignable by the Executive.  This
Agreement shall be binding upon and inure to the benefit of the Company and its
successors, assigns and legal representatives.


 


7.                                      CHOICE OF
LAW.


 


This
Agreement shall be construed and interpreted in accordance with the internal
laws of the State of California.


 


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8.                                      INTEGRATION.


 


This
Agreement, including Exhibit A and
the Employee Confidential Information and Inventions Agreement referenced in Section 5.1,
contains the complete, final and exclusive agreement of the Parties relating to
the terms and conditions of the Executive’s employment and the termination of
the Executive’s employment, and supersedes all prior and contemporaneous oral
and written employment agreements or arrangements between the Parties including
the Prior Agreement except as indicated herein.


 


9.                                      AMENDMENT.


 


This
Agreement cannot be amended or modified except by a written agreement signed by
the Executive and the Chief Executive Officer of the Company as directed by the
Board.


 


10.                               WAIVER.


 


No
term, covenant or condition of this Agreement or any breach thereof shall be
deemed waived, except with the written consent of the Party against whom the
wavier is claimed, and any waiver or any such term, covenant, condition or
breach shall not be deemed to be a waiver of any preceding or succeeding breach
of the same or any other term, covenant, condition or breach.


 


11.                               SEVERABILITY.


 


The
finding by a court of competent jurisdiction of the unenforceability, invalidity
or illegality of any provision of this Agreement shall not render any other
provision of this Agreement unenforceable, invalid or illegal.  Such court shall have the authority to modify
or replace the invalid or unenforceable term or provision with a valid and
enforceable term or provision which most accurately represents the Parties’ intention with respect to the
invalid or unenforceable term or provision.


 


12.                               INTERPRETATION;
CONSTRUCTION.


 


The
headings set forth in this Agreement are for convenience of reference only and
shall not be used in interpreting this Agreement.  This Agreement has been drafted by legal
counsel representing the Company, but the Executive has been encouraged to
consult with, and have consulted with, the Executive’s own independent counsel
and tax advisors with respect to the terms of this Agreement.  The Parties acknowledge that each Party and
its counsel has reviewed and revised, or had an opportunity to review and
revise, this Agreement, and any rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement.


 


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13.                               REPRESENTATIONS
AND WARRANTIES.


 


The
Executive represents and warrants that the Executive is not restricted or
prohibited, contractually or otherwise, from entering into and performing each
of the terms and covenants contained in this Agreement, and that the Executive’s
execution and performance of this Agreement will not violate or breach any
other agreements between the Executive and any other person or entity.


 


14.                               COUNTERPARTS;
FACSIMILE.


 


This
Agreement may be executed in two counterparts, each of which shall be deemed an
original, all of which together shall contribute one and the same
instrument.  Facsimile signatures shall
be treated the same as original signatures.


 


15.                               LITIGATION
COSTS.


 


Should
any claim be commenced between the Parties or their personal representatives
concerning any provision of this Agreement or the rights and duties of any
person in relation to this Agreement, the Party prevailing in such action shall
be entitled, in addition to such other relief as may be granted to a reasonable
sum as and for that Party’s attorney’s fees in such action.


 


16.                               TRADE
SECRETS.


 


It
is the understanding of both the Company and the Executive that the Executive
shall not divulge to the Company and/or its subsidiaries any confidential
information or trade secrets belonging to others, including the Executive’s
former employers, nor shall the Company and/or its Affiliates seek to elicit
from the Executive any such information. 
Consistent with the foregoing, the Executive shall not provide to the
Company and/or its Affiliates, and the Company and/or its Affiliates shall not
request, any documents or copies of documents containing such information.


 


17.                               ADVERTISING
WAIVER.


 


The
Executive agrees to permit the Company and/or its Affiliates, and persons or
other organizations authorized by the Company and/or its Affiliates, to use,
publish and distribute advertising or sales promotional literature concerning
the products and/or services of the Company and/or its Affiliates, or the
machinery and equipment used in the provision thereof, in which the Executive’s
name and/or pictures of the Executive taken in the course of the Executive’s
provision of services to the Company and/or its Affiliates, appear.  The Executive hereby waives and releases any
claim or right the Executive may otherwise have arising out of such use,
publication or distribution.  The Company
agrees that, following termination of the Executive’s employment, it will not
create any new such literature containing the Executive’s name and/or pictures
without the Executive’s prior written consent.


 


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18.                               APPLICATION
OF SECTION 409A.


 


Notwithstanding
anything to the contrary set forth herein, any Severance Benefits that
constitute “deferred compensation” within the meaning of Section 409A of
the Code and the regulations and other guidance thereunder and any state law of
similar effect (“Section 409A”) shall not
commence in connection with the Executive’s termination of employment unless
and until the Executive has also incurred a “separation from service” (as such
term is defined in Treasury Regulation Section 1.409A-1(h)) (“Separation From Service”), unless the Company reasonably
determines that such amounts may be provided to the Executive without causing
the Executive to incur the additional 20% tax under Section 409A.


 


It
is intended that each installment of the Severance Benefit payments provided
for in this Agreement is a separate “payment” for purposes of Treasury
Regulation Section 1.409A-2(b)(2)(i). 
For the avoidance of doubt, it is intended that payments of the
Severance Benefits set forth in this Agreement satisfy, to the greatest extent
possible, the exemptions from the application of Section 409A provided
under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and
1.409A-1(b)(9).  However, if the Company
(or, if applicable, the successor entity thereto) determines that the Severance
Benefits constitute “deferred compensation” under Section 409A and the
Executive is, on the termination of service, a “specified employee” of the
Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of
the Code, then, solely to the extent necessary to avoid the incurrence of the
adverse personal tax consequences under Section 409A, the timing of the
Severance Benefit payments shall be delayed until the earlier to occur of: (i) the
date that is six months and one day after the Executive’s Separation From
Service, or (ii) the date of the Executive’s death (such applicable date,
the “Specified Employee Initial Payment Date”)
and the Company (or the successor entity thereto, as applicable) shall (A) pay
to the Executive a lump sum amount equal to the sum of the Severance Benefit
payments that the Executive would otherwise have received through the Specified
Employee Initial Payment Date if the commencement of the payment of the
Severance Benefits had not been so delayed pursuant to this Section and (B) commence
paying the balance of the Severance Benefits in accordance with the applicable
payment schedules set forth in this Agreement.


 


19.                               PARACHUTE
PAYMENTS.


 


Except as otherwise
provided in an agreement between the Executive and the Company, if any payment
or benefit the Executive would receive from the Company or otherwise in
connection with a Change of Control (“Payment”) would
(i) constitute a “parachute payment” within the meaning of Section 280G
of the Code, and (ii) but for this sentence, be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise Tax”),
then such Payment shall be equal to the Reduced Amount (as defined herein). The
“Reduced Amount” shall be either (x) the
largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax, or (y) the largest portion, up to and
including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all
computed at the highest applicable marginal rate), results in the Executive’s
receipt, on an after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax.  If a


 


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reduction in payments or
benefits constituting “parachute payments” is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following order: (1) reduction
of cash payments; (2) cancellation of accelerated vesting of equity awards
other than stock options; (3) cancellation of accelerated vesting of stock
options; and (4) reduction of other benefits paid to the Executive.  If acceleration of vesting of compensation
from the Executive’s equity awards is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant.


 


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


 


	
  REGULUS
  THERAPEUTICS LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Maraganore.

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  John Maraganore, Ph.D.

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman of the Board

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Kleanthis G.
  Xanthopoulos, Ph.D.

  	
   

  
	
  KLEANTHIS
  G. XANTHOPOULOS, PH.D.

  	
   

  
				



 


 


[Signature Page to Employment
Agreement]


 

















 


EXHIBIT A


 


RELEASE
AND WAIVER OF CLAIMS


 


In consideration of the
payments and other benefits set forth in Section 4 of the Employment
Agreement dated December 29, 2008, to which this form is attached (the “Employment Agreement”), I, Kleanthis G. Xanthopoulos,
Ph.D., hereby furnish Regulus Therapeutics LLC (the “Company”)
with the following release and waiver (“Release and Waiver”).


 


In exchange for the
consideration provided to me by the Employment Agreement that I am not
otherwise entitled to receive, I hereby generally and completely release the
Company and its directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers,
affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring prior to my signing this Release and
Waiver.  This general release includes,
but is not limited to: (1) all claims arising out of or in any way related
to my employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (3) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (4) all tort claims, including, but not limited
to, claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and (5) all federal, state, and local
statutory claims, including, but not limited to, claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) (“ADEA”), and
the California Fair Employment and Housing Act (as amended).


 


I also acknowledge that I
have read and understand Section 1542 of the California Civil Code which
reads as follows:  “A general
release does not extend to claims which the creditor does not know or suspect
to exist in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the debtor.”  I hereby expressly waive and relinquish all rights and
benefits under that section and any law of any jurisdiction of similar effect
with respect to any claims I may have against the Company.


 


I acknowledge that, among
other rights, I am waiving and releasing any rights I may have under ADEA, that
this Release and Waiver is knowing and voluntary, and that the consideration
given for this Release and Waiver is in addition to anything of value to which
I was already entitled as an executive of the Company.  If I am 40 years of age or older upon
execution of this Release and Waiver, I further acknowledge that I have been
advised, as required by the Older Workers Benefit Protection Act, that:  (a) the release and waiver granted
herein does not relate to claims under the ADEA which may arise after this
Release and Waiver is executed; (b) I should consult with an attorney
prior to executing this Release and Waiver; (c) I have 21 days in which to
consider this Release and Waiver (although I may choose voluntarily to execute
this Release and Waiver earlier); (d) I have seven days following the
execution of this Release and Waiver to revoke my consent to this Release and
Waiver; and (e) this Release and Waiver shall not be effective until the
eighth day after I execute this Release and Waiver and the revocation period
has expired.


 


I acknowledge my
continuing obligations under my Employee Confidentiality and Inventions Assignment
Agreement a copy of which is attached hereto (the “CIAA”).  Pursuant to the CIAA, I understand that among
other things, I must not use or disclose any confidential or proprietary
information of the Company and I must immediately return all Company property
and documents (including all embodiments of proprietary information) and all
copies thereof in my possession or control. 
I understand and agree that my right to the severance pay I am receiving
is in exchange for my agreement to the terms of this Release and Waiver and is
contingent upon my continued compliance with my CIAA.


 


This Release and
Waiver, including the CIAA, constitutes the complete, final and exclusive
embodiment of the entire agreement between the Company and me with regard to
the subject matter hereof.  I am not
relying on any promise or representation by the Company that is not expressly
stated herein.  This Release and Waiver
may only be modified by a writing signed by both me and a duly authorized
officer of the Company.


 


	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  KLEANTHIS G. XANTHOPOULOS